Five ways to help your customers avoid Brexit IT price rises

From negotiating harder on price to getting in orders before January and sweating assets for longer, we round up what tactics open to VARs looking to help customers negotiate the Brexit-induced price hikes

With the price UK punters pay for their IT hardware, software and services rising by up to a fifth since the summer, the onus is on resellers to help their customers avoid the worst of the carnage, where possible.

Here we round up some of the options available.

1) Help customers negotiate hard

According to data from IT supplier Probrand, the average IT product price in the UK has increased by 12.7 per cent since June as the vendors across the board moved to mitigate the impact of the collapse in Sterling.

That's way above inflation and higher even than the 12 per cent price increases food vendors such as Birdseye and Walkers are currently negotiating with supermarkets.

Probrand's figure is based on a basket of 100 regular-buy B2B IT products from a range of vendors, price levels and sectors. But it doesn't cover the spate of price rises coming in January, most notably a 13 to 22 per cent hike from Microsoft. VMware is also planning a 15 per cent hike, with HPE reportedly having implemented a second round of rises this month.

Ian Nethercot, head of supply chain at Probrand, said he suspected that some price rises may be higher than needed, and that one tactic open to customers is to push for a better deal.

"There's now an opportunity to negotiate much harder with the supply chain," he said.

"The price rises that are happening are certainly ahead of UK inflation, and there's a caution there that the supply chain may be increasing prices more than expected to make extra margin. So there's certainly room for the channel and customers to be negotiating harder to close down that margin. I think some of the vendors are hedging their bets and are trying to protect themselves for the future by doing price rises that will cover them for the next few months. That's the message of why customers need to be scrutinising the supply chain much more closely at the moment."

2) Push independent support

The recent spate of price rises have been greeted as a gift by some IT suppliers who offer independent support.

Paul Timms, managing director at MCSA, said that although the cost of cloud services, new equipment and vendor support agreements are all heading north, support offered by UK-based, independent firms which charge in pounds, not dollars - like MCSA - can hold their prices.

"For us, recessions and bumps along the road, like 20 per cent price hikes, have always been an opportunity, as we are a UK, family-owned business," he said. "In a price-rise environment we are in a great position to go to customers and say 'we can save you money and we can look after your infrastructure for a bit longer, and when the time is right and you want to look at infrastructure - private cloud, hybrid cloud - whichever way you want to go - we will help you with that'."

3) Orders in before 31 December

Microsoft and VMware are among those to confirm they will be hoisting prices in January, meaning there may be some merit in persuading customers to complete orders this month, said Nethercot.

HP Inc is among the other vendors expected to implement a second rise in January, he said.

"VMware recently announced official price rises of a minimum of 15 per cent - we don't know what the maximum is yet.

"The special bid agreements we've got in place with a lot of the vendors are only valid until the end of December, so the signs are pointing towards renegotiations happening in January," Nethercot said.

"Certainly the message we're putting out to customers at the moment is to bring forward any large project purchases into FY16."

4) Point public sector customers towards frameworks

The best vehicle public sector customers can use to avoid the price hikes, for now at least, is the new Technology Products 2 framework, according to its organisers.

In an interview with CRN last month, Kelvin Lee, Crown Commercial Services' category director for technology products and services, said CCS is in ongoing discussions with all the major vendors about the exchange rate, with the aim of keeping customers abreast of any price increases coming and using all the stock in the channel.

"We're giving the best possible advice to minimise the impact," Lee said. "But everything is traded in dollars so it will have an impact. Suppliers can't just ignore it, we've got to deal with it. Customers may well see the impact. There are 61 suppliers in there so they might have deals with distribution [to offset the increases]. Public sector customers using Tech Products 2 probably have the best chance of [avoiding being] affected by these price rises."

5) Shun A-brands

With customer budgets coming under more constraint, there is "certainly more opportunity for emerging vendors that are price attractive", Nethercot said.

"It's certainly going to encourage customers to scour around the market much more," he said.

Customers faced with a five-year investment in equipment and support from the likes of HPE, Cisco or Oracle will now look harder at their options, Timms predicted.

"Those options are going to be either you take a leap to the cloud, or you look at the up-and-coming vendors like Huawei and Lenovo. The Chinese vendors are doing what HP did 20 years ago and they are coming and doing everything better and cheaper. Customers are buying software, not infrastructure, and don't really care about the badge now," he said.

Paul Barlow, managing director of Lenovo and HP partner Servium, said he hadn't seen customers switching yet but conceded that the price rises had made it a topic of conversation for customers.

"It's not just the cost of the infrastructure, but the knowledge base the customers have on that infrastructure," he said.

Many customers appreciate that Brexit is a one-off and not an "industry-manufactured opportunity", Barlow added.

"We are just doing our best to keep people informed as soon as possible of the price changes, as no-one likes surprises," he said.