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HP Seeks to Block Competitor From Revealing Its Pricing

Posted by timothy on from the whaddya-mean-the-price-tag's-showing? dept.

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?"

44 of 144 comments (clear)

  1. Differential Pricing? by msgmonkey · · Score: 5, Insightful

    Maybe the price of the software varies significantly from customer to customer. I mean if you just found out that you paid 2x as much for software mentioned here you'd be pretty annoyed.

    Plus there is always corporate paranoia..

    1. Re:Differential Pricing? by wisty · · Score: 4, Insightful

      Companies don't like to release pricing, because then they would be more compelled to compete on price.

    2. Re:Differential Pricing? by betterunixthanunix · · Score: 4, Insightful

      Actually, they do not like to release pricing because it would take away one of the best bargaining pieces they have: the ability to lower the price during a sales meeting. Enterprise vendors love to tell a customer that they are going to lower the price by 50%, 60%, 80%, etc., because in the end, it works out for everybody. The customer goes back thinking they got a deal and the vendor still turns a profit (because the list price is marked up significantly). Once you are forced to reveal your list price to the world, it becomes more difficult to convince your customers that you are even willing to give them a discount or negotiate, because they have already seen the price and assume that is what they will be charged. The order in which things are revealed to a customer will determine whether or not that customer is willing to close the deal and buy the product.

      --
      Palm trees and 8
    3. Re:Differential Pricing? by Hurricane78 · · Score: 4, Interesting

      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.
    4. Re:Differential Pricing? by theaveng · · Score: 2, Insightful

      So HP salespeople are deceitful, trying to mislead customers into making them feel they got a good bargain (even though they paid exactly what everyone else pays). Sorry but I prefer honesty. I prefer openness. Same as any other retailer like Walmart or JCPenney. The list price is there for all to see, and not hidden behind a bunch of marketing BS, and sleight of hand.

      I'd tell HP to go frak off. If I want to tell my friends, colleagues, whoever that I was able to get HP software for 50% off the list price, that's my right of free speech to do so. If HP does not like it, then too bad. My mouth is my mouth and I will continue using it no matter what the HP CEO thinks about it. He can bend over and sck my ___ for all I care.

      Stupid arrogant corporations. I hate them. They are becoming modern-day versions of kings & tyrants.

      --
      FOX NEWS.com should be BANNED from television and internet. Have the Congress take it over and give us Truespeak.
    5. Re:Differential Pricing? by Paralizer · · Score: 4, Informative

      You're right, except I don't think making their list price public makes a whole lot of a difference. No one pays full price, it's just like a car dealership. So if a particular vendor has a higher price but a good product, you're probably still going to at least look at that product and get a custom quote. From there you decide if the product itself is a good match for you, and if it is then you can start working with the vendor to reduce the price.

      I just got my first IT job about a year ago fresh out of college. One of my first projects was to research, recommend, buy, and implement a particular product. I did some research and ended up being convinced this certain vendor has the best product for our needs. Their list price on their website was $29,000, +25% for each additional CPU over one, +20% support per year. I then called them, had a couple web demos, and began exchanging phone calls with the sales rep. What we wanted came out to about $75,000 with a 5 year support contract. Within a couple weeks (hey, this was my first time so it took a while) I had talked him down ~$40,000 with a 5 year support contract. It was easy, it didn't take a lot of negotiating, and I think I could have got him down more if I really wanted.

      My point is they will lower their prices without so much as you asking them to, and that is what they are counting on -- you get interested in the product, they sell it to you for less than list price, and you're a happy customer who hopefully has repeat business based on your positive experience. List price means very little.

    6. Re:Differential Pricing? by isj · · Score: 2, Interesting

      The salespeople may be forced to do this. There are industries (eg. telco) where the procurement managers won't sign a contract unless there is a discount. If the salespeople know that then they are forced to advertise a higher base price.

      On the other hand, in some cases the discounts and negotiations are ridiculous. I once experienced a router vendor salesman responding to a coworker's concern for the price with "oh, no problem. You can get 50% discount". That is a bit silly.

      Haggling over the service, options and price is ok. I don't like haggling over the price only.

    7. Re:Differential Pricing? by sumdumass · · Score: 2, Insightful

      The problem with that theory is the effect it has with people who look at the pricing and say "there are some other solutions that work well enough at cheaper prices".

      I would think that software marked at twice their real world value would scare a lot of people away before the chance to bargain ever comes into play. You don't really want people to consider other people's/company's software before yours just because of a marketing ploy. That's actually what is happening in this case with HP claiming confidentiality except the marketing ploy is another company's. You have a lot less control over other people and companies then you do over your own so unless your the only provider of the software, I wouldn't think it would be beneficial.

    8. Re:Differential Pricing? by jellomizer · · Score: 4, Interesting

      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.
    9. Re:Differential Pricing? by billcopc · · Score: 2, Interesting

      bad companies see it as being punished as bad customers

      So where's the problem ? If I'm fed up with a resource-hogging deadbeat, I let them know and they are free to hog someone else's time instead. They stick around because they have nowhere else to go, or they know the competition sucks...

      If HP has a legitimate reason to charge a different price, I think they should man up and be perfectly frank about it, like saying "Shitty clients pay more, because they cost more to support".

      Coddling those shitty clients only leads to more shitty clients draining your resources, often at the detriment of your awesome clients... unless you're in the business of cleaning shit up.

      --
      -Billco, Fnarg.com
    10. Re:Differential Pricing? by cerberusss · · Score: 2, Interesting

      they sell it to you for less than list price, and you're a happy customer who hopefully has repeat business based on your positive experience

      However, the next time you *will* pay full price or at least closer to it.

      Or worse, over full price. A friend of mine asked his regular Dell accountmanager for a quote. When the quote turned out to be over the expected amount, he checked the website, and lo and behold -- the website price was lower :-) Turns out they give you a very low first price, then sometimes try to errrr... make up for that :-)

      --
      8 of 13 people found this answer helpful. Did you?
    11. Re:Differential Pricing? by wiz_80 · · Score: 4, Interesting

      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. "
    12. Re:Differential Pricing? by jellomizer · · Score: 2, Insightful

      Well Pissing off bad customers gets the effect of bad press towards you. However rewarding good customers will improve the chances that they will give good press to you. Even if they are Bad customers you need to make sure they have a fair deal, as they don't have a reason to hate you and give you bad press. However if they are a good customer and get a deal, they will have a reason to like you better. You make your public prices for the average bad customer when they prove themselves you give them a better deal.

      --
      If something is so important that you feel the need to post it on the internet... It probably isn't that important.
    13. Re:Differential Pricing? by MentlFlos · · Score: 3, Insightful

      Ah, so you don't change the price of the car but you add undercoating and "free" oil changes for 1 year. :D

    14. Re:Differential Pricing? by jhol13 · · Score: 2, Interesting

      Competing products? What are you talking about?

      I was just mentioning that big companies do get better deals on pretty much everything.

      Perhaps due to buying more (and therefore deserve it) or perhaps just because they can put pressure (and then it is questionable whether they deserve it or not).

  2. High Prices? by Anonymous Coward · · Score: 5, Funny

    I thought that is what their name stands forâ¦

  3. It's a stupid practice... by Enter+the+Shoggoth · · Score: 4, Interesting

    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.
    1. Re:It's a stupid practice... by sumdumass · · Score: 3, Interesting

      It's not technically illegal. As long as the consumer knows how much they are paying before the sale is final, that's all that matters. If you go into discounts retail shops you will see the price listed as the manufacturer printed them on the box. This is the list price (MSRV) and then somewhere there will be a sign saying "All X some percent off" or even "all X this price".

      You can and do have price points in marketing and certain customers can and do get different points based on a number of things too. I have one vendor that gives me almost 50% off the lists price if I spend over $10,000 a month (they have steeper discounts but I never have hit higher then this for an average). The rest of the time, the price point set me at 35% below the price. Where it becomes deceptive is where it costs more then the advertised price or when the customer doesn't know the real price before ordering/paying.

      I'm willing to bet that if you check your state's false advertising laws or deceptive business practices laws, there is some requirement for it to harm consumers or be potentially harmful to consumers before it can be enforced.

  4. Software feels it can justify the high prices by Anonymous Coward · · Score: 5, Funny

    How arrogant! What's next, software that feels it doesn't need programmers?

  5. barbara streisand effect by apodyopsis · · Score: 5, Insightful

    another fine example of the barbara streisand effect in the making.

    see...
    http://en.wikipedia.org/wiki/Streisand_effect

    stupid. sometimes I wonder how these executives think, or even if.

    1. Re:barbara streisand effect by Rogerborg · · Score: 4, Funny

      When they dispatched the Pony Express to deliver the letter, did they send out a few extras to ensure that at least one made it past the velociraptors?

      --
      If you were blocking sigs, you wouldn't have to read this.
    2. Re:barbara streisand effect by Lonewolf666 · · Score: 5, Insightful

      And free publicity for GroundWork. With this Slashdot article I guess the number of people who are aware of that alternative to HP has multiplied ;-)

      --
      C - the footgun of programming languages
  6. Erm... by abigsmurf · · Score: 3, Interesting
    I thought this was pretty much standard in a large number of industries, especially when contracts are involved.

    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.

    1. Re:Erm... by Yaa+101 · · Score: 4, Insightful

      Erm... this is called open market.

    2. Re:Erm... by syntaxglitch · · Score: 2, Interesting

      And? An open market means they're free to price their goods at whatever they want to whoever they want and people can choose to buy or not buy at those prices. It has nothing to do with making their quotes confidential.

      On the other hand, a free market itself isn't all that great. For a free market to provide optimal results, a variety of other conditions must be met, one of which is that all market participants have perfect information.

      Trying to keep prices secret is one popular way that companies try to give the middle finger to the Invisible Hand and profit off of engineered market inefficiency.

  7. Session Terminated by cjfs · · Score: 3, Funny

    That "publicly available at GSA Advantage" link from the article goes to:

    Session Terminated Your Advantage! or e-Buy session has been terminated for one of the following reasons: ...

    So was it really publicly available?

    Also they'd have to state that HP authorized it to be public on the GSA site. Otherwise you could just have two sites referencing each other saying the info is already public.

  8. Sad. by lobiusmoop · · Score: 4, Interesting

    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."
    1. Re:Sad. by Anonymous Coward · · Score: 5, Informative

      I've been a software developer at HP for a little while since my previous employer was aquired. The amount of sales propaganda bullsh*t we get fed is rediculous.

      HP has an online 'garage' thing where staff are supposed to submit ideas in the hope that their ideas are supported and developed. It's aimed at the technical staff to 'foster innovation', and yet the ideas are judged on how much money they can make HP and how fast. Nothing to do with making the world a better place, despite what their propaganda (like "the HP way") spews.

      It should be noted that I view the average slashdot poster as a naive socialist hippie compared to myself, but maybe HP could do with some of that...

      My impression of HP is that it's a massive hypocritical money-grubbing sales team.

    2. Re:Sad. by Jeff+DeMaagd · · Score: 4, Insightful

      This is why judgments on corporations or people should be made on what they do, not what they say. It's easy to say anything. It's harder to make actions lie.

      That said, people that believe corporations aren't out to make the most money that they can really don't understand how corporations generally work. They're not out to improve the world unless that's where they make the most money. I think you can blame stockholders for that, and maybe more specifically, day traders on the part where corporations look for the quickest bang for the buck, those people are often the kind that are eager to make a quick buck, not build wealth over the long term.

    3. Re:Sad. by tehcyder · · Score: 2, Insightful

      My impression of HP is that it's a massive hypocritical money-grubbing sales team.

      If you find a company's culture objectionable then leave, it's not like you've been drafted into the army or something.

      --
      To have a right to do a thing is not at all the same as to be right in doing it
    4. Re:Sad. by HiThere · · Score: 2, Insightful

      Considering that the path they're choosing to "make money" is offending past repeat customers, you *ought* to be offended.

      --

      I think we've pushed this "anyone can grow up to be president" thing too far.
  9. Pricing is marketing by Sobrique · · Score: 5, Interesting
    This one is easy. They keep their pricing quiet, because they use it as sales and marketing manipulations - give them a list price that's insanely high, after you've vaguely got them interested, but then negotiate a discount of some huge percentage.

    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.

  10. IT pricing by pegdhcp · · Score: 4, Interesting

    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...

  11. They're just enforcing an NDA by Anonymous Coward · · Score: 5, Insightful

    HP found out that one of their competitors (GroundWork) has HP's confidential documents. They shouldn't have those - somebody has obviously broken an NDA. Do GroundWork have any other NDA'd documents that would allow them to unfairly compete against HP? HP probably don't know. So HP are investigating, and one way they are doing that is by asking GroundWork where they got the document from. (Oh and they also ask for the document to be returned and for GroundWork to stop using it; that doesn't stop GroundWork from quoting HP prices because they can just get the prices from the GSA site).

    GroundWork is doing a very good job of spinning this so people report "HP don't want everyone to know they're expensive". And that's a nonsense story - anyone seriously considering buying HP is going to ask HP for a price, they don't need to find out from GroundWork! (And GroundWork can quote the prices from the GSA site anyway). But it pushes GroundWork's key marketing message - "we're cheaper than HP" - and gets them namechecks and sympathy on blogs - so congratulations to GroundWork for excellent marketing.

    1. Re:They're just enforcing an NDA by easyTree · · Score: 2

      How could you stand up for fuck-you-over corporate tactics..

      Isn't the 'fuck-you-over' redundant in the sense of 'wet water' ?

      --
      Requiem for the American Dream
    2. Re:They're just enforcing an NDA by Headcase88 · · Score: 3, Insightful

      "Anyone seriously considering buying HP is going to ask HP for a price, they don't need to find out from GroundWork"

      ... why should I waste my time getting prices from different competitors when I could get all the information from one source? Sounds like bullshit to me.

      Imagine if you went to a grocery store, but none of the price tags were there. You had to ask someone at the cash register for the price of each product (and negotiate your way down). So a competing grocery store that doesn't force you into these negotiations lets you compare the list prices and... you know the rest. Worse yet, there are only 4 grocery store chains in the world, 3 chains have the no price tag practice, and the remaining one doesn't have the brand names and shiny colours that your children like. Talk about getting in the way of the free market.

      The only difference here is that only corporations are buying the products, so it only affects the small % of the population that purchases\negotiates for them. Hence no public outrage. Also, instead of children, it's executives, but the shiny colours point stands.

      --
      "When the atomic bomb goes off there's devastation...but when the atomic bong goes off there's celebraaaaation!"
  12. 545% higher, not 82% by Paradise+Pete · · Score: 2, Informative

    but which doesn't question the veracity of the pricing (which, not surprisingly, is 82 percent higher than the open-source vendor's

    HP's pricing is 545% higher. That's some fine arithmetic there, Lou.

  13. I picture a world / asteroid where.. by easyTree · · Score: 2, Funny

    All the lawyers, marketeers and traffic wardens could live in 'harmony'.. then the rest of us can get on with doing other things..

    Mmmm.. *warm fuzzy feeling often exerienced during waking*

    --
    Requiem for the American Dream
  14. Same case for CAD/CAM/CAE software by johnny+cashed · · Score: 2, Interesting

    Just try to get a price on the higher end CAD/CAM/CAE software with out talking to a vendor or some other middleman. I can't stand the way the prices are secret. It is like they give different prices to different customers. Just tell me what it costs to buy. If there is volume discounts (for more seats) fine, publish that as well.

    1. Re:Same case for CAD/CAM/CAE software by easyTree · · Score: 2, Insightful

      Q> How much is it?

      A> How much have you got?

      --
      Requiem for the American Dream
  15. Re:Sour grapes much? by MikeBabcock · · Score: 2, Interesting

    Nobody outside retail reveals pricing. Pricing is almost always secret, from first class flights for executives to building materials to software.

    Ever noticed that websites have "call for quote" instead of a price on enterprise goods? They want their sales people involved and they want to quote you a price based on your size and volume.

    This is not Walmart marketing, this is very low volume sales in comparison.

    --
    - Michael T. Babcock (Yes, I blog)
  16. Re:Sour grapes much? by fmoliveira · · Score: 3, Insightful

    I never buy anything announced with an "ask us" price tag. Unless there isn't an alternative with a more clear pricing. I found that usually, when the price is hidden, it's a bad price.

  17. hp stung by HD manufacturer by ArhcAngel · · Score: 3, Interesting

    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
  18. Re:shouldn't pricing be public info? by mysidia · · Score: 2, Informative

    doesn't the FTC have clear rules on pricing schemes? Seems like it could be a bait and switch.

    Bait and switch occurs when a vendor advertises a product at a low (unprofitable price.

    Whenever a customer inquires, or places an order, intending to buy, it is revealed that the item is no longer available, or out of stock, so they CANNOT buy it, but there is an alternative (more expensive) substitute available.

    i.e. This occurs when a retailer advertises a huge sale on a product just to get people to come to the store, but they take the for-sale product off their shelves (lock it away in storage), and only leave one unit in the store, so the item cannot actually be purchased at sales price.

    HP is not advertising to sell a product that is not available to be purchased, so it is not a bait and switch.

    It is also not bait and switch because HP does not advertise a price (they are not holding a sale).