Microsoft: More Price Cuts
March 13, 2009
ZDNet in the UK reported here that “Microsoft Gives Discounts on Software Licenses”. I have been watching for discount and bundle offers. The ZDNet.co.uk story added some useful information to my stockpile. The most interesting comment in the article was:
One special promotion is ‘Simplify and Save’, which offers savings of 15 percent for those who consolidate at least two existing licence agreements into an Open Value agreement. Microsoft said the discount will run for the entire length of a three-year licence deal. Another offer is for between 15 percent and 25 percent off the price of the licence and the Software Assurance costs of running Exchange Server, Office Communications Server, SQL Server, Office SharePoint Server, Visual Studio, Office Project and other Microsoft software.
If accurate, these price cuts are similar to the old fashioned “price wars” that raged between Clark Oil Company and the Standard Oil Company gas stations on Prospect Avenue in 1960. The idea was that the lower price would pull fuel purchasers to the pumps of the lower priced fuel. Microsoft Incentives strike me as pointing in this direction. Click here for the Incentives page.
If my recollection is accurate (keep in mind that I am an addled goose), the gasoline came from refineries and was, for all practical purposes, chemically the same. Skip the marketing jargon. The fuel ran commodity engines.
Is a price war in enterprise software in general and enterprise search similar? In my opinion, “No.” Information is not a product cracked at the local refinery. Vendors and the naive want software to be “one size fits all” or to sustain the analogy “one fuel for any gasoline engine”.
Information looks like a commodity to the uninformed. Information gets value from context. Context is particularized. A price war may help one company starve its competitors of revenue. The licensee may find that the low cost solution is not the one that suits that organization’s information context.
I am not sure how many companies will respond to the Microsoft drift toward a price war. This might make great business sense for Microsoft. I think it may create some sticky wickets elsewhere in the enterprise software ecosystem. Price cuts can habituate buyers to discounts. Once a lower price mentality locks in, the seller has to find other ways to pump up revenues. A misstep can destabilize the economics on which the price cut was based. The house of cards could collapse under certain conditions. I wonder if the present economic climate presents those conditions.
Stephen Arnold, March 13, 2009
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