Vendor Price Rises – Why do They Keep Happening? How to Combat?
As has been discussed over the past few months, we have seen a fairly consistent approach to software price rises, the main ones are contained in the table below:
|Microsoft||13% (28% on online services)|
|Symantec||20% (effective 1st April)|
|AutoDesk||Successive rises totalling 35% by 2019|
|Adobe||Up to 62% depending on user types|
|Citrix||Indirect 15-35% based on SA retirement|
Reason #1: Currency Normalisation
Due to the nature of the software industry, the vast majority of software partners are headquartered outside of the UK, primarily in the US. As a result, the recent changes in the relative values of US dollars and Great British Pounds have had a substantial effect on the market. This has been fuelled by world events such as Brexit that has affected the currency rates worldwide.
As a result, almost all mainstream vendors have applied a price increase to their UK price books, leading to an increased buy price to our customers.
In the case of some smaller vendors, the buy price is provided to our distribution partners directly in dollars. This results in some vendors being more immediately affected by fluctuations in the currency market, on a month to month basis.
Reason #2: Vendor Strategy
From a macro level, we have seen in our other articles on Autodesk, where their desire to move to a fully subscription led organisation; or Citrix, where a lower level maintenance agreement has been retired, a vendor’s strategy on how they wish to trade is another factor.
We will most likely see further changes in strategy as some vendors try to escalate their customer consumption from on premise perpetual to cloud services / SaaS style offerings. This has further been ratified by Adobe’s latest results which has shown a 22% increase in revenue by adopting a subscription only model.
Reason #3: Vendor Product / Suite Change
From a micro level, we have seen how vendors have changed product or suite consolidation – two examples in the same product set are Microsoft’s System Center suite. This has gone through two changes in recent years. Firstly the consolidation of point products such as Configuration Manager, Operations Manager and Virtual Machine Manager into one suite – System Center. Secondly, in the 2016 release, the licence metric changed to a per core model. This has its own indirect pricing increases, although simplicity is often offered as a mitigating factor!
The bad news…
There is likely to be no abatement in this approach by vendors, either through direct price change or indirect price change through consolidation of products, changes in product metrics or retirement of certain programmes that may cause a cost increase.
The other view is the migration to cloud services can also lead to an indirect price increase as the model is completely different and the ability to control sprawl can also increase costs.
The good news…
SCC’s software services have a number of offerings to help you understand, mitigate or plan for the increases.
- Software Smart-Buy informs and keeps you updated on changes and its impact
- Software Asset Management services helps you optimise the utilisation of software
- Software Professional Services can help you re-architect your software environments to optimise this further
Contact SCC to help you optimise your software consumption TODAY!