Published on the 17/08/2015 | Written by Beverley Head
Analyst Gartner has warned CIOs they may need to rethink their technology budgets because of the rising US dollar which is still used to price most tech products and services…
Technology professionals are being warned of the risk of up to 20 percent price increases on some goods and services because of the rising US dollar relative to the Euro, Yen and Brazilian Real which have all dropped by about 20 percent compared to the $US in the last 12 months.
It’s a similar picture in Australia. On 19 August 2014, the dollar was worth 93 US cents. It is currently buying just 73 US cents. Some analysts have forecast a further fall, with the dollar being worth just 67 cents over the next year according to Goldman Sachs.
Given that many technology products and services are priced in $US, it’s inevitable that there will be hikes.
Some Australian prices have already risen. Microsoft raised its cloud prices – of Office 365, Dynamics CRM and Azure – by 26 percent at the beginning of the month in order to stave off the impact of the tumbling Australian dollar. Those new prices apply to new or renewing Microsoft customers, while companies on long term contracts will be shielded until they renew.
According to Gartner research director Roberto Sacco, CIOs should expect currency pressures until at least the end of 2016.
“As the CIO, the most important action is to review your project plans through the second quarter of 2016. Assume there will be a 20 percent euro price increase on dollar-based IT products, and then make a plan to deal with it. This exchange rate challenge will be managed by good planning — not by rapid response.”
In Europe Sacco said that vendors were trying to “obfuscate” the price rises by rebundling, changing the mix of modules, training and support services so that the price rises aren’t immediately obvious.
Gartner says that some companies will be spared until their contracts come up for renewal. That is certainly the case with Microsoft cloud users in Australia, who won’t face the new prices until their current contract expires.
“Any country whose currency has weakened against the dollar will face similar conditions to those of Europe,” said Sacco. “In situations in which there are differences in pricing power or strategic importance, some variations will occur. However, the central mechanics of the currency problem are similar.”
He said that unless CIOs reviewed their position it was possible that looming price rises would place other projects at risk.
