On September 13, 2006, Microsoft Corporation (Microsoft), the world’s largest software company, announced that it planned to launch prepaid software cards in India. According to the company, these prepaid cards, similar to mobile phone prepaid cards, would enable users to buy Microsoft’s software and use it for a limited time period.
One of the objectives of this initiative was to counter the problem of software piracy by making it easier to purchase the company’s software, instead of having to incur a large one-time cost. Craig Mundie, chief research and strategy officer, Microsoft, said, “In Brazil, we are testing the pre-paid card and we will launch it in India. This will be one of the alternate models to fight piracy.”
Software piracy was a major problem for Microsoft in most emerging markets such as China, India, Brazil, etc. With regard to India, Microsoft said that pirated software accounted for approximately 73 percent (as of November 2005) of the software available in the country.
The high prices of original software products were believed to be one of the main reasons for the high proportion of pirated software. Kiran Karnik, President of Nasscom , said, “One of the most important factors that encourage piracy in India is the high cost of commercial software-the street price of software forms one-sixth the price of acquiring the computer.”
Although the prepaid software system was expected to help Microsoft counter the software piracy problem, it was actually part of a larger business development initiative termed as Microsoft’s “FlexGo” program. The “FlexGo” program, announced in May 2006, was a pay-as-you-go computing model that was developed to increase Microsoft’s business in emerging markets by ensuring that PCs were made more affordable for low income users.
Under this program, an individual could purchase a PC by making an initial payment equivalent to one-third of the total cost. A third-party financer was brought in to pay the remaining cost of the PC to the retailer, on behalf of the individual.
The individual also agreed to purchase 800 hours of computing time on their PC at a predecided hourly rate. The cost of the 800 hours included the re-payment to the financial institution (including interest). The individual user could then purchase this computing time through prepaid cards depending on their usage requirements. Microsoft ensured that these prepaid software packs were easily accessible through various distribution channels such as convenience stores (for scratch cards), ATMs, and even the Internet.
Moreover, once the individual user purchased the 800 hours of usage time, no further additional payments were required to use the PC. Analysts noted that as developed markets had become saturated, Microsoft was looking to tap developing markets as well as counter the piracy problem it faced in these markets.
The “FlexGo” initiative was also considered as a win-win situation for the end user, PC manufacturer, and Microsoft. This system was expected to smooth out the costs of affording a PC, which would be especially useful for low-income consumers who had unpredictable income flows. Moreover, Microsoft said that it would earn the same revenues from this new system as it did under the traditional model.
With regard to India, Microsoft was reportedly in advanced stages of discussions with hardware vendors like Intel, HCL, Lenovo, and financial institutions like ICICI Bank and Bajaj Auto Finance Limited to market its prepaid software.
However, a few experts opined that, it remained to be seen how Microsoft would implement its prepaid computing initiative in India, given the high proportion of assembled PCs, easy availability of pirated software, lack of awareness of IPR laws, and cultural differences. It was also felt that any anti-piracy initiative would need to be supported by the legal enforcement system.
One of the objectives of this initiative was to counter the problem of software piracy by making it easier to purchase the company’s software, instead of having to incur a large one-time cost. Craig Mundie, chief research and strategy officer, Microsoft, said, “In Brazil, we are testing the pre-paid card and we will launch it in India. This will be one of the alternate models to fight piracy.”
Software piracy was a major problem for Microsoft in most emerging markets such as China, India, Brazil, etc. With regard to India, Microsoft said that pirated software accounted for approximately 73 percent (as of November 2005) of the software available in the country.
The high prices of original software products were believed to be one of the main reasons for the high proportion of pirated software. Kiran Karnik, President of Nasscom , said, “One of the most important factors that encourage piracy in India is the high cost of commercial software-the street price of software forms one-sixth the price of acquiring the computer.”
Although the prepaid software system was expected to help Microsoft counter the software piracy problem, it was actually part of a larger business development initiative termed as Microsoft’s “FlexGo” program. The “FlexGo” program, announced in May 2006, was a pay-as-you-go computing model that was developed to increase Microsoft’s business in emerging markets by ensuring that PCs were made more affordable for low income users.
Under this program, an individual could purchase a PC by making an initial payment equivalent to one-third of the total cost. A third-party financer was brought in to pay the remaining cost of the PC to the retailer, on behalf of the individual.
The individual also agreed to purchase 800 hours of computing time on their PC at a predecided hourly rate. The cost of the 800 hours included the re-payment to the financial institution (including interest). The individual user could then purchase this computing time through prepaid cards depending on their usage requirements. Microsoft ensured that these prepaid software packs were easily accessible through various distribution channels such as convenience stores (for scratch cards), ATMs, and even the Internet.
Moreover, once the individual user purchased the 800 hours of usage time, no further additional payments were required to use the PC. Analysts noted that as developed markets had become saturated, Microsoft was looking to tap developing markets as well as counter the piracy problem it faced in these markets.
The “FlexGo” initiative was also considered as a win-win situation for the end user, PC manufacturer, and Microsoft. This system was expected to smooth out the costs of affording a PC, which would be especially useful for low-income consumers who had unpredictable income flows. Moreover, Microsoft said that it would earn the same revenues from this new system as it did under the traditional model.
With regard to India, Microsoft was reportedly in advanced stages of discussions with hardware vendors like Intel, HCL, Lenovo, and financial institutions like ICICI Bank and Bajaj Auto Finance Limited to market its prepaid software.
However, a few experts opined that, it remained to be seen how Microsoft would implement its prepaid computing initiative in India, given the high proportion of assembled PCs, easy availability of pirated software, lack of awareness of IPR laws, and cultural differences. It was also felt that any anti-piracy initiative would need to be supported by the legal enforcement system.