How much can vendors charge for the click of a mouse button?
Call costs and volume licensing are a hornet's nest
Blogs | 13 Jun 2012 :
Sometimes I find that you can gain some interesting perspective if you look at something in a very naive fashion. By that I mean leaving any preconceived notions you might have about something behind and trying to approach it without any knowledge or expertise.
For instance, several years ago I wrote an article in Business & Finance magazine wondering why the phone companies were able to charge different tariffs for daytime and evening calls. I was surprised that no one questioned a charging regime based on the premise that there should be a differential between day time calls in "peak times" for telephone traffic and off peak night time and evening calls. It amazes me that this still seems to apply today with phone companies charging slightly more for bundles that include anytime calls compared to off peak.
As far as I could see (and still do), the only way that type of charging could be justified was if it served to deter some people from using the phone because the infrastructure would have been incapable of handling the volume of traffic thrown at it if everyone (in work and at home) used it at the same time. There was no extra cost, at least as far as I could tell, for the network provider in handling day time calls compared to evening ones. Still, I suppose I can take some comfort from the fact the differential today for those people in some kind of bundle is nowhere near what it used to be, probably no more than €5 a month.
All of which is a roundabout way of bringing me to the issue of software volume licensing. This was sparked by reports that Microsoft was planning to align list prices across Europe to the euro from the beginning of next month. One consequence of this decision was that UK users faced potential increases in pricing of as much as a third (although this amount reduced significantly within a couple of weeks as the euro declined in value against UK sterling).
Some people might be asking why Microsoft chose to align pricing with the euro rather than the dollar rate which, if applied, would lead to a nice decrease for customers in Europe but we all know the answer (or non-answer) to that one. Anyway, aside from the manoeuvring over currency rates and the effect that has on pricing, it occurred to me that there is a much bigger question behind all this. Why should software vendors increase volume licensing prices at all? In fact, shouldn't they, by rights, be reducing them year on year?
Most volume licensing deals involve nothing more substantial than someone at the vendor, channel partner or customer clicking a mouse to install a copy of an OS, product suite or application on a given server, PC or laptop. There is very little physical expense attached to these types of arrangements. The vendor does not have to ship, for example, 500 physical copies of a piece of software, along with the manual and box to the customer which means it also doesn't need to make them (so that's another cost saved).
So how much should a vendor be allowed to charge for clicking a mouse to install a copy of its software on a customer's hardware? And should any vendor be able to charge different prices in the US and Europe for that mouse click? More importantly, how on earth can any vendor justifiably try and charge more for that process from one year to the next? If anything, it should charge less because all the work in terms of establishing the link to the customer and installing any licensing and monitoring tools necessary to make the volume licensing agreement work has already been done in the first year.
The reality is, of course, that vendors like Microsoft charge whatever they can get away with and so long as people put up with those prices (and even tolerate price increases), vendors will continue to do so. It doesn't take much expertise or knowledge to work that one out but it doesn't stop people from paying up.