It's often said that software piracy damages business. It does, but not for who you think it does.
When someone uses a pirate copy of Microsoft Office to write letters, do their household finances and keep track of their CD collection, this does no harm to Microsoft; because they would never have paid £500 for a copy of Microsoft Office anyway, even if they could not have obtained a pirate copy free. Rather, they would have searched for a less expensive office suite offering the functionality they needed -- or even stuck to good old-fashioned notebook and pencil.
Now supposing someone decides to release a basic office suite, with sufficient functionality for the needs of most users, and sell it for £50. A user with a brand new computer has a choice: Pay £500 for Microsoft Office, pay £50 for Cheap and Cheerful Office 2013 and save £450, take a pirate copy of Microsoft Office and save £500 or take a pirate copy of Cheap and Cheerful Office 2013 and save £50. Paying for CaCO13 actually makes better economic sense * than not paying for it, but the pirate copy of Microsoft Office is the clear winner.
When, not if, the vendors of CaCO13 go out of business, it will be because of software piracy -- even although no-one need ever make a single pirate copy of Cheap and Cheerful Office 2013.
And it isn't just Microsoft Office, of course. There's also Adobe Photoshop (for holiday snaps) and Dreamweaver (for creating web sites), and AutoCAD (for drawing diagrams, dressmaking patterns and so forth).
Microsoft, Adobe and others tolerating rampant piracy is a deliberate tactic to eliminate competition, by saturating the market with freely available software. They have nothing to lose from it anyway, since the pirates would most probably have bought a competitor's product. What is more, this creates a huge pool of self-taught users of the major players' software. If an amateur photographic artist, who already uses an illegal copy of Adobe Photoshop for their art, gets a job editing photographs, then it makes sense for their new employers to purchase the tool with which they are already most familiar. Had they used some hypothetical inexpensive alternative software instead, they might have suggested it to their new employers, who might again have purchased the tool with which the employee was most familiar -- this time, from the small, independent software vendor, to Adobe's detriment.
Another loser from pirated software is the business that uses only legitimate, fully paid-up software. When faced with an unusually large order, a business might have to take on additional staff, and so pay more for additional software licences for them. This will create an additional cost for the job, which will have to be reflected in the price offered and could only be offset against guaranteed future purchases. (In this economic climate? YMBK.) A rival business using pirated software would have no such increased overhead cost when taking on extra staff, and could undercut the competitor.
Although the big software vendors focus their attention on businesses
and prosecute offenders heavily, and to much publicity, there are still far too many firms getting
away with software piracy.
And lastly, but certainly not leastly, pirated software harms the Open Source movement.
Freedoms Zero (the freedom to enjoy the use the software) and Two (the freedom to share the software) can be taken by force if necessary (this, if nothing else, is what piracy is). Most people are not programmers, and cannot fully appreciate the value of Freedoms One (the freedom to study the workings of the software) and Three (the freedom to adapt the software to one's needs) -- freedoms in the practical exercise of which the Source Code, something jealously guarded by proprietary software vendors, is highly desirable. This, in turn, is perhaps something that programmers cannot fully appreciate, if their worldview is that of a programmer ever seeking to improve software incrementally towards perfection. Nonetheless, the fact that a particular freedom has perceived importance only to a minority should never be an excuse to permit it to become abridged -- to do so would simply be discrimination. (And those who perceive Freedoms One and Three as important, perceive them as fundamental.) To the majority, Freedoms 0 and 2 are sufficient; this may be unfair, but we have to work with it for now.
Open Source software competes fairly with pirated software on price; and has traditionally been behind in features but has now overtaken proprietary software in some areas. This has come about because of both stagnation in the proprietary camp, and continued progress in the Open Source camp -- accelerating with the growth in user numbers, for even a complaint can lead to an improvement. Nonetheless, a perception remains that it must be somehow ... unsophisticated, if people feel the need to give it away. It is also disadvantaged by businesses continuing to use proprietary software (because most of the workforce are also using pirate copies of the same software).
The reality is, every pirate copy of Microsoft Office is a lost "sale" of LibreOffice, OpenOfficeOrg, Calligra Suite, Trinity Office, or any number of other lesser-known Open Source projects -- a missed opportunity to educate someone in the use of an alternative product, who might go on to influence others to use it. In the case where a lesser-known project is chosen, it can actually influence the project positively by providing feedback, creating interest and tempting other users to try it and maybe keep it. And every pirate copy of a newer version of Windows than was originally installed on a machine (a tactic which is often unsuccessful, due to the tendency of proprietary software to increase its demands to match improvements in hardware as proprietary developers are given the latest, fastest workstations; therefore, proprietary software is sub-optimal on older, slower hardware with less RAM and disk space. Some Open Source developers are forced to work with less than the newest hardware, and make a deliberate effort to improve performance on slower hardware and limit memory requirements) is a lost "sale" of a complete Linux distribution.
We should not take violations of proprietary end-user licence agreements any less seriously than we take violations of the GPL. Copyright law is ultimately what keeps the Source open; and this is what Microsoft, Adobe, AutoDesk et al are subverting when they subvert copyright law to their own ends by enforcing it selectively. If users do not wish to pay for software, that is their choice: but they should accept the gift of Open Source software, and not make unfair of proprietary software. For it is unfair: unfair to the legitimate users who pay, and unfair to the competitors whose work is spurned for something that its users should not even have.
* The fallacy is: You actually save a full £500 by not paying for Cheap Office, if you aren't paying for MS Office either.