Under the Gun.

Argentine software scribes want their money--or they'll call the cops.

LIKE ANGRY PARENTS OF REBELLIOUS teenagers, Argentina's software writers are resorting to threats, force and even humiliation in one of the region's most active campaigns to get users of contraband programs to buy legal permits and software.

And, like balky teens, many businesses still aren't taking them too seriously.

"Up until now, the culture in Argentina is 'Why pay for something if you can get it for free?"' says Alfredo Salas, second vice president of Legal Software, an association of software producers that banded together to fight piracy in Argentina

Of the 15,000 companies identified last year by the alliance as using illegal software, 6,000 have since taken steps toward purchasing legal software, obtaining required licenses and at least partially correcting their situation; the other 9,000 businesses haven't, says the alliance.

In Argentina, an estimated 62% of software is illegal, so the alliance has launched an all-out offensive against those they call pirates. It began with a radio campaign featuring a depressed and unemployed software developer who couldn't feed his family because immoral software copiers cost him his job.

Later, warning letters were mailed to companies believed to be using illegal software. Finally, after a brief truce that ended in November, Legal Software teamed with police to begin raids. Offenders included three government offices.

To crank up the humiliation and send a signal to others, raids were followed by news releases listing the names of the offending companies in bold, black letters. "A few people got nervous because the software people were making a lot of noise, but most of the small and medium companies I know of are still skeptical they will be caught," says Roberto Castellani, general manager of Esabel, a consultant on Web pages, the Internet and business-to-business endeavors.

New laws across Latin America make the use of pirated software a violation of intellectual property, punishable with fines and up to six years in jail, although the maximum is seldom applied. Almost 60% of PC business software loaded onto computers in Latin America is illegally copied, according to research conducted in 1999 on behalf of the U.S.-based Business Software Alliance.

In the United States and Canada, the rate of software piracy is 26%. In Western Europe the rate is 34%, while in Asian Pacific nations it's 47%.

Pay to play. This year alone, some 20 raids have already targeted Argentine companies identified through a complex database that cross-references information like tax statements, number of computers and number of software licenses. Tips from disgruntled workers also help.

To date, a hefty 85% of those raided 'fess up and pay fines--usually up to four times the value of the total pirated software. They must also obtain licenses for all their illegal software, an undertaking that can run about US$3,000 for a modest firm with a dozen computers. "There is a certain amount of fear in the area of information technology right now and they are being very careful about the issue of installing pirated software programs--but it is still done," admits a systems engineer in Buenos Aires.

The crackdowns are hardly the stuff of the movies. In a typical raid, suited police inspectors accompanied by a couple of uniformed cops politely order employees away from their terminals then methodically check every computer in the workplace for illegal software.

"Almost always the managers say 'I don't know why you've singled us out. Everything is above-board.' But then they secretly dash to the systems engineer in a panic to see what they can do," says Antonio Mille, vice president of Legal Software. "Once they're caught, the managers blame the systems guys, who then accuse the finance heads of not giving them the money they need for legal programs. Then the finance guys feign ignorance."

According to industry statistics, a mere 25% reduction in the Latin American piracy would by the year 2002 produce an additional $10.34 billion in sales, almost 300,000 jobs and $3.6 billion in annual tax revenues. Software producers also argue--much like drug companies--that high fees are justified to pay for years of expensive research and development.

"I think the high rate of piracy is partly because people still tend to think of software as something intangible and without economic value," says Felipe Yungman, of the Novell anti-piracy team. "As long as more users pay for the products they use, the prices will fall. Today those who are using the programs legitimately are unfairly absorbing all of that cost.

Market forces, While businesses are increasingly aware of the need to legalize their software, the task is not as easy as it sounds. More often than not, software pirates are using old versions of programs that are no longer found on the market. In order to get legal licenses, companies must purchase the most updated versions of their programs.

"Trying to legalize all the information programs in an average office can be a complete nightmare," says the country manager of a European firm, who asked to remain anonymous. "We have some terminals that still operate on DOS and it is really hard, if not impossible, to find them on the market."

Others argue that the expensive price tags of legitimate software fosters piracy: businesses simply can't afford the legal versions, particularly during an economic slump. "If something is very cheap, you can get your money back in volume since it's not worth the effort for hackers to pirate, therefore you cut down on piracy," says Serge Poulard, an expert in programming for the U.N.'s Economic Commission on Latin America and the Caribbean.

The alliance's campaign is not creating a stampede among Argentine firms anxious to legalize their software, but small and medium businesses often obtain legal permits for a couple of programs to justify the argument that they are working on the problem.

"They don't have a real policy on the issue. They get licenses for some things but not all," says Ezequiel Lazaga, IT manager for CraveroLanis Euro RSCG, who says his company only buys fully licensed software. "They're worried because they know they could be raided, but they haven't really contemplated all the penal and legal consequences."

                              Ahoy, Matey!
                       Latin America PC business
                                software
                              piracy rates
LATIN AMERICA
 Argentina             62%
 Bolivia               87%
 Brazil                61%
 Chile                 53%
 Costa Rica            72%
 Dominican Republic    73%
 Ecuador               73%
 El Salvador           87%
 Guatemala             85%
 Jamaica               72%
 Mexico                59%
 Panama                70%
 Paraguay              85%
 Peru                  64%
 Puerto Rico           49%
 Trinidad & Tobago     72%
 Uruguay               72%
 Venezuela             62%
WORLD REGIONS
 United States/Canada  26%
 Western Europe        34%
 Asia Pacific          47%
STUDY BENCHMARK        25%
SOURCE: PricewaterhouseCoopers.