Easy terms, cut price for MS Office
Office 2007 costs R5800 as a standalone package, or R3100 when it is pre-installed on a new computer. The preloaded version will now cost just R800 a year, to be paid in instalments of R200 a quarter. Customers will be able to run the software for four years before they finally match the current upfront payment.
The new deal means few people are likely to pay the full upfront fee any more, agrees Neil Holloway, its director for Europe, the Middle East and Africa. But Microsoft is hardly cutting its own throat.
The price cut should boost sales by such an enormous degree that the loss of upfront revenue will be eclipsed by the sheer volume of additional long term payments.
“We think we are going to sell more licences through this. If four out of 10 PCs sold to consumers and small businesses have Office on it and we can get that up to six or seven out of 10, that’s where the upside is for us,” Holloway says. “Because we will ship more volume we can give a preferential price.”
Only SA, Mexico and Romania are receiving the discounts as part of Microsoft’s Unlimited Potential programme to make technology more affordable to the world’s 5-billion people yet to enjoy its benefits.
“A billion people worldwide have good access to technology, but we believe everybody has that right as technology can play a role in enabling people’s potential and helping job creation,” says Holloway. “Over the next eight years we want to reach another billion. That requires us to think differently from in the past.”
One obvious step was to make software more affordable for consumers and small businesses in emerging markets by replacing high upfront fees with lower long-term fees. That is not a surprising move, but the size of the reduction is.
When people buy a new PC they can opt to have Office pre installed and pay just R300 towards the software. Then they will pay R200 to the retailer every three months. Since many outlets also offer credit terms on the hardware, more people will be able to afford computer packages, Holloway says. Microsoft’s terms are not the same as a credit deal, as customers will never actually own the Office suite and are instead paying to lease it.
Analyst Roy Blume of BMI TechKnowledge says this does not imply that Microsoft is charging too much in the first place. “I don’t think it’s really an admission that its too expensive. They are just trying to give people other options. It makes sense for consumers and small businesses to spread the load of their expenses.”
Nor does he think it is a defensive stance against free-to use open source software such as Linux. The biggest threat to Microsoft in Africa is not open source alternatives, but pirated copies of its own programs, Blume says. “There are more pirated Microsoft installations out there than Linux installations. A lot of people would rather not be software pirates but honestly can’t afford it, and this gives them another option.”
Neither Blume nor Holloway are willing to predict the likely take-up, although Holloway says: “Our expectations are good.”
A pilot project was conducted with three retailers in Johannesburg, Durban and Cape Town. The full scheme will begin next month, after Microsoft met numerous retailers to explain how it works. Local computer makers including leading supplier Mustek are backing the scheme, and retailers can also preload Office on to the international brands.
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