Microsoft blames costs and competition for higher pricing

The software giant doesn't operate on a 'single global model', says local MD Pip Marlow

Microsoft Australia boss Pip Marlow has blamed labour and rental costs, compliance with local laws, customer perception and increased competition for up to a 70% price disparity between the company’s products in Australia and the United States.

Marlow, who was the final IT industry executive to be grilled at the parliamentary inquiry into IT pricing on Friday, defended the pricing differences, saying Microsoft doesn’t operate on a single global model and the “way we compete in each country can be quite unique.”

She added that it was “the most competitive time” she had experienced in her 17 years at Microsoft and if the company prices its products too high, customers will vote with their wallets and the company will see its sales decline.

Earlier today, Adobe’s ANZ managing director Paul Robson, was also questioned about price differences between Australia and overseas countries for Adobe’s popular design products. He suggested that if Australian customers don’t see the value of Adobe’s software, they can buy a competing product, take a trip overseas or import the American version.

Labor MP Ed Husic highlighted an anonymous email he received from a Microsoft channel partner recently stating that the partner was paying 50 per cent more for identical downloaded Microsoft software in Australia than the US. This represented an additional cost of $33,000 per month, which is passed on to customers.

“How is it that Microsoft partners feel that even they are being overcharged on products that they feel they have to pass that price on?” Husic asked.

Marlow said she would not comment on a confidential email but claimed cost structure, customer perceptions and the competition that Microsoft has in the market affected pricing.

Similar to the earlier Adobe hearing, committee members repeatedly asked Marlow, using several examples, to explain why the software giant justifies charging more for products in Australia compared to countries like Canada, Singapore and the United States. In one example, there was an 86 per cent price differential between markets.

Marlow said that Microsoft doesn’t have a “standard price” for its products because it doesn’t believe that every market is the same.

“If you are selling into an emerging market for example where the cost of living and the availability of technology, customer perception and competition may be completely different to [another] market.”

Marlow suggested that competition from free products – such as open source solutions – was also a factor.

Consumer advocacy group Choice has previously lambasted IT vendors for differential pricing, calling on them to back up claims that there are unique costs to doing business in Australia.

The IT pricing inquiry was established in May last year to examine if there was a pricing disparity between Australian pricing for hardware, and software and other digital goods and prices in the US, United Kingdom and the Asia-Pacific.

Husic was a key player in the establishment of the inquiry and the Labor MP had previously called on the three vendors to front the inquiry.

In February Adobe, Apple and Microsoft to were summonsed to appear at today's hearing.

Tags IT pricingPip MarlowMicrosoft

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8 Comments

Peter Bastable

1

"Microsoft Australia boss Marlow...... the company prices its products too high, customers will vote with their wallets and the company will see its sales decline."

They changed the pricing from a Perpetual licence to annual subscriptions because they are driven by Control. This huge difference in pricing is nonsence and has been going on for years (and now an expensive AUD). The big cost difference is because Australian subsidiary management have limited ideas, out of touch, talkers, not doers, they are petrified by and look with awe at American bosses.

Enigmatic

2

TRANSLATION: We screw people out of as much as we can get away with and still keep them as customers. What's your problem? Nothing to see here, move along... move along.

Kat

3

And they honestly wonder why their software gets 'pirated'? Windows 8 will be my last Microsoft OS, their pricing and increasingly ridiculous licencing requirements have gone WAY beyond what's acceptable. Combine that with this filthy scheme to push users into the 'cloud' with subscription-based programs and it's the final straw. Linux Mint (Cinnamon) is in a VM here, and is proving to be every bit as good as Windows, but without the threshold-of-pain pricing or the frankly offensive licencing restrictions and push to the 'cloud'. So long, Microsoft, it's been a long time now (since Win 3.1) but you've blown it as far as I'm concerned.

Enigmatic

4

Kat, I love how you single out Microsoft and pick on them, when Apple are charging 70% more for iTunes purchases, even though we all use the same servers (ie no wage, rent or tax issues).

Why don't you boycott them as well? At least with Microsoft, they do actually have a presence in Australia, which means they do hire people, rent space and pay taxes here. Apple do everything offshore and claim that it is the Australian trade commissions that is telling them to set their prices higher!

gnome

5

Nice try, Enigmatic, to try and teflon out of accurate comments by saying 'Ooh, look, somebody else is even worse.'

As for MS having a presence here, your comments might have more substance if all the (excess) profits garnered weren't remitted straight back to head office.

Enigmatic

6

gnome, I was simply pointing out that there are 3 companies here, all of which are doing the same thing, but Kat seemed to just single out Microsoft.

I just dislike MS bashing for the sake of it. Either bash them all or bash none of them, but don't pick and choose who to focus on.

gnome

7

Fair comment, Enigmatic.

Though I do note that Kat was referring to OSs, while your response related to iTunes. However, your final point about 'the Australian trade commissions', etc, was dead right!

IT_Observer

8

it really bad the situation here now, Micro$oft has decided to "rent" the software instead of a perpetual licence, also the terms are for 1 user; previuosly it was for two computers.
The most evil IT baddies are: Adobe, Microsoft, Apple, Autodesk and some more out there.
One thing is to sell the software on disc and other is to exploit the ignorance of many people who don't know what is the "cloud", in hat environment you do not have control over your work because the small print gives the software company full access to any work created with any software that uses the said "cloud" services.
I prefer either a disc or at least a program that can be installed locally in the computer in a permanent basis; not to be controlled by those companies that have unjustified fears that some people will "pirate" their programs.
To this extent is that those who cannot afford will do anything to have the program they want through the web or bought in any unknown place for a little amount of money.
Instead of persecuting these people, the software companies should understand that with higher prices nobody will buy anything, with a reasonable pricing peoplewould be able to buy, also the upgrades should be very cheaper, after all the losers are the software companies that are out of touch with the reality due to the constant greedy and arrogant attitude towards the users.
the open source community are a very good example of why they can strive on areas of great interest.
Linux may not be equal than Windows but has demonstrated the determination of many to make a real challenge to the established software companies, why software must be free of any kind of bias, not just the monetary gains which can come second place.

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