To reduce piracy of its products in one of the hotbeds of this type of theft, Microsoft is instituting a price break on Office 2007 Home and Student Edition in China, to remain in effect through next week. The short timeframe suggests this may be a test offering. I would surmise that the end date will be extended further, and perhaps to more products, if results are at all positive.

The price change is from 699 yuan to 199 yuan, the equivalent of $102 to $29, says Reuters. The article goes on to report that pirated copies of this software can be purchased in China for under 10 yuan.

Earlier this month, Microsoft reported that its numbers show software piracy by percentage of the market is highest in Montenegro, where the rate is 83 percent, a figure that cost the country $7 million last year, according to the International Herald Tribune. China's rate, while just barely lower, equates to a much larger dollar loss, compared to tiny Montenegro.

And in January, the Business Software Alliance sponsored a survey, "The Economic Benefits of Reducing PC Software Piracy," carried out by IDC. Not surprisingly, the hotbeds of piracy stand to enjoy the largest benefits to their economies if they can lower the rates of illegal purchase and use. The surveyors concluded that if China could make a 10-point reduction in software piracy between 2008 and 2011, from 82 percent to 72 percent, it could realize $20.5 billion in economic growth, $1.6 billion in tax revenue, and 355,000 new jobs, many of them highly skilled and highly paid.

Coincidentally, Red Hat President James Whitehurst is calling for lower software prices in order to enable the Indian economy to benefit further from technology, and to increase his company's market share, of course. The Business Standard quotes Whitehurst as saying:

We should empower Indians and reduce the digital divide. They cannot afford dollar-denominated software. For PCs to be affordable by every household, the cost of basic software has to reduce or else piracy will only go up.

In some areas, clearly, piracy couldn't get much worse. Open source vendors like Red Hat need to be mindful that if Microsoft has to take pennies on the dollar, as opposed to the zero dollars it earns when its software is pirated, it's prepared to do so.