FACTORS INFLUENCING SOFTWARE PIRACY IN SRI LANKA By Isuru Upendra Pieris Suriyapperuma The Dissertation was submitted to the Department of Computer Science and Engineering of the University of Moratuwa in partial fulfilment of the requirement for the Degree of Master of Business Administration. Department of Computer Science and Engineering University of Moratuwa December 2008  DECLARATION I hereby declare that the dissertation titled “Factors Influencing Software Piracy in Sri Lanka” is my own work and effort and in part or whole has not been submitted for any other academic qualification at any institute. Where other sources of information have been used, they have been acknowledged. I.U.P.Suriyapperuma Date MBA/IT/05/9069 Approved by: Mr. Shantha Fernando (Supervisor) Date Senior Lecturer Department of Computer Science and Engineering University of Moratuwa MBA in IT Department of Computer Science and Engineering, Faculty of Engineering University of Moratuwa Sri Lanka December 2008  ABSTRACT Computers and Software have been swift to gain popularity ever since their advent in Sri Lanka. Though we are behind our immediate neighbour India, Information Technology (IT) as an industry has also seen a dramatic boom in the Island. Yet, along with the excitement of a techno savvy society in the making, the menace of software piracy too has seen a silent, yet rapid growth. The situation has grown to an alarming level of 90% piracy rate, thus placing Sri Lanka among the top 5 countries in the world with the highest piracy rate and also within the top two in the Asian region. A low piracy rate is of much importance when it comes to maintaining healthy foreign trade relationships and attracting foreign software vendors and also for the growth of the local software industry catering to the local market. Research of this nature is of much significance as attempts made to combat piracy in the absence of proper analysis would be futile, as even at present the laws enacted have proved to have made little impact considering the high rate of piracy. This research attempted to fill a void created by the absence of research in the software piracy area in the Island, by giving an insight to the factors contributing to software piracy in Sri Lanka with significant research focus on individual software piracy. As such several contributory factors were identified through previous research and a pilot study done locally which were verified through a full scaled survey and subsequent analysis done using regression analysis to identify significant relationships between the factor and individual software piracy. This research identified “affordability of original proprietary software”, “availability of original proprietary software”, “social acceptance of software piracy”, “perception of the piracy issue” and “awareness level of the individual” as the most influential factors contributing towards individual software piracy. Among the key recommendations made through this research the need to implement measures to increase awareness and change the public perception on software piracy and importance of copyright protection of software. Additional measures to popularise Open Source Software (FOSS) were also among the suggestions.  ACKNOWLEDGEMENTS The completion of this research and thesis would not have been a reality if not for the support and guidance of several key individuals. Initially I would like to extend my sincere gratitude to Mr.Shantha Fernando, my supervisor, who has been constantly guiding my efforts and providing valuable insight and also Ms.Vishaka Nanayakkara, Head of Department of Computer Science and Engineering (CSE) for her much valued guidance and support. I owe a big thank you to Mr. Jayantha Fernando, Legal Advisor of the Information and Communication Technology Agency of Sri Lanka (ICTA), for providing valuable insight to legal aspects concerning the protection of computer software. I further extend my gratitude to all academic and non-academic staff at the Department of CSE and library staff of University of Moratuwa, for their support in numerous ways. My appreciation also goes out to all participants of my pilot studies and final survey who provided the crucial data, enabling me to complete this research successfully. Last but not least, I would like to thank my parents, family and friends who supported me throughout the research in numerous ways and have always been a source of motivation.  P a g e  | i    Table of Contents    1  Introduction ....................................................................................................................... 1  1.1  Background ................................................................................................................ 1  1.2  Problem statement .................................................................................................... 4  1.3  Significance of the study ............................................................................................ 4  1.4  Research objectives ................................................................................................... 5  1.5  Scope and limitations of study ................................................................................... 5  2  Literature Review ............................................................................................................... 6  2.1  Chapter overview ....................................................................................................... 6  2.2  Background of software piracy .................................................................................. 6  2.3  The figures .................................................................................................................. 7  2.4  The impact ................................................................................................................. 7  2.5  Law enforcement ....................................................................................................... 8  2.6  Review of previous work ............................................................................................ 9  3  Methodology of Study and Data Collection ..................................................................... 11  3.1  Chapter overview ..................................................................................................... 11  3.2  Definitions for the research ..................................................................................... 11  3.3  Initial/pilot study ...................................................................................................... 13  3.4  Conceptual framework ............................................................................................ 14  3.5  Hypothesis formation .............................................................................................. 15  3.6  Research methodology ............................................................................................ 16  3.7  Operationalizing of variables ................................................................................... 17  3.7.1  Software piracy of an individual (Dependant variable) ................................... 17  3.7.2  Affordability of original proprietary software .................................................. 17  3.7.3  Availability of original proprietary software .................................................... 17  3.7.4  Perception of the piracy issue .......................................................................... 18  3.7.5  Social acceptance of software piracy ............................................................... 18  3.7.6  Popularity of proprietary software .................................................................. 18  3.7.7  User friendliness of proprietary software ........................................................ 18  3.7.8  Awareness ........................................................................................................ 19  3.7.9  Workplace IPR policy ........................................................................................ 19  3.8  The second pilot study ............................................................................................. 20  3.8.1  Affordability of original proprietary software .................................................. 21  3.8.2  Availability of original proprietary software .................................................... 21  3.8.3  Perception of the piracy issue .......................................................................... 21  3.8.4  Social acceptance of software piracy ............................................................... 21  3.8.5  Popularity of proprietary software .................................................................. 21  3.8.6  User friendliness of proprietary software ........................................................ 22  3.8.7  Awareness ........................................................................................................ 22  3.8.8  Workplace IPR policy ........................................................................................ 22  3.9  Data collection ......................................................................................................... 22  3.9.1  Questionnaires ................................................................................................. 22  3.9.2  Interviews ......................................................................................................... 23  3.9.3  Sampling ........................................................................................................... 23   P a g e  | ii    3.9.4  Operational strategies to maximise response rate and accuracy .................... 24  4  Observations and Results ................................................................................................. 26  4.1  Chapter overview ..................................................................................................... 26  4.2  Profile of the sample ................................................................................................ 26  4.3  Overview of responses ............................................................................................. 28  4.3.1  Leniency towards Software Piracy ................................................................... 28  4.3.2  Perception of the piracy issue .......................................................................... 29  4.3.3  Social acceptance of software piracy ............................................................... 29  4.3.4  Availability of original proprietary software .................................................... 30  4.3.5  Affordability of original proprietary software .................................................. 31  4.3.6  Popularity of proprietary software .................................................................. 32  4.3.7  User friendliness of proprietary software ........................................................ 32  4.3.8  Awareness ........................................................................................................ 33  4.3.9  Workplace IPR policy enforcement .................................................................. 34  4.4  Other information gathered from the respondents ................................................ 35  4.4.1  Legal enforcement ........................................................................................... 35  4.4.2  Education on copyright protection and software piracy ................................. 35  4.4.3  Education on FOSS ........................................................................................... 36  4.4.4  Presence of workplace IPR policy .................................................................... 36  4.5  Data uncovered through qualitative interviews ...................................................... 37  4.6  Statistical data summery .......................................................................................... 41  4.6.1  Software piracy (dependant variable) ............................................................. 41  4.6.2  Affordability of original proprietary software .................................................. 42  4.6.3  Availability of original proprietary software .................................................... 43  4.6.4  Perception of the piracy issue .......................................................................... 44  4.6.5  Social acceptance of software piracy ............................................................... 45  4.6.6  Popularity of proprietary software .................................................................. 46  4.6.7  User friendliness of proprietary software ........................................................ 47  4.6.8  Awareness ........................................................................................................ 48  4.6.9  Workplace IPR policy ........................................................................................ 49  5  Analysis ............................................................................................................................ 50  5.1  Chapter overview ..................................................................................................... 50  5.2  Method of analysis ................................................................................................... 50  5.3  Testing of hypothesises ............................................................................................ 50  5.3.1  Testing hypothesis 1......................................................................................... 50  5.3.2  Model validity of hypothesis 1 ......................................................................... 51  5.3.3  Testing hypothesis 2......................................................................................... 53  5.3.4  Model validity of hypothesis 2 ......................................................................... 54  5.3.5  Testing hypothesis 3......................................................................................... 55  5.3.6  Model validity of hypothesis 3 ......................................................................... 56  5.3.7  Testing hypothesis 4......................................................................................... 57  5.3.8  Model validity of hypothesis 4 ......................................................................... 58  5.3.9  Testing hypothesis 5......................................................................................... 59  5.3.10  Model validity of hypothesis 5 ......................................................................... 60  5.3.11  Testing hypothesis 6......................................................................................... 61   P a g e  | iii    5.3.12  Model validity of hypothesis 6 ......................................................................... 62  5.3.13  Testing hypothesis 7......................................................................................... 63  5.3.14  Model validity of hypothesis 7 ......................................................................... 64  5.3.15  Testing hypothesis 8......................................................................................... 65  5.3.16  Model validity of hypothesis 8 ......................................................................... 66  5.4  Summary of hypothesis testing ............................................................................... 67  6  Conclusions and Recommendations ................................................................................ 69  6.1  Chapter overview ..................................................................................................... 69  6.2  Fulfilment of research objectives ............................................................................. 69  6.2.1  Background and adopted approach ................................................................. 69  6.2.2  Research findings and recommendations ........................................................ 70  6.3  Enhancements and Future Research ....................................................................... 74  7  References ....................................................................................................................... 75  8  Appendices ....................................................................................................................... 78  8.1  Appendix A – Questionnaire for pilot study ............................................................. 78  8.2  Appendix B – The final research questionnaire ....................................................... 82  8.3  Appendix C – Qualitative study on views of organisations and top executives on the  issue of software piracy ....................................................................................................... 88         P a g e  | iv    List of Tables Table 3.1: Summery of operationalized variables. .................................................................. 20  Table 3.2: Industry categorisation based on [26] .................................................................... 24  Table 4.1: Software piracy ‐ descriptive statistics. ................................................................... 41  Table 4.2: Affordability of original proprietary software ‐ descriptive statistics. .................... 42  Table 4.3: Availability of original proprietary software ‐ descriptive statistics ....................... 43  Table 4.4: Perception of the piracy issue ‐ descriptive statistics. ............................................ 44  Table 4.5: Social acceptance of software piracy ‐ descriptive statistics. ................................. 45  Table 4.6: Popularity of proprietary software ‐ descriptive statistics. ..................................... 46  Table 4.7: User friendliness of proprietary software ‐ descriptive statistics. .......................... 47  Table 4.8: Awareness ‐ descriptive statistics. .......................................................................... 48  Table 4.9: Workplace IPR policy ‐ descriptive statistics. .......................................................... 49  Table 5.1: Variables Entered / Removedb – Hypothesis Test 1 ................................................ 51  Table 5.2: Coefficients – Hypothesis Test 1 ............................................................................. 51  Table 5.3: Model Summeryb (Enter) – Hypothesis Test 1 ........................................................ 51  Table 5.4:Variables Entered / Removedb – Hypothesis Test 2 ................................................. 53  Table 5.5: Coefficients – Hypothesis Test 2 ............................................................................. 53  Table 5.6: Model Summeryb (Enter) – Hypothesis Test 2 ........................................................ 53  Table 5.7: Variables Entered / Removedb – Hypothesis Test 3 ................................................ 55  Table 5.8: Coefficients – Hypothesis Test 3 ............................................................................. 55  Table 5.9: Model Summeryb (Enter) – Hypothesis Test 4 ........................................................ 55  Table 5.10: Variables Entered / Removedb – Hypothesis Test 4 .............................................. 57  Table 5.12: Model Summeryb (Enter) – Hypothesis Test 4 ...................................................... 57  Table 5.11: Coefficientsa – Hypothesis Test 4 .......................................................................... 57  Table 5.13: Variables Entered / Removedb – Hypothesis Test 5 .............................................. 59  Table 5.15: Model Summeryb (Enter) – Hypothesis Test 5 ...................................................... 59  Table 5.14: Coefficients – Hypothesis Test 5 ........................................................................... 59  Table 5.16: Variables Entered / Removedb – Hypothesis Test 6 .............................................. 61  Table 5.18: Model Summeryb (Enter) – Hypothesis Test 6 ...................................................... 61  Table 5.17: Coefficients – Hypothesis Test 6 ........................................................................... 61  Table 5.19: Variables Entered / Removedb – Hypothesis Test 7 .............................................. 63  Table 5.20: Coefficients – Hypothesis Test 7 ........................................................................... 63  Table 5.21: Model Summeryb (Enter) – Hypothesis Test 7 ...................................................... 63  Table 5.22: Variables Entered / Removedb – Hypothesis Test 8 .............................................. 65  Table 5.23: Coefficientsa – Hypothesis Test 8 .......................................................................... 65  Table 5.24: Model Summeryb (Enter) – Hypothesis Test 8 ...................................................... 65   P a g e  | v    List of Figures Figure 1.1: Global losses due to software piracy by region [2] .................................................. 2  Figure 3.1: Conceptual framework .......................................................................................... 14  Figure 4.1: Breakdown of the industry diversity among the respondents. ............................. 27  Figure 4.2: Age distribution of the respondents. ..................................................................... 27  Figure 4.3: Distribution of the highest qualification among respondents ............................... 27  Figure 4.4: Distribution of job categories of respondents. ...................................................... 28  Figure 4.5: Use of pirated OS ................................................................................................... 28  Figure 4.6: Piracy of other software ........................................................................................ 28  Figure 4.8: Software piracy is an insignificant issue in the country. ........................................ 29  Figure 4.7: Minimal importance in copyright protection of software ..................................... 29  Figure 4.9: Use of pirated software by people is acceptable. .................................................. 29  Figure 4.10: Influential society’s use of pirated software ........................................................ 29  Figure 4.11: Getting opinion of others during software purchase .......................................... 30  Figure 4.12: Consult others in choosing software among alternatives ................................... 30  Figure 4.13: Observe others' software use .............................................................................. 30  Figure 4.14: Lack of knowledge on where to purchase original proprietary  software ........... 30  Figure 4.15: Belief that original proprietary  software is not freely available for purchase. ... 30  Figure 4.16: Lengthy duration for software acquisition .......................................................... 31  Figure 4.17: Perception on high initial cost ............................................................................. 31  Figure 4.18: Perception on high total cost of ownership ......................................................... 31  Figure 4.19: Price dependant willingness to purchase ............................................................ 31  Figure 4.20: Popularity of proprietary software through long term use. ................................ 32  Figure 4.23: Low knowledge on the concept of FOSS .............................................................. 33  Figure 4.24: Low knowledge in using FOSS .............................................................................. 33  Figure 4.21: User friendliness of proprietary software ............................................................ 32  Figure 4.22: Feature richness of proprietary software ............................................................ 32  Figure 4.25: Low knowledge on copyright law ........................................................................ 33  Figure 4.26: Low knowledge in verifying originality of proprietary software .......................... 34  Figure 4.27: Enforcement of IPR policy on organisational software ....................................... 34  Figure 4.28: Enforcement of IPR policy on employees’ personal software use ...................... 34  Figure 4.29: Low chance of conviction for software pirates .................................................... 35  Figure 4.30: Education on copyright protection and software piracy issue at school ............. 35  Figure 4.31: Education on copyright protection and software piracy issue at university or at a  professional / training course .................................................................................................. 35  Figure 4.32: Education on FOSS at school ................................................................................ 36  Figure 4.33: Education on FOSS at university or at a professional / training course ............... 36  Figure 4.34: IPR policy on organisational software .................................................................. 37  Figure 4.35: IPR policy on employees’ personal software use ................................................ 37  Figure 4.36: Software piracy distribution. ............................................................................... 41  Figure 4.37: Distribution in Affordability of original proprietary software. ............................. 42  Figure 4.38: Distribution in Availability of original proprietary software. ............................... 43  Figure 4.39: Distribution of the Perception of the piracy issue. ............................................... 44  Figure 4.40: Distribution of Social acceptance of software piracy. ......................................... 45  Figure 4.41: Distribution of Popularity of proprietary software. ............................................. 46  Figure 4.42: Distribution of User friendliness of proprietary software. ................................... 47  Figure 4.43: Distribution of Awareness. ................................................................................... 48  Figure 4.44: Distribution of Workplace IPR policy ................................................................... 49  Figure 5.1: Normal Probability Plot of Regression Standardized Residual‐Hypothesis Test 1  52  Figure 5.2: Frequency Distribution of Error ‐ Hypothesis Test 1 ............................................. 52   P a g e  | vi    Figure 5.3: Normal Probability Plot of Regression Standardized Residual‐Hypothesis Test 2  54  Figure 5.4: Frequency Distribution of Error ‐ Hypothesis Test 2 ............................................. 54  Figure 5.5: Normal Probability Plot of Regression Standardized Residual‐Hypothesis Test 4  56  Figure 5.6: Frequency Distribution of Error ‐ Hypothesis Test 4 ............................................. 56  Figure 5.7: Normal Probability Plot of Regression Standardized Residual‐Hypothesis Test 4  58  Figure 5.8: Frequency Distribution of Error ‐ Hypothesis Test 4 ............................................. 58  Figure 5.9: Normal Probability Plot of Regression Standardized Residual‐Hypothesis Test 5  60  Figure 5.10: Frequency Distribution of Error ‐ Hypothesis Test 5 ........................................... 60  Figure 5.11: Normal Probability Plot of Regression Standardized Residual‐Hypothesis Test 6  ................................................................................................................................................. 62  Figure 5.12: Frequency Distribution of Error ‐ Hypothesis Test 6 ........................................... 62  Figure 5.13: Normal Probability Plot of Regression Standardized Residual‐Hypothesis Test 7  ................................................................................................................................................. 64  Figure 5.14: Frequency Distribution of Error ‐ Hypothesis Test 7 ........................................... 64  Figure 5.15: Normal Probability Plot of Regression Standardized Residual‐Hypothesis Test 8  ................................................................................................................................................. 66  Figure 5.16: Frequency Distribution of Error ‐ Hypothesis Test 8 ........................................... 66  List of Abbreviations BSA  Business Software Alliance  BU  Business Unit  CD/VCD  Compact Disk/ Video Compact Disk  CSE  Computer Science and Engineering  FOSS  Free and Open Source Software  FSF  Free Software Foundation ICTA  Information and Communication Technology Agency of Sri Lanka  IDC  International Data Corporation  IIPA  International Intellectual Property Alliance  IP  Intellectual Property  IPR  Intellectual Property Rights IS  Information System  IT  Information Technology  NEA  Nationwide Enterprise Architecture Standards  NIPO  National Intellectual Property Office OS  Operating System  OSI  Open Source Initiative  OSS  Open Source Software  SME  Small and Medium Scale Enterprises TPB  Theory of Planned Behaviour US  United States  US$  United States Dollar