Microsoft Security Pricing Irks Partners

When Microsoft first hinted that it would enter the security software market three years ago, the company's partners began to worry behind closed doors about the implications. With Microsoft's security push now in full swing, the doors have opened and once bedfellows have turned adversaries.

Apprehension began to surface after Microsoft purchased GeCAD Software in June 2003, acquiring the company's RAV antivirus technology. In August of that year, Microsoft launched its PC Satisfaction trial, which would later morph into Windows Live OneCare.

A Microsoft partner told BetaNews at the time that the Redmond company was asking a number of questions regarding the design of antivirus software before PC Satisfaction made its debut. Grumbling was heard throughout the industry, but politics kept the complaints under wraps.

2004 brought the acquisition of GIANT Software and its anti-spyware utility, now free and branded Windows Defender. Microsoft shored up its enterprise security offerings last year by purchasing Sybari Software and its Antigen line of security products. Microsoft recently rolled out updates to Antigen and a lower pricing structure.

Security was also the central focus of Microsoft's TechEd conference in Boston this month. The company unveiled a new security software brand called "Forefront," comprised of its Antigen product line and Microsoft Client Protection -- essentially an enterprise version of Windows Live OneCare.

Windows Vista, meanwhile, will have built-in malware and spyware protection through Windows Defender, along with a beefed up firewall. The new efforts may be good news for Microsoft customers, but the company's partners are seeing an already-competitive market being invaded by the 800-pound gorilla.

"It’s bad enough that Microsoft is getting in to all aspects of security. But now they are going to kill their competition through predatory pricing," explained Sunbelt Software CEO Alex Eckelberry in a blog posting on Tuesday. Sunbelt makes a number of security solutions for both enterprise and consumer customers. The company also recently acquired the popular Kerio Personal Firewall utility.

Eckelberry notes that Microsoft has priced its products 50 percent below the security market leaders like McAfee and Symantec. Predatory pricing occurs when a dominant firm sells its products at a loss to drive competitors out of business, and is then able to raise prices beyond standard market rates.

"Alex contends--and I would agree--'that Microsoft is endangering the entire security ecosystem,'" commented Jupiter Research senior analyst and Microsoft pundit Joe Wilcox. "No question: Microsoft is competing with its security software partners, and the company is doing so through aggressive pricing."

"OneCare costs $49.95 for three PCs, an average of $16.65 per machine," Eckelberry says, noting that the software is selling on Amazon.com for $19.95. "Let’s look at their price, versus the market leaders: Symantec and McAfee. Both of these companies have AV products that retail for $39.99. But they also have three-user offerings, at $69.99 (McAfee) and $89.99 (Symantec)."

When it comes to Antigen for Exchange, "Microsoft has priced themselves over 60% less than Symantec, an astonishing difference in price," added Eckelberry. "Microsoft has effectively low-balled the entire antivirus industry in one fell swoop. And their product includes five antivirus engines, not just one."

Microsoft disagrees with Eckelberry's assessment, claiming that "with such a large segment going unprotected," the security market "is full of opportunity for all security vendors to play a role in customer security."

"We believe that Windows Live OneCare and Microsoft Antigen products provide a good value to customers and that all firms should compete to provide good value. Our customers have made it clear that malicious software and other Internet threats represent a major problem and they want Microsoft to deliver effective solutions," a Microsoft spokesperson told BetaNews.

Last October, Microsoft acknowledged to BetaNews that it has "knowledge and an understanding of the capabilities of the operating system" that its partners may not have, but said it would not hide this information from those companies.

"Microsoft believes that customers want the freedom to choose the security solutions that work best for them," the company reiterated Tuesday.

But Eckelberry, whose company is a Gold Partner and does business with Microsoft, takes issue with the recent strategic decisions that endanger third-party developers. "It’s one thing that Microsoft has destroyed competition in browsers, languages, word processors, spreadsheets, presentation packages, and all the rest," he says. "But it’s another thing to kill competition in the security space."

For now, however, the industry appears to be gearing up for tough competition ahead. McAfee on Friday began beta testing new security suites based on its "Falcon" platform, which will compete with Windows Live OneCare. Symantec is working on a similar all-in-one solution known as "Genesis," but has not set a timeframe for release or pricing.

Whether or not Microsoft can be successful in efforts to dominate the market remains to be seen, but Eckelberry says security vendors should not rest on their laurels. "In a world where Microsoft has a hegemony on security, the implications may be far reaching, possibly to our own national security."

McAfee and Symantec had not returned requests for comment as of press time.