Computer Crime Research Center


Problems of Software Market in Ukraine

Date: January 27, 2004
Source: Computer Crime Research Center
By: Andrey Belousov

Last years, Ukrainian state services followed recommendations of several foreign mega corporations that stand up only for their commercial interests. As a result of two years of fighting “counterfeit production” we have homeland field of compact disks destroyed (2 of 8 plants are working now at 7% of their project capacity) and now we observe systematic elimination of enterprises and scientific institutions specializing in high technologies field. Tax administration and legal representatives of foreign corporations, close homeland enterprises and seize their computers because they use unlicensed software. Thus observing one law they violate number of other [1].

Arisen situation is moreover a result of long term policy and perspective plans of foreign companies. Unlicensed software for computers IBM-Intel (Microsoft-Intel, “WIntel” and Windows-Intel) was widely distributed from midst of 80 years on the territory of Third World countries. Unlicensed software was spread only for this only platform and it was the only industrial platform for which it was possible to buy hardware without any software. The last circumstance is significant because this was the way most common and less well-provided customer acted.

It is also important in the view of strategy. For example it was almost impossible (it is still impossible now) to buy Apple Macintosh, Sun or SGI computers (platforms competitors of WIntel) without pre-installed software, as it has never been sold without software. In a result, cases of pirated software usage on these platforms were single. But naturally, these computers didn’t get such spread.

Intel-Microsoft union for 15 years almost hadn’t been prohibiting from application of unlicensed software and won a world prevalence in this field as the most used platform.

Situation in Third World countries developed as such: in case of tough software policy there was no PC market at all because the cost of commercial software, as a rule, was in several times higher of PC cost and government did not pay any attention to development of own software field for a long time. Having followed consequently the policy of hardware wide sales that was entailed by stolen software, WIntel managed to build complete hardware markets that depend now on software application policy. Essentially, two corporations became what they are today due to this policy. Intel directly and indirectly (license of production) had received already and is receiving its money for processors and other hardware. Having developed a market, Microsoft not only increased software sales (especially corporate editions), but also there is a long term trend of dependence on one software developer.

Toughening of license policy started exactly in the end of last century: tens of countries, tens of thousands of firms and hundreds of thousands (if not millions) individuals suddenly found themselves in lists of “criminals” and “debtors”.

Internal situation in Ukraine is also important. In spite of absence on the market of Ukrainian pirate production, there are many shops on the streets of cities that sell unlicensed production (mainly produced in Russia). It is typical that all they have patent for sale and pay taxes – i.e. they exist legally, at least at level of local authorities and relationship with exchequer.

The most important for the majority of Ukrainian users – from individuals to enterprises and organizations – is price. The cost of single-user operating system of Microsoft in box-version is 140-400 USD (cost of OEM version, which is installed only with new computers is starting from 75 USD, like Windows XP Home Edition). The cost of server operating systems of the most used environment – from 869 to 1430 USD, set of office software – from 440 to 600 USD. And here we can make some conclusions:

1. The cost of Intel or AMD computer of the most common configuration today is about 450-550 USD. Thus we see that price of minimum software set is 1,5 -2 times higher than PC cost and it makes computerization impossible for average Ukrainian (as well as for government institutions).

If software cost is 19 times higher than average wage all over the country and data are stored in restricted commercial standards, we can’t speak about “free access of citizens” to technological achievement and important social information, and observance of corresponding constitution norms.

2. Are today’s requirements of foreign software corporations lawful? In any case they do not correspond either real opportunities of average Ukrainian users or general standard of living in Ukraine.

3. Actually today’s unprecedented discounts on Microsoft products in Ukraine won’t affect anything. Further degradation of domestic software field will make Ukraine, first to pay for users training and structure of government information exchange, and then spend every one-two years more and more money on software upgrades from developer. Thus dependence from commercial software of foreign manufacturer will grow along with funds needed for legalization.

4. Microsoft software is referred to category of “corporate software” with commercial (closed) source. User gets a program “compiled” (ready to use) and he cannot get program source and see how everything is realized there [2]. In view of tough measures on national security adopted in USA after September 11, and scandals arisen earlier because of detection of “loopholes” in commercial software, open for secret services of the country-manufacturer (also scandals occurred about different concealed from user programs that identified computer owner, his localization and list of software installed in the given computer). There is no confidence that it is secure to use such software in government or business.

At present there are some phenomena in legal market of intellectual products like: monopolization, obtrusion of product or service, misinformation on real features of the product, active retention of consumer’s dependence, scandal and dishonest advertisement, mass sales of defective products, dishonest competition, violation of different rights of consumers, obtrusion of own state, field, national standards, principles, traditions and restriction of natural freedoms of person, full absence of assurance and balance of obligatory rights for counterparties usual in civilized market.

5. Orientation only to software of foreign commercial manufacturer lead to such consequences:

a) outflow of significant funds abroad;
b) elimination of home high tech fields, corresponding professions and training schools as such.

Thus such field will be excluded from national economy. It is possible to counteract this process by developing for state sector (for all fields) of information systems based on open solutions (described, and without any restrictions on use), protocols and data formats, and hence also by way of organization of government contractual work for this important field.

As experience shows, software developed in Ukraine (standard reports exchange, bank data transmission, accounting programs) is not so complicated at present. At the same time there are some developments in Ukraine (and Russia) that are quite competitive with foreign (in field of developing Internet applications, data bases support, fonts recognition and etc.). However, foreign software put more and more growing pressure upon these products and, in the end, it replaces them from local market because of better support and advertisement. Accordingly, structure of productive potential of the country is changing: less and less experts are engaged in scientific technical sector, and most of them get to distribution departments of foreign companies-monopolists and do not take up own developments. Hence, own schools of technologies are interchanged by certified courses of foreign companies.

Domestic high tech field needs national development programs and balance of world integration processes and objective national interests, balance between interests of foreign and local business. Level of technological, humanitarian development is decreasing fast without this balance. Number of countries solved or are solving similar problems.

Solution’s main point is that there is full functional software in the market, similar (in some cases more profound) to software of Microsoft (and many other developers of commercial soft with severe restrictions on use and modification). Such software is distributed according to so called GPL – General Public License (or other similar types of licenses like BSD or Public Domain), including freeware (cost of the carrier or “compilation”, i.e. remuneration of adaptation efforts and set of tools for this or that class of users). The most spread name of such soft is “Open Software” or “Open Source” (open or with open source).

One of the most important advantages of open software is low price of new programs development – due to opportunity of unlimited repeated use of the source developed for other products.

Main principles of such licenses are: opportunity to apply such software on any purposes, free access to source, opportunity to research into mechanisms of program functioning, research into principles applied, using any parts of source in other programs and purposes, modifications for solving problems of the concrete user, opportunity to copy (replication) and public distribution of copies, opportunity of modification and...

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