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Fear of further price rises once Article 50 is triggered

There have been plenty of price rises already but with the government getting closer to triggering Article 50 there could be more for the channel to contend with

This article can also be found in the Premium Editorial Download: MicroScope: MicroScope: April 2017

The worst of the price rises might appear to be behind the industry with Microsoft's recent Surface hike coming long after other hardware manufacturers had reacted to exchange rate fluctuations, but there are fears the triggering of Article 50 could spark further problems.

The government is going through the process of getting into a position where it can trigger Article 50 and formally begin to leave the European Union with this month the target that the Prime Minister had been working towards.

But so far each time a major Brexit development has occurred the impact on the value of the pound has been swift and fairly dramatic and some are getting prepared for more potential issues with prices.

So far the likes of HP, Dell, Lenovo, Apple and Microsoft have raised hardware prices between 10-15% and software prices by 20%, but there could be potentially more to follow.

“A host of political events have thrown currency markets into turmoil and the pound in particular has been hit hard. Now that we know a hard Brexit is almost certain, further rapid currency fluctuations have to be expected at a time when the dollar has seen considerable rises. As hardware components are traded in the US currency, this ultimately means price rises, causing problems for the channel," said Peter Hannah, head of UK channel at Zyxel.

A lot of the previous price rises were prevented from being fully felt by users thanks to the efforts of distribution in managing stock but that could become harder if further hikes come through the supply chain.

"Overall in the UK the revenues have increased in line with the new ASPs so demand has not been heavily hit. Until Article 50 is triggered and the formal process actually starts the channel is at the mercy of the overall economy," said Jonathan Wagstaff, country manager UK & Ireland at Context.

Some in the channel are trying to work out just where price rises might be felt by customers and what it will mean for investment plans.

“Price rises are a real and current issue for the industry, with many of the major vendors supplying from the USA, there is significant pressure for them to recover ground lost by exchange rate changes.  In particular, I see this affecting business critical ‘solutions’ projects, across both the public and private sectors, that are already in ‘the pipeline’. These projects have already been planned and have firm budgets established," said Paul Timms, managing director at MCSA.
 
"In this instance, companies have relatively few options – they can put the project on hold and look for a lower cost option, re-visit the project scope, revert to their management for additional funds - or stretch the project over a longer period to even out the capital costs. In most business environments, the decision to upgrade their IT systems is a rational one based on the future needs of the organisation - so any delay will affect their future capability," he added.

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