Are price rises impacting your software sales?

If you're an IT reseller, you've likely seen how economic factors, such as rising interest rates, can impact the cost of software for your customers. This is not the only reason that prices are heading upwards as additionally, some major software vendors are globally aligning¹, or “price harmonising”², their pricing strategies.

The impact of these price rises is felt most when it’s time for businesses to renew software licenses.

Businesses are often seeing significant increases to their annual software costs, with some of these being well over 20% that of the previous year³. With other operating costs also on an upward trajectory, senior decision makers responsible for the financial health of their business, are having to make difficult decisions as to where they best place their investments.

Such decisions would have been easier 15 years ago, when interest rates were last at their current level. However, in today’s world, many business tasks, such as managing customer data, are largely dependent on having the very latest software.

So, can businesses really afford to compromise when it comes to having the latest software that is so integral to their infrastructure?

There is a solution…with predictability and reassurance.

Software resellers are coming to the rescue by being more than just an IT equipment supplier.

By understanding their customers’ needs and crucially, the way they want to pay for their software, smart IT resellers are delivering value to their customers by providing flexible payment over time solutions. These solutions can help businesses stay up to date with the latest software, whilst fixing their annual costs and protecting themselves against future license increases.

The total amount paid, including interest, over say a three-year period can provide savings when compared to the annual increase in license costs.

But these savings are just one part of the benefit. When you also consider the internal impact of removing capital from the business, the case is even stronger. Furthermore, by opting for a multi-year commitment, businesses are much better placed to negotiate a discount from their vendor. This is illustrated below.

Let's say you have a customer that made an initial technology investment of £100,000.

Table one shows the annual cost over time, based on your customer's investment. This is assuming a 15% year-over-year price increase. At the end of year three, the total cost of the customer is £347,250.

By comparison, in Table 2, the reseller has negotiated a 10% discount on behalf of the customer for a multi-year commitment, meaning the annual cost for each of the three years is £90,000. When you add DLL’s annual interest cost of £7,858, this gives a total fixed cost for each year of £97,858.

Saving with a multi-year fixed payment plan

At the end of the three years, a payment over time option can deliver a significant saving of 15% versus a cash purchase.

This payment option can help businesses control their cash flow — they have better insight into how much they’re paying and when.

What price do you put on having predictability on your business expenditure?

For chief financial officers, knowing the costs of their business for the next three years, is invaluable. It can help them better manage resources and plan other investments to grow their business.

Learn more about IT payment solutions.
If you are an IT reseller and would like to find out more about how technology financing can benefit you and your customers, contact our tech financing experts.
Or, you’re welcome to contact me directly.
Either way, we look forward to working together with you to find IT payment strategies to help you and your customers.

References & data sources

1. Consistent global pricing for the Microsoft Cloud.
2. IBM price increases coming in 2023.
3. IBM is increasing its pricing by as much as 24% from January 2023!
   Microsoft 365 SaaS prices increase by up to 25%

Disclaimer

This blog has been prepared for promotional purposes only. It does not constitute an offer and is not meant as advice on how any transaction or aspect of it should be qualified from a legal, tax, accounting or other perspective. We cannot guarantee that any information provided in this blog is complete or accurate or fit for your purposes. We recommend that you seek independent advice and consider alternative payment options available in the market.