We recently posted a story ‘IT Purchases - Buy Now, or Buy Later’ that predicted possible price increases over the coming weeks or months. We have had feedback to this story questioning whether this could be the case in the face of the financial meltdown and the predictions of many economies slowing and some possibly going into recession. To some, logic would suggest that the opposite should be true and that prices should either remain steady or even fall in such a climate. So what is going on?
The story looked at pricing in international markets where the currencies had depreciated against the US Dollar. Where this has occurred and products are priced out from a USD perspective, which is the case with many large US based IT companies, this has created some short-term upward pressure on prices.We are now starting to see price rises in international markets of some products that we track in the Competitive Profiles service. For example, the Australian Dollar has depreciated by around 30 – 40% against the USD and we have seen price rises as a result in the order of 10-20% in the past few weeks. Likewise, the Euro and British Pound are down around 20% and we have detected some price increases in the order of 5% to 10%, over the past few weeks. Note that these changes are patchy with not all products or companies having made such changes. But this could be because we are currently in the middle of the change cycle.
It may be counter intuitive, but it is a fact that we are seeing evidence of price increases for some products in this bear market.
However, where we are seeing price changes in international markets, we are not generally seeing any equivalent movement in US prices. In the short to medium term, we don’t see the same upward drivers on price in the US that we are seeing in some international markets, which are purely currency related. Our pricing research has not detected any general structural shift in pricing in the US, up or down, since the financial crisis became apparent. That is not to say that these changes are in the pipeline. However, it is IDEAS opinion that if such price changes were to occur, they would most likely be downward and as a result of local market conditions in the US economy.
So where buyers in international markets might have contemplated buying now to get in before any price rises, conversely, should US buyers wait, in the hope of more favorable IT pricing next year?
We don’t think so. The two main drivers for IT projects in 2009 should be to save costs, and/or help companies generate new revenues. So if a project is ready to go now, with these already identified benefits, it is IDEAS opinion that they shouldn’t be delayed. The opportunity lost cost of delaying and not realizing the projects’ benefits as quickly as possible, in what could be a tough market in 2009, could far outweigh any benefits of waiting to see what happens with product prices over the medium term.
What is your perspective? Do you expect to see prices rise, remain steady or even fall, over the coming months? Post a comment below.
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