More than a third of all packaged software loaded on PCs in the world is now pirated, a new study conducted by analysts IDC for the Business Software Alliance (BSA) has concluded.

Although the figure of 35 percent for 2004 was actually marginally lower than the previous year, the cost of pirated code to the industry actually soared to a record $33 billion for the year thanks mostly to currency falls in the US dollar. The total amount spent globally on legitimate software was $59 billion.

The countries singled out as having especially bad records on software piracy were Vietnam, China, Indonesia, Ukraine, and Zimbabwe, which between them had piracy rates ranging between 87 and 92 percent of the total new software in use.

Countries with a good record were the US, New Zealand, Austria, Sweden, and the UK, which ranged from 21 to 27 percent level of piracy, although the report points out that since these markets are all much larger than the worst offenders, the theft is actually more burdensome.

"These losses have a profound economic impact in countries around the world. Every copy of software used without proper licensing costs tax revenue, jobs, and growth opportunities for burgeoning software markets," BSA President and CEO Robert Holleyman said.

Software piracy was not a crime that should only concern the companies that suffered directly as a result of piracy – the economic impact affected the whole industry as well as the countries in which it occurred.

Most of the countries where piracy is high are developing countries, but the report draws attention to one, the United Arab Emirates (UAE), where piracy levels are approaching those of the developed world at only 34 percent. It explains this anomaly by noting that the UAE was one country that took the trouble to enact legislation to protect intellectual property during the 1990s. Without such laws in expanding software markets, piracy was inevitable.

Arguably, the underlying causes, cures and effects of software piracy are more complex than the report appears to acknowledge.

Clearly, piracy is high in some countries partly because the cost of buying software is too high in relation to the ability of that country to bear the cost. This is especially true with expensive software from large companies such as Microsoft, which have a monopoly of a particular software segment. Microsoft offers discounts in many developing countries, but software remains an expensive “brain tool” even after this is taken into account.

Similarly, piracy could actually help a company establish its software as a standard in a market where the potential for future growth is high. This is something that is often claimed to have benefited Microsoft in markets such as Asia, although this analysis remains unproved.

What all this means for the average law-abiding software buyer is difficult to untangle. Officially, software is more expensive in “honest” markets to take account of piracy elsewhere. Equally, everyone agrees that software remains a risky but nevertheless lucrative money-spinner that is charged for like any other product; see what the market will put up with and then some.