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.

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