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?"

Comments

Differential Pricing?

[msgmonkey]

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..

Re:Differential Pricing?

[wisty]

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

Re:Differential Pricing?

[betterunixthanunix]

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.

Re:Differential Pricing?

[Hurricane78]

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.

Re:Differential Pricing?

[Paralizer]

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.

Re:Differential Pricing?

[jellomizer]

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)

Re:Differential Pricing?

[wiz_80]

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.

High Prices?

[Anonymous Coward]

I thought that is what their name stands forâ¦

It's a stupid practice...

[Enter the Shoggoth]

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.

Software feels it can justify the high prices

[Anonymous Coward]

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

barbara streisand effect

[apodyopsis]

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.

Re:barbara streisand effect

[Rogerborg]

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?

Re:barbara streisand effect

[Lonewolf666]

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 ;-)

Sad.

[lobiusmoop]

I remember when HP was run by Engineers, not the marketing and legal department.

Re:Sad.

[Anonymous Coward]

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.

Re:Sad.

[Jeff DeMaagd]

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.

Pricing is marketing

[Sobrique]

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.

IT pricing

[pegdhcp]

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...

Re:Erm...

[Yaa 101]

Erm... this is called open market.

They're just enforcing an NDA

[Anonymous Coward]

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.