Inflation within Technology

“Inflation is when you pay fifteen pounds for the ten-pound haircut you used to get for five pounds when you had hair.”

Inflation is the topic of the day. It has been at the forefront of people’s minds for many months.

There have been lots of column inches produced about both the cause and implications of inflation on our daily lives. Depending on which flavour of inflation you prefer (RPI, CPI etc), it currently sits between 10% and 15%. Now we are seeing the effects of inflation trickle through the corporate world of IT. Inflation within technology has become a real issue.

It is a fact of the world that costs are going up.

Electricity, oil, and gas are all on the rise with many factors contributing to this problem. The manifestation is that the cost of production and support is going up. But surely this is not something we are seeing in the world of technology? Wrong!

“You have to include inflation in your annual revenue and expense forecasts. You have to treat inflation as an annual fee your business pays into the economy. If inflation is 2% for example, that means the economy is charging your business a 2% annual fee. You have got to make sure your income and total assets grow at a minimum of 2% annually just to keep up.”

Inflation within technology is affecting all technology suppliers. Whether they are the Original Equipment Manufacturer, the software owner and vender or a reseller, all of them have been suffering.

The natural consequence of this is to see prices rise.

However, no-one will have expected to see the types of rise that have been coming through, such as:

• Microsoft increasing their whole portfolio by 9% on 1st April 2023, following a 20% rise on 1st March 2022
• Cisco increased an average of 10% this time last year, followed by an additional 10% later in 2022
• Dell, HP and Lenovo all increasing prices by an average 20% across their laptop, desktop and server estate
• General software prices have inflated by an average 15-20% during 2022

The technology sales market has been volatile though. Unfortunately, there has been little choice for businesses today. They must meet the challenge placed on them by the venders.

“The way prices are rising, the good old days are last week.”

Or at least that is what used to happen. The reality is that markets are changing. Software providers know that they have a lot of competition but equally the cost of change is a strong consideration for most businesses. End User Compute has a different problem: computers are changing too fast. Supporting lots of different models is a challenge, and the requirement for increased computer processing ability (based on software) causes refreshes to be considered more frequently (every 3 years on average).

The prediction is that the EUC market will autumn 3% by way of sales in 2023. This means that businesses have taken the decision to live with underperforming technology to safeguard budgets.

“Once a new technology rolls over you, if you’re not part of the steamroller. You’re part of the road.”

And this is the kicker, despite all of this, ERA are achieving savings not thought possible. In some cases, we are bringing prices down to the last year’s price. Other times we are reducing the impact of inflation. The reality is that in this market wholesale savings on last years’ prices is not a possibility. However, reducing the impact of inflation within technology industries is.