Outsourcers: nothing to fear from piracy

This compares to 37 percent in Western Europe, 67 percent in Eastern Europe and 26 percent in Canada and the United States.

Citing these statistics, American companies considering the possibility of doing business in Russia express concern over potential intellectual property violations. This is backed up by the experience of many companies that have offices in Russia. But foreign companies who place orders with Russian programmers don’t consider this a major issue at all.

According to the results of a survey carried out by professor Erran Carmel of American University in Washington, companies that have contracts with programmers in Russia don’t list intellectual property theft among their top ten problems. The companies with large development centers in Russia also suggest a high level of trust, as does the U.S. Department of Energy. These companies include Dell, Intel, Siemens, Motorola, Boeing, GE, Sun Microsystems, Sam-sung Electronics and many others.

Common piracy does not deter American companies from placing development orders in Russia.

The same is true of U.S. companies placing orders in India, the leader in program outsourcing services. The Business Software Alliance puts piracy in India at 70 percent.

Ordinary piracy is indeed common in Russia, but in the 10 years that the country has been developing its outsourcing industry, there has never been a serious case of violation of a foreign company’s intellectual property rights concerning development of programs.

Explaining this usually takes time, however, because of mix-ups with terminology.

The main problem is that several different types of intellectual property violation carry the same name: piracy. The term may be useful for journalists and lawyers, but it is confusing for businessmen, as violations of their intellectual property have many different nuances and many different consequences for their businesses. It is important, therefore, to clearly differentiate between the various types of violation.

The first type is illegal copying of others’ programs for personal use. Illegal copying is of little importance on an individual scale and has real consequences only if it becomes a mass phenomenon. In a way, this kind of piracy can be likened to petty shoplifting. It’s simply easier for the individual user to copy a disk from another computer than to go and buy one. It’s not so much a money issue as an issue of convenience.

The second type of violation is when someone deliberately copies and sells another person’s intellectual product such as a program, or an audio or video recording.

This can be likened to selling stolen goods and can have serious consequences because a single violator can cause considerable damage to the developers of the products and upset the balance on the market.

The third type of violation involves breaking a contract with the company that placed the order and abusing its trust. This is what happens when, say, an American company hires a Russian programming company to develop a new product, and the Russian company then begins to sell the same or a similar product. This is a very serious type of violation similar to robbery.

Companies looking at the possibility of outsourcing in Russia are only interested in the risk of this kind of robbery. This risk in Russia is very low, perhaps even lower than on the U.S. domestic outsourcing market. This isn’t because Russian companies are all amazingly honest. It lies in economic difficulties and cultural traditions. Robbery requires considerable efforts not connected to programming - it’s virtually impossible to sell a specifically created product without a good marketing network and without arousing the suspicions of a relatively small group of professionals.

If a company specializes in programming, it’s highly unlikely that it would want to suddenly abandon its established business and risk losing programming orders to market someone else’s product.

Unlike intellectual property shoplifting, intellectual property robbery requires a great effort and is a high-risk gamble that goes against the style and spirit of program-developing companies.

Essentially, illegal copying for personal use - as well as copying intellectual products and then selling them - is widespread in Russia, but the risk of intellectual property robbery by one company carrying out a contract for another is virtually nil.