We already pre-empted price increases
Scott Nursten, CEO, ITHQ
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
We already pre-empted price increases. Around April and May of this year, we foresaw an inflationary environment as a result of the supply chain issues we were seeing, first due to the Chinese lockdown and then through the start of the war in Ukraine. All the signs were there for inflationary rises, and we hadn't put our prices up for two and half years - so we had some catching up to do. In short, it wasn't a critical moment for our business. It was more about maintaining profitability and service levels.
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
We don't expect to absorb the costs. In the cyber resilience game, the quality of the output is what counts. Absorbing costs would mean doing less work per customer or cutting corners somehow. Something would have to give, and we can't let our clients down; our job is too important.
What's the right approach…should price rises be done in one go, or in stages, for instance, and to what extent will your strategy vary when it comes to consultancy, managed services and product resale?
Most businesses use a cost-plus model for product sales. So, if vendors raise prices, their output price goes up automatically. With managed services and consultancy, we made slight increases at the start of the year as previously mentioned; we did it in one go. I don't think staging price increases helps. Having your prices go up multiple times in a year is more painful for the client, in my opinion. I prefer to take one run at price rises, explain why it's happening, be clear about how input costs have gone up. I always think you should be transparent and authentic with your clients, explain that it's about maintaining service levels. Get it done and move on.
HPE's CEO recently described HPE as a ‘market leader' when it comes to price rises. Is it better to lead or follow?
I don't even know what that means! To say that you are the market leader when it comes to price rises sounds like the dumbest statement ever. Why would you want to be known as the business that leads with price increases? What about leading with innovation and technology? Our approach is to solve for the customer. There's no ‘better to lead', or ‘better to follow' with price rises; it has to be based on service levels. To effectively solve problems for our customers we need a certain amount of resource and headspace. Solving those problems is the only thing that matters. The only question should be: "Is the price right for the problem we're solving?". It could not be less about whether we are the first or last to raise prices.
When dealing with big increases in your overheads and the price of the products you carry, what's your top tip for protecting margins while - at the same time - keeping customers happy?
My top tip is super easy: be transparent. We are pretty much an open book with our clients. We show them almost everything. We discuss our staff costs, our salary costs, input costs, and we're transparent on margins. For us, protecting our margin is a by-product of delivering a good service. We want to protect both our customers and the customer experience. I believe if we do that, the margin will follow.
"We have typically increased wages ahead of inflation and have had no choice but to pass this onto our customers". See what Flow Communications CEO Etienne Greeff has to say on the thorny topic of price rises on following page...
