Microsoft Targets SOE Pirates 微软打击国有企业盗版

Despite Beijing’s repeated efforts to stamp out piracy, the problem remains a major one in China, with companies large and small, public and private still engaging in a practice that costs software makers billions of dollars in lost sales each year.  The magnitude of the problem was on prominent display last week when reports emerged that Microsoft was seeking Beijing’s help to get four major companies, including the parent of PetroChina (HKEx: 857; Shanghai: 601857; NYSE: PTR), to stop using pirated copies of its popular Office software suite.

The fact that companies as big as PetroChina continue to use illegal software testifies to how addicted Chinese firms are to piracy, as such firms have the resources to buy legal products and should also understand the importance of intellectual property protection. But clearly more intervention is needed to wean Chinese companies from piracy, and Microsoft’s approach of working with Beijing to target big State-owned enterprises like PetroChina represents a smart start to tackling the problem.

According to reports last week, Microsoft’s appeal to Beijing was aimed at tackling widespread illegal use of its Office product at PetroChina parent China National Petroleum Corp (CNPC), along with China Railway Construction Corp and China Post Group.  (English article; Chinese article) Microsoft estimated that a full 40 percent of Office products in use at CNPC were pirated; while the figures were even higher – over 80 percent – for China Railway Construction and China Post, the reports said.

Microsoft’s latest approach to Beijing mirrors a similar effort in 2006 to stamp out piracy of Windows, the company’s biggest money earner that was being widely pirated in China at that time. Under that effort, Microsoft and Beijing pressured China’s biggest PC makers, including Lenovo (HKEx: 992) and Founder, to load legal copies of Windows on all new computers they sold. Before that, most PCs sold in China came with either no operating system installed or free open source software, providing an open invitation for buyers to install pirated copies of Windows.

That program was highly successful, helping to sharply boost the number of legal copies of Windows sold in China. This latest effort shows that Microsoft now wants to tackle the illegal use of Office and some of its other most popular software, and is looking to leverage Beijing’s huge influence at big State-owned enterprises to achieve its goals.

If Microsoft is smart, it will not only work to wean these and other companies from pirated versions of its products, but will get them to stop using pirated software in general and help them to publicize their efforts both with Beijing and the broader public. Only through this kind of campaign, involving enforcement, education and publicity, will Beijing and makers of software and other intellectual property finally be able to curb the piracy problem.

Bottom line: Microsoft’s appeal to Beijing marks a smart approach to tackling piracy at big SOEs, with a high degree of success.