Economic and international market volatility is set to reveal a further contributor to increasing technology costs.
Many software and cloud vendors ‘peg’ prices against the USD at a rate which delivers some price advantage to USD purchases. FX movements, effectively appreciation in USD, over the past 12 months has led to price deltas hitherto in favor of USD contracting being reversed and now beneficial in non USD currencies.
- Microsoft list prices in Euros for their core M365 products are now better value than USD rather than 10-20% higher – UPDATE Microsoft are adjusting their price harmonization methodology to a 6 monthly cadence, as of Nov 2nd Microsoft Japan announced a local price increase effective April 1st 2023 in Japanese yen, by 20% for on-premises products and 15% for online services https://news.microsoft.com/ja-jp/2022/11/02/221102-information/ and a parallel announcement for Korean won prices for on-premises software will increase by 15% and online services will increase by 11% also effective April 1, 2023.
Risk of further Microsoft price increases in European currencies also exists. Particularly challenging for clients in the context of both the economic environment and Microsoft’s global increases of up to 25% in March 2022.
- Salesforce list prices in sterling appear to be some 5% lower than the GBP/USD rate of 1.25 they are based upon
- Adobe Creative Cloud is currently circa 15% lower cost in both Euro and GBP than USD at list prices.
History shows these types of regional price breaks are temporary however, with vendors harmonizing (as Microsoft put it) international prices. Thus benefit for the likes of European corporations may be short lived.
Attention is mostly oriented to triple squeeze (inflation, labor costs and supply chain constraint) driven price increases currently, fed by geo-politics and energy prices. Unless FX markets reverse recent USD appreciation, fed by the same issues, a wave of FX driven cost increases in a number of currencies appears to be around the corner. Atop the array of ‘triple squeeze’ cost increases many organizations can ill afford further price or bottom line pressure, although US IT budget holders may be relieved to be broadly exempt in this case.
Demand and pressure on sourcing functions, and their allies in IT Asset Management and FinOps will likely increase for the foreseeable future. Organizations adopting these cost and value management disciplines, either internally resourced or externally supplied, will continue to be best placed to minimize cost increases as prices rise. Those dependent of negotiation alone have limited means at their disposal to combat the unfortunate array of cost pressures.
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