The pound’s 17 month low against the dollar has prompted manufacturers to forecast significant price rises of up to 10% from the beginning of February. This may hit some IT budgets hard, says IT supply chain expert Al Nagar from KnowledgeBus.
Exchange rates play a pivotal role in fuelling volatility of price in the three-tiered, global IT supply chain. In the UK, although IT products are purchased in local currency, they are first traded on a worldwide level in US dollars.
Sterling has dropped against the dollar from its 2014 close of 1.5587 to below 1.52 currently, which includes a 2.6% drop in just two days. The dollar continues to rally, boosted by the euro's weakness.
Due to these significant adverse movements outside of manufacturers’ control, brands like HP, Dell and Lenovo have warned reviews across the board will see UK price increases of up to 10% in February. For companies buying in Euros the impact could be much higher.
Al Nagar from KnowledgeBus, said: “IT brands have been releasing price warnings into the channel during the last week. That in itself is nothing new, but it is the size of the increase that is being dictated by exchange rate movements that makes it significant.
“Having plotted IT supply chain data over the last few months, it is clear to see the price rise trend already coming into effect. In some cases it is turning product lifecycles upside down, seeing the usual price declines over time actually increase for a period.
“In October, the average price of a popular Lenovo desktop was £352, it then went down to £336 and stock fell to zero in November and December 2014. New stock of the same product entered the UK IT supply chain on 12th January 2015 priced at £437. These widespread rises will impact budgets and some may choose to put large scale refresh cycles on hold.”
Nagar continues: “We are trying to raise awareness of volatility in the market, so that IT buyers can become more strategic in spotting and overcoming purchasing barriers. This will help procurers get more from their IT budgets in the short and long term.”
Research by KnowledgeBus found 81% of IT buyers weren’t aware of the scale of volatility, where price and stock changes occur regularly. This was impacting on understanding of the profit margins paid to suppliers for products.