New innovations improve lives and business outcomes, and that drives adoption, purchase and volatility.
The IT market is driven by persistent New Product Introductions - 7,000 in 3 days - with manufacturers all over the world investing in innovation and getting that to market as quickly as possible via a three tiered global supply chain.
However, every product passes through a lifecycle from early to mass market adoption, which demands scale of production and sees unit costs drop over time. Couple that to a complex supply chain crossing multiple geographies and there’s a recipe for many variables to impact final end product price.
So, for IT buyers, monitoring over 30,000 daily price changes and stock levels to identify best value is a hugely manual and time consuming approach – sourcing data, analysing and comparing – and even then, how do they really know they’re getting a deal? Related read; guide to overcoming market volatility.
On average, buyers spend an hour a day researching and transacting whilst receiving up to 40 unsolicited reseller calls every day. Can every purchase represent best value and what drives the volatility?
Exchange rates may fluctuate, there may be a shortage of raw materials or a new product might launch. These and many more factors send trade prices up and down daily. There are also major political events or natural disasters to consider.
The Brexit and Trump votes last year both had significant repercussions on currency, causing a ripple effect down the global supply chain. For instance, the pound fell 13% against the dollar after the UK voted to leave the EU.
Exchange rates play a significant part in fuelling the volatility of price in the IT supply chain and this impacts on everything from component costs to cross boarder logistics charges and prices paid by distributors and resellers. And, most IT across the supply chain is bought in dollars first then GBP, so impacting end price.
Given the speed of technology development, prices usually fall by up to 50% within the first two years of their launch, but following the Brexit vote, some manufacturers increased UK IT prices by more than 20% as a result of dollar movements.
To bring structure and process to combat time wastage, and what is a behemoth of a challenge, organisations often benchmark for value by getting quotes from three suppliers.
However, prices fluctuate up and down by 66% of their value daily, and it appears this high level of volatility and a lack of transparency mean buyers struggle to keep track of the margins being paid to resellers on top of trade value.
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Research has found that average margins of 18% are being paid for IT products – substantially more than the industry best practice level of 3% recommend by the Society of IT Managers. In extreme cases, buyers are paying up ten times the trade price, and last year, one local authority paid a 1,095% margin for an order of SD memory cards.
Volatility in the IT market is clearly causing pain for IT buyers and suppliers alike. It impacts upon time and often delivers poor value for buyers. However, 81% of IT directors say they have no awareness of this volatility or the scale of price and stock fluctuations.
It is challenging market conditions such as these, where there is demand for choice, efficiency and transparency, where many are turning to digital tools and marketplaces to unlock visibility and value.