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HP Seeks to Block Competitor From Revealing Its Pricing
Matt Asay writes "On October 13, 2008, Hewlett-Packard sent a complaint to an open-source competitor, GroundWork, asking GroundWork to stop revealing HP's 'confidential' pricing. CNET has posted the letter, which indicates that HP doesn't want its pricing revealed, but which doesn't question the veracity of the pricing (which, not surprisingly, is 82 percent higher than the open-source vendor's). Does HP think its pricing is really a secret? It's publicly available at GSA Advantage. Guess what? HP software costs a lot of money, but presumably feels that it can justify the high prices. Why try to hide the pricing information?"
but "Enterprise" software is normally never sold at the list price, so I suspect that HP doesn't what the list price used in a comparison, because they aren't actually going to sell it at that price.
Andy Warhol got it right / Everybody gets the limelight
Andy Warhol got it wrong / Fifteen minutes is too long.
If your prices become well known, you leave yourself open to being undercut or pissing off other customers who weren't as good at negotiating a deal. Conversely, if you're making a bid for an exclusive licence and the amount you're bidding becomes public, a rival can come in and bid slightly higher to sabotage you.
I remember when HP was run by Engineers, not the marketing and legal department.
"I bless every day that I continue to live, for every day is pure profit."
This is a long standing scam, where there person 'handling' the deal gets credit for saving oodles of money on the list price, and the salesman has negotiating room to figure out just where he's padding his commission. The list prices are therefore completely unrealistic, and they don't want them published because that might stop people talking to them in the first place.
I can tell you for certain that we (as in, large financial sector company) get 50-75% _discount_ terms with quite a lot of our vendors of IT hardware. I don't know what the rate is with HP hardware (we do use it) but I know it's a substantial reduction on 'list' price.
Most IT related producers, prefer to have very high (higher than reasonable) prices in their GPLs, and then apply a big discount to that price when an actual customer shows up. This is useful for seller, because s/he can say, "see how much we value your business, and cut into our profit just to have you as a customer" and is also useful for buyer, because it is not easy to convince suits, that IT is something you need to spend money on and you cannot use advices from 14 years old neighborhood kids. So by claiming it was sooo expensive and you bargained a big chunk from seller, you can get the signature for backup tapes you need since last week. However as any kind of trader tends to make bigger favors to bigger customers, sellers need to keep their discount rates secret, in order to be able to keep negotiation power.
Just to keep regular IT types in the dark, some firms claim that their GPLs are trade secrets etc. but in fact that is not right. For example a big Network firm, who is obsessed with blue-green boxes and originated from San Francisco, do not give GPL to customers publicly, but their sales representatives hand out them as a very secret, job risking (!) favor. And while everybody know that their regular discount rate in my country starts at 32%, I saw some certified engineers of that company on the customer side, claiming obtaining an amazing 20% discount, thus buying equipment 17% above the market, and showing themselves as indisposable negotiators to some upper level managers, who do not know the difference (or lack of, depending on the case) between a computer and calculator...
That's exactly what happens in the whole construction material industry (at least in Europe).
Every client (craftsman's business) gets a different price (or discount as they call it), depending on how a "good client" they are. (Depending on how much they like to keep you because you buy much and pay early, and so on).
I'm pretty sure HP does the same. It makes sense to handle good old clients different than that new company that can't quite guarantee a quick payment.
Of course, if that "bad" company starts to know how much they really can push the price, they might start making demands.
On the other hand, this is a typical monopoly problem, because in working economies, the client can do the same, and pay more for quality suppliers.
Any sufficiently advanced intelligence is indistinguishable from stupidity.
That and public display of pricing often cause consumers not to Apples vs. Apples type of purchase.
Organization X get product A for $3,000
Organization Y is told their software will cost $5,000
Now the reason could have a huge amount of reasons.
Organization X can be good at paying the bill while Organization Y takes forever and needs numerous calls to get it paid.
Organization X has been a steady repeat customer. While Organization Y will purchase a product and will not purchase anything else in a long time.
Organization X may have less need or proven to to be less of a support sink, while Organization Y is a constant problem.They
Organization X may put a Powered by Your Company on its page. While Organization Y will not.
They don't want their prices public because they don't want to know how they rank and value their customers. This is not evil or greedy, it is business. You want to keep good customers for the long term so you will be willing to cut your margins. But if the company is a problem and you don't see much opportunity take what you can get.
You tend to do the same thing as an employee. You are willing to work for less per hour if you know you job is relatively stable like you will have consistent paid work. vs. if your a 1090 employee where you charge 3x as much per hour for your work because you know there could be weeks or months you may not get paid for, and if your quality isn't up to snuff you may not get paid for your work. Or if there is a job you don't like or have to work hours you don't want to you usually ask for more pay to do undesirable work. The same thing with companies and their customers. If the customers try to rip them off then the company will build in padding to prevent this.
Some big companies will take a 10% discount off the top if they pay on-time for your services as part of the contract (after they agree the rate) so what happens when it is time to re-contract the rate the client will add 20% to the price. While their other client who is more friendly may get a deal which is 10% less then the the first company at start because they have been good at paying on time.
Companies like to reward good customers. But unfortunately if the reward is public bad companies see it as being punished as bad customers.
The bible passage explains this well: Matthew 20:1-16 (You don't need to believe in the mythicism but take it as a philosophical example)
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
Actually actually, that's not how it works at all. I work for an enterprise software vendor, and the list price is where we start quoting from. If you buy ten seats, you get list price. Buy a hundred, we round it down to the closest round number. Buy thousands of seats, you get a big per-seat discount.
We do this because we make it up on volume, not to mention the services large installations require, the kudos associated with big-name references, and so on. We never inflate list prices in quotes. In fact, I believe that is a termination offence at my current employer.
That's not to say, of course, that some quotes don't get padded up before getting slimmed down again in front of the prospect's purchasing team, but we are talking about things like 24x7 support which can be negotiated down to 10x5, or using one pricing model when another might be more advantageous, but all of these are based on an unalterable price list.
" There is a rational explanation for everything. There is also an irrational one. "
I was working for Compaq during their merger and one thing that came to light during that time was that one of the HD suppliers was charging hp more (about $0.80 more if memory serves) for the same drives they sold Compaq. Not a lot for one device but in bulk it's huge. I heard there were some pretty heated "discussions" with the vendor shortly thereafter. This is why manufacturers do not like having their pricing known.
"A person is smart. People are dumb, panicky dangerous animals and you know it." - K