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Predatory Pricing Paranoia
Submitted by Mike Rothman on Wed, 2006-06-21 08:29.
Given my limited opportunities to rant while I'm on vacation, I'll need to make this short. I just read Alex Eckelberry's piece (link here) lambasting Microsoft's security product pricing (for OneCare and Antigen) and I need to call bunk on this. This feels like more of a marketing stunt than a legitimate discussion.
To be clear, I am no Microsoft lover. With the exception of Office, I run away from Microsoft software as a matter of course. I'd throw out my desktop PC if I hadn't bought it a year ago. They've boned security since they started trying to be a player. But Microsoft is in every technology market, so I'm perplexed that smart, experienced folks like Alex would expect Microsoft to not try to be a player in security. He also ends the piece by intimating Microsoft owning the security market could be a threat to national security. I think he's been watching a bit too much "24" lately. Give me a friggin' break.
Alex believes that pricing will make Microsoft the security leader and that they are going to "kill their competition" by pricing lower than the other guys. I don't buy it. Customers (even small customers) do not buy crappy security produts. If the product doesn't work, then the market will not buy. It's as simple as that. SO if Microsoft doesn't have a product as good (or better) as the other guys, I contend that customers will not migrate. In this space, Symantec is the incumbent and you need to knock the incumbent on its ass to displace a customer.
I also want to point out that Symantec and McAfee's current pricing levels are a result of them systematically raising prices over the past 5 years. To my knowledge, AV is the only technology market where prices have consistently gone UP over time. The Big Yellow and McAfee have had customers over a barrel for the past 5 years, and now Alex is shedding a tear because someone that could possibly compete and do the right thing for customers (which is to add functionality for a lower price) is going to hurt McAfee and Symantec. Sorry, but I'll keep the Kleenex in my pocket.
Innovation drives technology markets and candidly, neither Symantec nor McAfee has done much innovating in the AV suite for a long time. They added anti-spyware because they had to, Webroot (and even SunBelt) was poking them in the eye. McAfee adding SiteAdvisor was the first innovative thing I've seen in years out of these folks. As I mentioned quite a while ago (read the Genesis post here), shame on Symantec for letting Microsoft redefine the desktop security market as a service including backup. Symantec should have done this long ago. But they were too busy milking their cash cow.
Don't feel bad for these guys. Seriously. Darwin is alive and well, and if you don't innovate - you go away. Yes it's brutal, but it's the reality of commodity markets. And prices go down in commodity technology markets, whether Alex likes that answer or not.
Finally, Alex finishes with no suggestions for how to derail Microsoft's march on the security market. This is a cop out. I'll point to an example in the retail space. Smaller, local retailers that couldn't compete got slaughtered when Wal-Mart came to town. Others tried to stop progress through legislation (not allowing Wal-Mart to build). That is a short term solution and doesn't fix the root cause of the problem - a distinct lack of innovation and inability to add value. Retailers that either had better service or a unique value proposition welcomed Wal-Mart because it made their uniqueness that much more apparent.
I have a suggestion for everyone out there. Take the lead of folks like Intuit, Oracle and now Google, who have beaten Microsoft back as a matter of course for years and years. Get off your ass and solve some customer problems, as opposed to crying about big bad Microsoft coming to your town.
To be clear, I am no Microsoft lover. With the exception of Office, I run away from Microsoft software as a matter of course. I'd throw out my desktop PC if I hadn't bought it a year ago. They've boned security since they started trying to be a player. But Microsoft is in every technology market, so I'm perplexed that smart, experienced folks like Alex would expect Microsoft to not try to be a player in security. He also ends the piece by intimating Microsoft owning the security market could be a threat to national security. I think he's been watching a bit too much "24" lately. Give me a friggin' break.
Alex believes that pricing will make Microsoft the security leader and that they are going to "kill their competition" by pricing lower than the other guys. I don't buy it. Customers (even small customers) do not buy crappy security produts. If the product doesn't work, then the market will not buy. It's as simple as that. SO if Microsoft doesn't have a product as good (or better) as the other guys, I contend that customers will not migrate. In this space, Symantec is the incumbent and you need to knock the incumbent on its ass to displace a customer.
I also want to point out that Symantec and McAfee's current pricing levels are a result of them systematically raising prices over the past 5 years. To my knowledge, AV is the only technology market where prices have consistently gone UP over time. The Big Yellow and McAfee have had customers over a barrel for the past 5 years, and now Alex is shedding a tear because someone that could possibly compete and do the right thing for customers (which is to add functionality for a lower price) is going to hurt McAfee and Symantec. Sorry, but I'll keep the Kleenex in my pocket.
Innovation drives technology markets and candidly, neither Symantec nor McAfee has done much innovating in the AV suite for a long time. They added anti-spyware because they had to, Webroot (and even SunBelt) was poking them in the eye. McAfee adding SiteAdvisor was the first innovative thing I've seen in years out of these folks. As I mentioned quite a while ago (read the Genesis post here), shame on Symantec for letting Microsoft redefine the desktop security market as a service including backup. Symantec should have done this long ago. But they were too busy milking their cash cow.
Don't feel bad for these guys. Seriously. Darwin is alive and well, and if you don't innovate - you go away. Yes it's brutal, but it's the reality of commodity markets. And prices go down in commodity technology markets, whether Alex likes that answer or not.
Finally, Alex finishes with no suggestions for how to derail Microsoft's march on the security market. This is a cop out. I'll point to an example in the retail space. Smaller, local retailers that couldn't compete got slaughtered when Wal-Mart came to town. Others tried to stop progress through legislation (not allowing Wal-Mart to build). That is a short term solution and doesn't fix the root cause of the problem - a distinct lack of innovation and inability to add value. Retailers that either had better service or a unique value proposition welcomed Wal-Mart because it made their uniqueness that much more apparent.
I have a suggestion for everyone out there. Take the lead of folks like Intuit, Oracle and now Google, who have beaten Microsoft back as a matter of course for years and years. Get off your ass and solve some customer problems, as opposed to crying about big bad Microsoft coming to your town.
Microsoft doesn't engage in predatory pricing, even when they give away stuff for free (see Media Player and IE). It's predatory pricing when you give something away at a free or reduced cost specifically to drive competitors out of a market, then you raise prices. They don't typically do this. Rather, what we may see as a market (antivirus), they see as a feature of a larger customer relationship (part of the OS, part of exchange, etc).
Historically, Microsoft has delivered the customer the best bang for the buck than any other technology company. This isn't predatory, is a better value curve. Either move up the value curve and do something better than them or integrate more features to create a competitive whole product. Sometimes, they do take this to illegal extremes, such as claiming everything is part of the OS (browser bundling, media player, etc.) Their mistake was not in pricing (free or cheap) but in packaging (no choice). RB