There have been many warnings and predictions about the outcome of the Brexit vote and its ongoing consequences, both on a macro-economic level and also in more specific areas of business in the United Kingdom.

For consumers of IT, whether personal or business, there are already consequences. For example, Dell introduced a double-digit price rise in the summer, blaming Brexit. HP has followed suit, paving the way for others. But why those manufacturers?

The reasons are quite simple. Hardware manufacturers operate on low margins and source products form the Far East, in a market dominated by the US dollar. When the Brexit vote was confirmed, sterling fell sharply against the dollar, instantly wiping out a chunk of the margin from sales in the UK. Further margin is eroded by discounting and by the indirect sales channels favoured by many of the low margin, high volume vendors in the IT hardware space. Therefore, an adjustment had to be made to compensate for the abrupt change in circumstances – which meant raising prices.

It is also worth noting that the same vendors are struggling to sell equipment more than ever before, due to the shift towards cloud adoption. This has reduced the volume of sales to corporates and even though the pound is now showing signs of recovery against the dollar, the general picture for PC manufacturers remains fairly grim. Because of this, it is unlikely prices will be reduced, even if sterling recovers fully. In any case, the mood of uncertainty surrounding Brexit is likely to continue for some time, thus discouraging discretionary investment – a further blow to them. So, it is actually far more likely we will see further price rises, rather than falls, over the next two to three years.

So what can clients do about this?

Well, there are three options:

1. Increase IT budgets by at least 10% to compensate for the unplanned additional cost you will have to bear.
2. Reduce expenditure to stay within the existing budget structure – in other words reduce the actual number of projects you were going to undertake.
3. Take steps to find savings in the costs paid, so that money saved can be reinvested in planned projects – that means no budget increase and no reduction in planned efforts either.

The third option sounds like a utopian view. However, it is possible in some circumstances. Expense Reduction Analysts are presently running a number of IT projects with this goal in mind – and more importantly we are succeeding. Savings are being identified and/or retrieved from vendors, which is having the effect of nullifying price rises and in some cases going beyond that to create a significant net gain.

This does not only apply to hardware. Software, support and services also have a part to play in optimising spend, without reducing quality, as do hosting, data centres and communications. By taking a holistic view of the IT budgetary requirement, we are able to focus in on the areas where we can make the greatest impact, delivering budgeted cash back to clients and helping them to continue necessary IT provision and investment in their businesses.

Feel free to contact us for more information.