Wednesday, February 22, 2012

Google. Microsoft. Cloud Based Apps. Fight!

So Microsoft is feeling the heat from Google Apps.

Must be the case if Monkey Boy’s Microsofties have decided to go for an all out attack on the Gnomes of Mountain View.

Microsoft recently released a video telling Monkey Boy truths about Google Apps.

Now while I don’t necessarily believe that Google Apps is the greatest thing since Cuban Cigars and Premium Vodka, its not a bad product and it has a pretty good price point story to tell.

The truth is that Office 365 is very expensive, especially in Australia.

Now a friend of mine showed me a couple of emails relating to Office 365 discussions he had with Telstra before he told them to get a grip on reality.

The first, and biggest question was based around the variation in cost between most of the world and Australia. Across the planet the cost, predominantly, equates to USD$24 per user per month, for the plan he was looking at, in Australia its AUD$40.10 per user per month for the same plan.

As I write this the exchange rate is hovering around USD$1=AUD$1.06.

This means that it should be costing around AUD$22.64 per user per month. Its a cloud service, no boxes to move, distributors to take a cut, product to feeight into the country, DVD’s to produce, packaging to manufacture and so on so where’s the price differential?

I mean the data centre that runs Office 365 for Australia is in Singapore and is the same one that is used in Singapore where the cost is $24 per user per month and in the absence of anything else it looks like its priced in the local currency.

So what was the explanation from Telstra for the price variation?

As to pricing differences between AU and US, It is a common practice by all multinationals to have price discrimination based on Geography. If you compare the prices of Petrol, iPods, TVs Big Macs, there is a price discrepancy based on the purchasing power of that that country.

We still believe that purchasing Microsoft Online Services will be more cost effective than on premise software. But also consider this, the Australian currency is the 4th most traded currency. Between July and October 2008 our currency fell from 97c to 61c.


So the strongest argument Telstra had was that ‘all multinationals to have price discrimination based on Geography’, unless you live in Singapore, in Russia the price converts to USD$30 per user per month, and that three and a half years ago the Australian dollar fell from 97c to 61c.

Sorry but that’s ancient history.

Here’s the thing AUD$40.10 converts to USD$42.75. So if we use USD$25 per user per month as a base price someone in Australia is levying a massive tax on all Australian businesses to use a product that supposed to help reduce costs.

Lets do the math.

A business of 100 staff in the US will pay $2500 per month or $30000 per year to use the cloud based Office 365.

A business in Australia with 100 staff will pay $4010 per month or $48120 per year to use the same product running on a data centre ‘out there somewhere’.

Convert the annual US price to Australian dollars at todays exchange rate and the price becomes $28122 per year.

So it costs an Australian company $19998.00 per year more to use Office 365 in Australia than it does in the United States for an equivalent number of users.

No wonder Microsoft is taking aim at Google Apps.

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