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Microsoft software is seven times more expensive than alternatives, the latest issue of UK Consumers Association magazine Computing Which? claims today. But although the claim does have some justification, in going for the extreme the magazine misses the byzantine subtleties of Microsoft's pricing machine.

'Nobody ever buys retail' could have been coined for Microsoft Office. Computing Which? cites StarOffice 7 at £44.99 and says it has 90 per cent of the functionality at a fraction of the cost of MS Office, quoting a price for the Standard Edition of £326. Which is true enough; Dabs.com quotes £339.57 for Office 2003 Standard Edition, but claims that its second best-selling MS Office product is the Student or Teacher version of Office 2003 Standard, at £104.57.

Clearly we're not comparing like with like here, but (and we've told you this before) it is a sad home user indeed who is unable to whistle up something that could be deemed a legitimate qualification for purchase of Microsoft software via a 'student' programme.

You can be at school. You can be a full-time or part time student or someone attending a course whose qualifications are recognised by the UK and Irish Departments of Education. You can be a parent with children who qualify, or a teacher involved in supporting IT, or a member of support staff at a school/college/university. Tricky? It's possible being a lollipop person might do, as far as we can see. And nobody's going to check.

Not, of course, that we're encouraging it. We don't need to, Microsoft is perfectly aware of how this works, and is arguably pretty damn close to encouraging it itself, because it's all part of the big picture.

Corporate milch cow

Not a lot of people are going to spend £300+ on MS Office for home use, but rather than shoot the corporate milch cow by dropping the price of Office, Microsoft has historically defended its backyard by positioning Works as the cheap product. StarOffice is clearly competition for this, but it's less of a no-brainer if it seems feasible to buy an educational version for around £100. And actually, quite a lot of the target home market is likely to have a perfectly legitimate qualification to buy this version.

And indeed nobody's going to check anyway. But if you happen to buy a stash of them for use in a business, then somebody is far more likely to check, and businesses (at least those of a certain size) aren't going to be comfortable with being in a potentially costly licensing situation. So if they use Microsoft Office, they'll buy a higher price version or they'll get into one of Microsoft's volume licensing programmes. Having higher volumes of purchased copies of Office in the home also has the effect of reducing to some extent the incidence of people ripping off copies from their business and using them at home.

What about StarOffice competition in the office? It happens, but it's a tougher sell, and the major challenge it presents to Microsoft at the moment looks like being in large accounts, where much hard thinking and bean-counting may eventually result in the overcoming of inertia. But it's not an immediate, huge problem for Microsoft.

The net effect of Microsoft's pricing structures is that Office has a dominant position, that rivals tend not to get much of a look in, and that the installed base is source of upgrade income. This process is most developed via business licensing, because the picture here is that you essentially pay for upgrades for a period, not for full price software as and when you need it, and therefore it pays you to keep extending the deal. If you don't, you fall off the conveyor belt and you'll have to pay a very large full price tab to get yourself back on (although saying "Linux" a lot can sometimes ease the size of the tab).

So by simply saying Microsoft is seven times more expensive, Computing Which? misses out on all of this fiendishly cunning stuff. But it does note that as PCs usually come bundled with Microsoft software, "there's little incentive to hunt out alternatives" (as we all know, there's a point to this too). The mag suggests free versions of Mozilla, Opera and Eudora as viable alternatives, recommends consumers try to "support the companies that keep Microsoft on their toes," and welcomes the decision of the European Commission "to stop Microsoft using Windows as a tool against rival companies."

So perhaps it's not entirely on target when it comes to how it all works, but the Consumer Association's strong criticism is unlikely to warm hearts round at Microsoft UK. "Whatever happens," it signs off, "it's unlikely that Microsoft will cease being the UK's top selling software manufacturer anytime soon, which is bad news for competition and for the consumer." ®

Related stories:

MS exec lists joys of high prices, vast margins to top investor
Microsoft: no Office party
UK gov's ‘save on MS software’ deal slip-sliding away?

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