Brazil has earned an international reputation for software piracy. In this post I analyze how this affects foreign software business.
We are frequently visited by foreign software vendors that consider localizing their software to Portuguese or establish a commercial presence in Brazil. The primary concern for these businesses is software piracy and how well investment will be protected in the Brazilian market.
Let’s get the Facts Straight
Brazil’s international reputation for piracy is blown way out of proposition. The annual Global Piracy Study from USA based Business Software Alliance indicates that Brazil have the lowest Piracy rate of all countries in Latin America.
More important than being the country with the lowest levels of piracy in Latin America, is the positive trend that the figures show. Piracy rate was reduced from 59% in 2007 to 53% in 2011. This may look like a high rate compared to the 19% Piracy rate in USA, but the Brazilian rate is in the same ballpark as South Europe and is significantly lower than Russia, India or China.
I often ask myself why foreigners believe piracy is such a huge problem in Brazil. The only logical explanation is physical accessibility. In Brazil, street sale of pirated software is the most prominent and often the only retail channel for software. It’s so visible, all out in the open. It’s much harder to visualize people exchanging copies of software on BitTorrent.
As I’m writing this, I can easily get access to almost as many software as I can find on The Pirate Bay right outside my office door. However, the question that you as a software vendor need to ask yourself is: How much of your software revenue is coming from the retail channel?
According to Business Software Alliance the total value lost to software Piracy in USA is more than 3 times higher than in Brazil. The difference lies in visibility.
Legal Protection in Brazil
You often hear from the North American tech press that Piracy isn’t illegal in developing countries including countries like Brazil, Russia, India and China.
This is WRONG. Brazil has a strong protection of software right and has one of the most comprehensive software protection laws in the world. Software piracy will be sentenced to penalties or up to 4 years in jail.
Convenience, Delivery and Conversion
In a qualitative research our firm conducted between Brazilian IT departments in 2011, nearly 100% of the IT departments researched software online, and as much as 41% of the decision makers were open to buy software online.
The problem starts and ends with the payment. Invoice and Boleto Bancario were pointed as the preferred payment method by 74% of the interviewed companies.
Lack of preferred payment solutions stops the process of sales Conversion of even inexpensive software tools, and other channels including piracy are considered due to convenience reasons.
The preferred payment method does not reflect how evolved the Brazilian market is, but rather the culture. Private people have Credit Cards, but companies do not. Assuming that a Brazilian company will pay with credit card is as much of a limitation as asking American or European companies to pay by cheque.
How to address the Brazilian software market
Some of the most pirated software in Brazil are from Microsoft and Autodesk. Reports suggest that as much as 70% of Autodesk products in Brazil are unlicensed. However, both companies have success in the business in Brazil.
The real question any software vendor need to ask themselves is what is the alternative cost. If the market potential for your software in Brazil is 10 times larger than France, but you will be subject to 50% piracy in Brazil, what’s the most profitable market to enter?
Piracy should be treated as a variable in a business plan and not as a deal breaker when outlining the market potential for your software in Brazil.