blog A great analysis piece was published on local cloud computing media outlet BoxFreeIT last month on why Australians pay more for Microsoft’s Office 365 software as a service suite. It goes through various issues such as the exchange rate (and Microsoft’s internal exchange rate), taxes, support, Telstra’s support and sales costs, billing, the partner channels and so on.

The author of the article, Microsoft Office 365 MVP Loryan Strant, outlines his thinking on the issue further on his personal blog, The Cloud Mouth:

“Like many Microsoft partners I agree that the price of Office 365 is substantially high when compared to that of the rest of the world. I have to explain this to about 10% of prospective customers that I speak to. The difference between myself and many of the other partners “selling” Office 365 is that I can explain why the price is higher using logic and reason … and facts. How did I get these facts? I asked. They made logical sense to me.”

You can find more information on Microsoft’s Office 365 pricing markups last year here. The company, along with its partner Telstra, has, however, recently cut its Office 365 prices in Australia, in line with similar international cuts. I don’t buy Strant’s argument on this front entirely, but his thoughts do make for interesting reading in the context of the Federal Government’s plans to hold an IT price hike inquiry shortly.

Image credit: Microsoft

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1. Michael Wyres
   Posted 10/05/2012 at 1:34 pm | Permalink | Reply

   I love a good “prike hike”…or perhaps that should be “price”?

   :o)

   • Renai LeMay
     Posted 10/05/2012 at 1:46 pm | Permalink | Reply

     :P Fixed.

2. Daniel Myles
   Posted 10/05/2012 at 2:41 pm | Permalink | Reply

   I stopped reading his attempt at justification when he mentioned Microsoft using “their own internal exchange rate”. Like seriously wtf.

   • Moshe
     Posted 10/05/2012 at 3:44 pm | Permalink | Reply

     Couldn’t agree more. Explaining the price disparity through Microsoft’s internal exchange rate where 1 AUD = 0.83 USD is the best evidence for price gauging Australians could ever hope to come up with.
     The real question is how these “facts” “made logical sense” to anyone.

     • Stephen
       Posted 10/05/2012 at 5:01 pm | Permalink | Reply

       Indeed, the ‘internal exchange rate’ seems to be a made up figure to justify a hefty advantage in MS’s favour. Even if they were hedging currencies that would be in their investment position, not on-costs to customers. The exchange rate should be roughly the same for everyone, I seriously doubt MS is getting a much worse rate than I am!

     • SLDR
       Posted 10/05/2012 at 7:07 pm | Permalink | Reply

       As Microsoft have an internal exchange rate, so does Oracle.

       Strangely the Oracle rate is similar to MS and “fixed” at the low Aussie rate…

       • Renai LeMay
         Posted 10/05/2012 at 8:10 pm | Permalink | Reply

         Dodgy.

3. Gav
   Posted 10/05/2012 at 3:03 pm | Permalink | Reply

   I like the classic ‘reasons’ like exchange rate and location. Exchange rate… Umm, a year of parity plus shold put that excuse to rest. Location… All these products are burnt and packaged in SE Asia, and are actually CLOSER to Australia than the US or Europe.

   Other one is economies of scale, which is just as big a furphy. Send 10 of something, EoS is important. Send 100, less so. 1000, even less so, and the savings between 1000 and 10,000 is pretty much non-existant.

   When it costs around $10 to burn and package a PS3 game, the transport costs per unit arent going to be large. So any savings from those economies of scale drop off very quickly. If it costs $2 per unit for 100, and $1.50 per unit for 1000, its not going to be a big savings when you hit the next tier.

   So why DO we pay more? Convict tax?

4. Daniel
   Posted 10/05/2012 at 6:00 pm | Permalink | Reply

   I did a breakdown of the arguments presented in the original article on the BoxFree IT site. Hopefully my logic is, well, logical…

5. Nich
   Posted 11/05/2012 at 12:40 pm | Permalink | Reply

   How long has that specific internal exchange rate been in play for?

6. Simon Shaw
   Posted 11/05/2012 at 12:53 pm | Permalink | Reply

   OK… So it mostly boils down to this internal exchange rate eh? I think they need to review it and then tell us why similar rates aren’t in place in other countries.

   I buy software in places such as China, Mongolia, Kazakhstan, Russia, South Africa, UK and they are ALL cheaper than in Australia.

7. Gordon Edwards
   Posted 13/05/2012 at 10:09 pm | Permalink | Reply

   I can’t help feeling that Australia has shot itself in the foot when it comes to software prices.

   We are supposed to be a “Clever Country”, according to Paul Keating — you know, the world’s best treasurer. So why don’t we have our own software?

   Eh???

   Okay, we never learnt how to write software. Or maybe our programmers saw more lucrative futures off-shore. But, how many people use (for instance) Lotus SmartSuite? I know lots of businesses use Lotus Notes, simply because it outperforms Outlook — but why tie Notes to Office?

   I’m rather tired of unending complaints we’re being screwed over. WE are the ones screwing ourselves, simply by refusing to pursue excellence.

   I was managing a small NGO some years ago. Politically as well as for IT security, we had to separate ourselves from Microsoft, at least by refusing to use Office. Of about 25 volunteers straw-polled on our choice to use Lotus, 24 asked essentially “Where has this been all my life, where can I get it?”

   BTW, Lotus SmartSuite came in at around half the price of Office, IIRC. We were also one of the very few NGOs to use VET antivirus, which was written and developed here in WA.

   For a people who like to be thought of in the Lawson mould (tall, bronzed and irreverent), we really are a mob of whingers.

   Gordon.

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