Microsoft General Counsel On Pricing For The Poor, Cloud Computing

A top official of the Microsoft Corporation paid a visit to his former school in Geneva yesterday on his way from the World Economic Forum, and talked about corporate responsibility, the company’s principles, infringement issues and cloud computing. He also tried to explain the company’s complex differential pricing regime aimed at lowering prices for lower income populations – especially if they don’t happen to speak a popular world language.

Brad Smith, senior vice president and general counsel of Microsoft and former alumni of the Graduate Institute of International and Development Studies, said that Microsoft was aiming to be a “good corporate citizen,” through its programmes and principles. He also said the company was facing a large piracy problem as “not everybody pays for the products,” and it was trying to convert users into paying customers.

Smith was asked how to reconcile intellectual property rights and corporate social responsibility. “Microsoft in its heart is an intellectual property company,” Smith said. If there were no intellectual property laws, anybody could copy instantaneously without concern, which he sees as problematic. “We would create those hopefully magnificent products and then see them yield no revenue,” he said.

The company goes into markets and builds legal framework with governments and try to educate the public about IP rules and the value of protecting them, he said adding that Microsoft has “quite elaborate IP efforts” across copyrights, patents, trademarks, and trade secrets protection. Some countries used to be referred to as “one disk country,” where after one disk was shipped, a second shipment was unnecessary.

“We hope and even expect that most people who get our products are going to pay for them,” Smith said but he added Microsoft recognised that not everybody has the same ability to pay. Differential pricing has been a long established practice and the company has been providing “deep” discounts to schools, educational institutions, “especially public education institutions,” with software at much lower price.

Microsoft also recognises that different countries have different income levels “so our pricing tends to reflect that” but “it is quite a complex field,” Smith said, in particular if the company is working in a country that is speaking a language that is widely spoken somewhere else.

For example, if the company wants to have a discounted price for Romanian language products, they are “pretty sure that this won’t be used outside of Romania.” However, if the language is English or Spanish, it makes it more difficult to provide differential pricing as it may create a market for people to go buy it in country where it is cheaper and re-import it into higher priced countries such as the United Kingdom or the United States, he said.

The Microsoft Principle

According to Smith, Microsoft has three areas of work: programmes, principles, and pragmatism. Programmes involve empowering people to use technology “to realise their potential,” he said, and balance interests of different stakeholders such as communities, customers, governments, and regulators. Smith presented Microsoft as being an early supporter of the United Nations Millennium Development Goals.

Establishing principles means dialoguing with others, Smith said. On pragmatism, “no matter how good a job is … bad things still happen,” he said, referring to allegations in September 2010 that Microsoft had a role in the Russian government abusing copyrights to clamp down on non-governmental organisations. Corporate social responsibility needs a human voice, Smith said. That was the strategy in the blog he posted describing the actions that were to be taken to address the issue. Microsoft accepted its responsibility and decided to create a new unilateral software licence for NGOs, and an NGO Legal Assistance Programme in Russia. “Companies need a conscience,” he said.

Smith also addressed cloud computing, which he described as running software remotely in data centres, saying it offers a lot of potential for NGOs, especially in crisis situations, such as natural disasters.

On 24 January, he gave a speech before the French National Assembly on cloud computing in the context of network security, and he described cloud computing as a promising new shift in the information technology world, with lower costs for the users and global economic benefits.