Selling software online is expensive: AIIA

Selling software online is expensive: AIIA

Summary: The idea that the online distribution of software and services is much cheaper than selling through a bricks and mortar store is a misconception, according to the Australian Information Industry Association (AIIA).

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TOPICS: Software, Cloud
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Costs associated with online distribution of software and services can be the same as, if not higher than, selling through physical stores, according to the Australian Information Industry Association (AIIA).

The IT industry organisation was speaking at the Federal Government inquiry into IT pricing in Sydney, which was launched earlier this year, addressing public concern over the high cost of IT-related products in Australia compared to other countries around the world.

Consumer organisation Choice recently identified that the price difference of IT goods between Australia and the US is around 50 per cent. The AIIA has since claimed this number is "fallacious", though it pointed out that a smaller population, the GST, higher wages, rent for retailers and high cost of honouring product warranties all contribute to Australians paying more for IT goods.

AIIA counts Microsoft, Apple and Adobe as its members. All three vendors refused to participate in the hearing, despite being singled out as the worst offenders of product pricing disparity in the past.

The internet has presented opportunities for vendors to disseminate software and services online, as a download or as a pay-as-you-go basis. But the savings from not having to provide a physical product are negligible when considering other associated costs, according to AIIA CEO, Suzanne Campbell.

"Online is no different to bricks and mortar, insofar as the need for basic R&D, product development, product management, sales and marketing endeavours," Campbell said. "To that extent, the costs in Australia for the provision of those online operations are at the same high cost as for bricks and mortar, or perhaps even higher, where the skills involved are more specialist."

Another problem, according to the AIIA, is that in the case of software-as-a-service product, many software vendors and service providers do not host their products locally, due to higher operational and labour costs. This limits deployment and adds complexities.

Australian datacentres have yet to prove that they can operate at the same scale and with the same availability as international competitors, Campbell said.

Campbell did, however, admit that geo-blocking, where software vendors restrict Australian consumers from accessing their US-based websites, which may sell their products at a lower price, could be looked at.

"[Geo-blocking] definitely warrants scrutiny," Campbell said. "The challenge for us though, is that these arrangements are legacies of older times, when we were seeking to protect Australian content."

"So to the extent we are prepared to be exposed to a global market, then there may be a basis for negotiating a different outcome with international providers for comparable content."

The parliamentary hearing continues.

Topics: Software, Cloud

Spandas Lui

About Spandas Lui

Spandas forayed into tech journalism in 2009 as a fresh university graduate spurring her passion for all things tech. Based in Australia, Spandas covers enterprise and business IT.

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3 comments
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  • All Those Costs Are Fixed Costs

    The marginal costs of online software distribution are essentially zero. In a competitive market, the price declines to the marginal cost, regardless of fixed costs. So they're basically spouting hot air about how "expensive" it is.
    ldo17
  • If I were Chariman ...

    ... I would ask the AIIA to produce another report: warning them that if it was as incompetent as the first then the individuals involved in its presentation would be fined, the senior managers imprisoned and the organisation disbanded for criminal negligence.

    If they cannot see the differences between the economies of physical goods distribution and the virtues of digital then the existence of the AIIA is counterproductive to the National interest and the company should be punished as a lesson to others who might be equally misguided.
    jacksonjohn
  • BS

    What a load of BS. Campbell is full of crap and he is lying through his teeth. What rubbish. Online is GLOBAL and so making back teh R&D costs does not rely on one country. What a load of crap!!!
    bsguru