Vendors challenged to justify $Kiwi pricing

The strength of the New Zealand dollar has tech buyers crying foul

ICT buyers are crying foul over local vendor pricing, saying the differential with US pricing is out of hand as the kiwi dollar surges in value.

When looking to buy Office 2008 for Mac for his personal computer, local IT manager John Holley was shocked to find that the New Zealand pricing for the software converted into nearly twice the US price.

Initially he thought that this was limited to Office for Mac, but then he noticed that the price difference was the same for Office 2007.

“The pricing for Office 2008 in New Zealand is extortionate,” says Holley. “I am much better off buying [the software] off Amazon. That way I can save several hundred dollars even after paying air freight.”

“Is this how Microsoft helps New Zealand’s knowledge economy — by making us pay more than US customers?” he says. “It would be interesting to hear how Microsoft can justify such a significant price uplift.”

Office 2008 for Mac costs NZ$899, compared to the US price-tag of US$399.95. At a conservative exchange rate of 75 cents the US price translates into NZ$533, which means a cost differential of NZ$366 or 41%, says Holley.

Office 2008 for Mac Special Media Edition costs NZ$1,149, compared to US$499.95. The difference translates into NZ$482 or 42%, he says. Even the student edition has a 26% increase compared to what students would pay for it in the US, he says.

Even when taking into consideration that US prices are often shown excluding sales tax, and New Zealand prices often include GST, the difference in price is significant.

Holley sent an email to Microsoft’s online customer service but the reply only stated that Microsoft’s prices vary by region and are determined based on factors such as exchange rate, local taxes, local market conditions and retailer pricing decisions.

When contacted by Computerworld, a Microsoft New Zealand spokesman said the company had no further comment.

Computerworld had a look at the pricing of some other software products. The exchange rate was 77 cents at the time. The US price is excluding sales tax, which varies widely from state to state, and the New Zealand retail price includes GST.

And Microsoft is not the only vendor apparently charging a premium to Kiwis:

US priceUS$ price converted to $KiwiNZ retail price
Microsoft Vista Business US$299NZ$388 NZ$729
Microsoft Office Professional US$469 NZ$608 NZ$1149
Adobe Photoshop CS3 StandardUS$649 NZ$842 NZ$1337
Norton Internet Security Suite 2008$59.99 NZ$78 NZ$99.99

Holley is not alone in his concern and hardware costs could also be affected.

Former NZ Post chief information officer and ICT consultant Tony Hood also raised the issue with Computerworld. He was endeavouring to buy two IBM P series systems for a client but found that the price, given the favourable exchange rate, was prohibitive. Hood says the local prices would be more appropriate if the exchange rate was 50 cents New Zealand to the US dollar.

A 50-cent relativity is exactly the internal exchange rate IBM uses for measurement purposes — for comparing year-on-year performance. But that is a coincidence, a spokeswoman says.

“This internal exchange rate does not have any bearing on IBM’s pricing in New Zealand,” she says. “It is for measurement purposes only.”

She says IBM’s pricing model is different in every country, based on local market conditions and other factors, including things like freight costs, importation costs, official exchange rates, duty and tax. Another component is distributor and reseller margins.

“Because of the myriad factors that influence local prices, it is virtually impossible to make meaningful pricing comparisons between the US and other countries, or between any countries, for that matter,” she says.

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