Ponderous Piracy Problem - Russia

Position Paper 1997 Duane Goehner


Problem Observed

The piracy puzzle that exists in Eastern Europe is an incredible challenge for software producers. In Russia alone, with an estimated 94% software piracy rate [1], millions of dollars are lost each year. Russia is embracing high technology at a phenomenal rate. They need software, but what will be their source?

In the last few years, computer shops and open-air markets have made computers readily available. Kiosks are popping up on every corner. Besides selling snacks, vodka and cigarettes, they often offer other wares: software, videos and music. One day, out of curiosity, I bought a CD-ROM I saw displayed in a kiosk. It contained the full version of Win 95, Office 95, and dozens of other software titles…all for the wonderful price of $3. I already owned the legal versions of the titles, but I bought it to really see what was available in the Russian market. People pass around software at work and among friends. With the increasing use of CD-ROM, the problem will only escalate.

Adding to the dilemma, the use of the Internet is growing rapidly. ITAR-TASS reports that the number of ISP's has increased five-fold in Russia over the past two years to over 400 [2]. (A friend of mine is the director of an ISP. She has told me that business is booming!) Piracy via the Internet is an ever-growing problem. It is not just teenagers surfing around for free games. Businessmen and professionals learning of the plethora of "free" software download millions of dollars worth. Not only is the piracy problem affecting the bottom line investment of companies such as Microsoft, it is hindering the growth of the Russian domestic software industry.

Problem Roots

While the problems may relate to illegal activities (from our Western minds’ eye), the real causes go much deeper. Several factors are often ignored when people devise solutions for Eastern European problems. Although there is incredible potential in the market, there are some major barriers that must be considered: the country’s economic conditions, the political climate, the moral reference point of the people, and their character and culture.

Communism dealt a horrible blow to the belly of the Russian economy. A country rich in natural reserves and human potential slumped to the ground in pain from the impact of economic mismanagement and narrow-minded policies. This domestic financial crisis reaches right into the pockets of Russia’s "Alexanders" and "Ekaterinas" of today who are trying to earn a meager living. "We have no money," says Alexander Ostroumov, a professor of applied mathematics at Moscow State University. After purchasing a CD-ROM tutorial on an advanced programming language for $5 (which legally retails for $400), he said, "This is the only way to study it (the language), this is the only way to learn. [3]" Many of the colleagues I worked with, some of them University professors, are attempting to live on $100-200 a month salary! The present financial strain on Russia’s population is a factor in software pirating. Consider a Russian on a low income: Will he buy a $50 CD drive and get unlimited cheap software or buy individual software titles for $250 each?

Politics certainly play a role in the piracy problem. Watch any news program and you can see that the political climate in Russia and other former Eastern bloc countries is unpredictable. The operative word is "unpredictable." Things change quickly. The shifting sand is not only in government. Business relationships change frequently too. In trying to get things accomplished, more often than not, it is not what you know, but who you know. In Russia, there is a huge proportion of unqualified people doing momentous functions. The job or power that they hold was not obtained because of their abilities, but rather, their affiliation. Some people hold on to positions simply by knowing whose back to scratch. Knowing how to network with the right people can bring about incredible results in Russian business. For me, knowing someone who knows someone has opened previously impermeable corridors in Russia. Furthermore, a clear understanding of the rigid cultural class system is essential. It is no wonder that many Americans run into brick walls when trying to work through the soviet bureaucracy that is still alive and well. Enforcement of laws and the cooperation of officials are dependent much more on relationship, power, and prestige than on any laws actually written in a law book somewhere. In fact, often there are contradictory laws on the books. For instance, the law that prohibits possession of foreign currency is still on the books, even though Yeltsin signed a law that made it legal to own foreign currency. A policeman can enforce the one that he wishes, whichever one, at a given time, benefits him most. You can see why having a relationship with someone in power is very important!

When working in any international market, understanding the culture is essential in effective sales. Seventy years of communism has mired the economic and financial playing field. Like a football player who has trained on a soggy field, the advantage is significant if you know how to play in unusual conditions. I never cease to be amazed at how little investment American companies make into helping their employees understand target cultures. Understanding culture is much more than just speaking the native tongue; it is understanding the motivation and mores of the people and community. One important aspect of working in the Russian culture is the understanding of the moral reference point within the people. It is considerably different than our American perspective.

Russians are much more relational and connected than are most Americans. They are accustomed to community living. This is a major challenge that is faced in piracy prevention. It is hard to break through the psychological barrier that all things should be equally shared by the many. Why shouldn’t a single CD be shared among 50 friends and neighbours? [4]

Russian morality morphs, depending on the relationship. Moral requirements are different for friends vs. business associates. Russians value their personal friendships highly. Generally their friendships last a lifetime. During Soviet times, there was little else to invest in. Friendships are based on trust. Business relationships are not. It is essential to know that the word "businessman" has a negative connotation in Russian culture. Since Russians feel that businessmen are conniving and deceptive, they feel justified in exercising their own forms of trickery and deception. This attitude is coupled with the perception that all Westerners carry around a million dollars in their pocket; thus they feel completely justified in passing around software from one person to another. "Microsoft makes enough off of everyone else," is their thought.

Understanding Russian ethics requires the understanding of the Russian psyche. They hold the belief that they were created to suffer. God is punishing them. (Don’t ever think that communism squelched the spiritual mysticism of Russians. It only drove it deeper.) They must simply learn to deal with the hardships. You will never find a more enduring people. We Americans cannot possibly understand the experiences Russians have undergone from wars, communist oppression, and economic chaos. When you consider these experiences, it is no wonder that Russians’ chief motivator is Fear. There is an innate sense of fear and dread. The fear-motivator must be a key consideration in the piracy issue. [5]

Problem-Solving

Solutions to the challenging piracy problem will take the networking of individuals with backgrounds in engineering, law, business ethics, education and culture. The incorporation of the following ideas, I believe, can lead to much greater success in preventing piracy, not only in Russia, but throughout various areas in Europe and perhaps worldwide.

Cultural understanding cannot be over-emphasized! Americans have a unique worldview. They also have a tendency to lay their worldview upon foreign societies. Although I am convinced our culture has contributed significantly to the successes we have experienced in our relatively short history, our slant does not always translate to success in other cultures. In fact, ignorance can correlate rather well with disaster!

Having an economically appropriate pricing of product is an important consideration. When I priced legal software in Moscow several months ago, it was often priced as high or higher than our prices in the USA. Considering the average monthly income for a family is around $100 a month, it becomes obvious that income-related pricing is essential to cut off the pirating. Certainly it cannot be given away, but as part of the re-education of a nation, price-cuts in Russian-language software may be in order.

Re-education goes beyond just the price sticker. The nation needs a new awareness of the effects of piracy. Russians are smart. If they see cause-effect relationships, it will change their behaviour. Anti-piracy education needs to happen on a national scale. Certainly training of Russian educators will be the start of helping upcoming generations come to an awareness of piracy impact on the future. But publicity campaigns can impact the problem now. In big cities, TV ads can not only advertise, but also instruct. In March, Emilia Knight, VP of BSA Europe said one of the first phases to enhance anti-pirating efforts was to raise awareness of software theft through an advertising campaign, educating businesses and the public. It is a good start. From people I have talked to, once they understand piracy’s impact, they look at things differently. [6] Although I have read that companies such as Microsoft have educational programs [7], during my three years of residence in Russia, I never once heard of any.

Russians are very proud people. Their Russian ethnicity is a source of great pride. Last year Bill Gates said that Microsoft’s intentions are to continue investing in Russia and CIS [8]. If some of that investment can be seen as practical to "Russians," they will embrace Microsoft and other software companies more fully. For instance, if they see software companies putting money toward their children, as in some sort of education program, they will be much more likely to invest in companies' successes. The program I directed in Moscow had doors opened to us because the nationals saw how it would impact Russia’s success. It is the sense of "sharing the wealth," even though a great deal more profit will be made than ever "invested."

The moral reference point of fear is very important. Unless Russians begin to embrace Western understandings of morals and values, fear will be an important element to factor into piracy prevention. Personally, I am not one who likes to motivate by fear. In fact, it was something that contrasted my staff from their Russian colleagues at the schools and universities. Yet Russians use it constantly. Children are brought up with fear as a chief motivator…it goes on all through school, then into the rest of life. Although I generally preferred not to use fear, there were times when I had to revert to a "language" the students understood. It was then that without question, I got the correct response so the rule would be enforced.

Practically speaking, there is need for the business ethicists, software executives, cultural specialists, and legal specialists to sit down and dialogue over the fear factor. Fear tactics discussion might include topics like rumour-mongering, special enforcement techniques, subtle means for detecting and reporting illegal use, etc. There needs to be brain-storming of options to capitalize on the fear factor. The future distribution possibilities over the Internet make this a very important discussion matter.

Although software companies generally wants compliance rather than litigation [9], there may be some need for significant, highly publicized legal action to demonstrate the serious nature of the problem. The legal action, carefully taken, could educate without polarizing the people. While Russians generally stand up for their own, their sense of fairness is also highly developed. PR would play an important part of any legal action. Unfortunately, without legal action, there is no sense of consequence…again the fear factor.

Much of the Russian government has its share of corruption. People there have learned to play the political game. They also are quite familiar with bribery. Since accountability is weak, the best method of making sure you get proper action is often to make a lot of noise. When I had problems in Russian business or program development, there were two ways to develop success: know the right people (or find someone who does) and create awareness. Being friendly to the right people, and giving them some reason for helping is usually crucial in getting things done in Russia. Networking gets to the top guy in the office who can direct his underlings into action on your behalf. When that fails, it is necessary to create public awareness of the injustice or incompetence of the area. The squeaky wheel gets the grease! (It helps explain why Russians seem to be screaming and hollering at each other. They get action from each other when they make a scene.)

Russians can be brazen and cunning. Although creative genius was often squelched under communism, it was still very active in certain areas. Some of it went underground. Business was not dead in Russia, just hidden. It has thrived for decades. So, money or material gain has always talked…and still does. Knowing when and how to use this cultural tool of "wining and dining" is quite important. It is sometimes needed to make the cultural connections necessary in government and business dealings. It is playing the political card of relationships.

The piracy problem does not end with Russia. For instance, the supply line of pirated material from China needs to be severed. Piracy prevention success will come about through people working together in various alliances within the problem’s cultural context. The challenges facing the Eastern bloc copyright infringement problem are significant, but certainly solvable with qualified people brain-storming together for a mutual culturally-acceptable outcome.


Footnotes:

[1] Irene Marushko. Survey Says Software Piracy Costs $13 Billion in 1995. (Reuters Business Report: 18 December 1996).

[2] Newsbytes News Network. Russia Has 400 Internet Providers, Computer Piracy Grows. (ITAR-TASS: 16 January, 1997).

[3] Harmon, Amy. Piracy Rules the CDs. (Los Angeles Times: 19 August, 1996). Business, p3.

[4] Ibid.

[5] The moral and ethical bases are considerably more detailed than I have time to present in this brief overview. My experience working in the Russian system with educators, businessmen, students, government officials has provided me with a wealth of understanding of a complex people.

[6] Some of the university and high school students I taught asked me why piracy was wrong. I would tell them a story like this: "How would you feel if you spent two or three years working on the creation of a computer game. You put all your time into its creation. You invested money into the project. You had to take out loans to live and research so that you could create this awesome game. It personally cost you $40,000 to create. The people you borrowed money from were getting on your back because they wanted their money back, plus the interest from the loan. Finally you got the product out. You made thousands of disks to sell to people. You decided to market the computer game program for $20. You paid for advertisement, so that people would learn about your cool game. It was an excellent game indeed! Then two people bought your game. That was your first $40. Then, those two people passed their disk on to all their friends and made the software accessible to anyone who wanted it on the Internet. A million people played your game. But you made $40 after investing $40,000. First of all, is that right and fair? Secondly, how motivated will you be next time to invest so much time and money into creating a game?" Students began to understand the problem and saw things in a new light. They could see the practical impacts of piracy.

[7] Reuters. Microsoft Educates Filipinos On Software Piracy. (Newsbytes News Network: 8 April, 1997).

[8] Dennis, Sylvia. Bill Gates Claims Piracy Hurts Eastern Europe. Newsbytes News Network. (M2 Communications: 9 February, 1996).

[9] Reuters. Microsoft Educates Filipinos On Software Piracy.

 


   

 

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