What is software? For the average IT user it's a simple question. It's that stuff that arrives on a CD that runs on a computer and allows you to do things.

But for governments and legislators, it's been a thorny issue since the industry began. Much of the law relating to software pigeonholes it alongside unrelated copyrighted products such as music.

For software vendors, it's an enormous problem, debated at length in Brussels recently at the latest meeting of the Business Software Alliance (BSA). The BSA is basically a vendors' club, a lobby group to influence government legislation worldwide and to promote the economic benefits of the industry.

Inevitably the BSA's biggest issue is piracy, which it estimates costs vendors one-third of their potential revenues in Western Europe, the equivalent of $3bn in lost tax revenues and employment opportunities.

It's easy to have sympathy with the BSA, and anyone can understand the need to eliminate the dodgy market seller shifting illegal copies of Windows.

But the organisation remains a bete noire for corporate users. While companies recognise their duty to ensure software is used legally, many privately object to what they see as the BSA's heavy-handed approach to policing corporate piracy.

Ask honest users why they are sometimes guilty of unintentional piracy - such as installing too many copies of Microsoft Office - and they point to the complexity of vendor licensing terms and pricing policies.

The BSA insists software administration is not that difficult. But listening to its deliberations in Brussels, it struck me that helping users was the least of its priorities. It invests heavily in education, explaining to companies about copyright laws and legal responsibilities, but I heard little evidence of a desire to listen to users and change the way vendors operate for the benefit of all.

Microsoft's BSA representative told me that you can't have free software or you'd have no software industry, but perhaps he needs to view the future in a different way. A radical new pricing and licensing model could be an answer to many problems, for vendors, users and legislators alike.

Don't pay for software at all, pay for how it is used. Install as many copies of Microsoft Outlook as you like, but pay by the number of emails sent. Vendors could mandate the installation of usage monitoring software to create a model similar to US local telephony, where phone calls are free but charges are levied for using additional services.

Users would benefit, because costs would be directly related to their business activities and income streams. And the software industry would benefit by having annuity-based revenues to insulate vendors from an industry slowdown. One reason so many suppliers are reporting disappointing financial results - Microsoft, i2, Siebel and SAP in the last week alone - is because in tough times users can't afford large, one-off initial fees.

Corporate piracy would be eliminated because users would be free to install as much software as they like, but with a control mechanism in place to ensure vendors receive the revenue they are due.

It would be a difficult change for vendors to make, but not impossible. The software industry is rightly proud of its creativity and innovation, so it's perfectly placed to develop the capability.

The BSA says software piracy cost more than $11bn in 2000. The potential return on investment to move to a more user-friendly licensing model is immense.