8 UK partner leaders reveal how they are tackling price rises
HPE's CEO last week urged partners to follow its lead and raise prices. But how are UK resellers and MSPs approaching this thorny topic?
HPE and IBM's CEOs both said last week that it was right to raise prices in light of rising labour and supply chain costs, and advised partners to do the same (see here and here).
But how are some of the UK's top channel partners approaching this thorny topic?
The weak pound, coupled with supply chain and economic woes, has prompted some vendors to hike their UK price lists as of this month (by an estimated 5-15 per cent in some cases, according to some commentary). And wage inflation and skills shortages are lumping yet more cost onto firms in our sector, particularly those with a services bent.
But to what extent, and how quickly, should these cost and price increases be passed on to customers?
Here we quiz the leaders of eight UK channel partners to get the inside line on their strategy.
‘We should hold back, at least until the New Year'
Rickie Sehgal, CEO Transputec
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
I don't agree with the American based CEOs suggestion that we start to raise prices. This might be OK for the USA but it is counter-productive for the UK. Sure, we all want to raise prices, but it's a little too early in my opinion and we should hold back at least until the New Year. It would be wrong to raise prices now and destabilise further the already unstable market by kick starting a deep recession which will lead to an increase in unemployment to add to the miseries of working people.
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
Our Board is unanimous on this decision. We plan not to increase prices whilst monitoring the situation until the New Year. However, we are doubling our efforts to speak to all our staff about the market conditions, improving their job security against turbulent times ahead. We plan to assist those who are the most vulnerable with financial support whilst resisting general salary increase demands.
What's the right approach…should price rises be done in one go, or in stages, for instance, and to what extent will your strategy vary when it comes to consultancy, managed services and product resale?
There is no one simple solution that will deal with the different parts of the business. Our business can be split into three main categories: hardware/software, managed service contracts and professional services. Price increases for managed service contracts will be the most challenging because they are all unique, some with different inflationary increase provisions and different renewal anniversaries. Our clients are in the same boat, they don't want to pay more and pass on increases down the chain.
We are going to take a longer-term view on the professional services and resist increases and monitor the situation until quarter four. The hardware and software prices are likely to be passed through to the clients as the vendors increase their prices to us. I suspect initially margins will reduce because of increased competition and some cost abortion capability.
HPE's CEO recently described HPE as a ‘market leader' when it comes to price rises. Is it better to lead or follow?
I don't agree. Leading a price increase charge may be OK for some but not for us. Transputec values loyalty of their staff and clients over the short-term profit downturn. We are by nature a prudent company, and this has served us well over the past 35 years.
When dealing with big increases in your overheads and the price of the products you carry, what's your top tip for protecting margins while - at the same time - keeping customers happy?
- Over-communicate with your staff and help where needed.
- Address the individual needs of the most vulnerable first. Personalise the support that you offer to each person in need.
- Cut waste in your organisation.
- Improve operational efficiency
- Maintain loyalty and share the pain with your staff and clients
"To say that you are the market leader when it comes to price rises sounds like the dumbest statement ever." Which UK partner leader said it? See next page for more...
8 UK partner leaders reveal how they are tackling price rises
HPE's CEO last week urged partners to follow its lead and raise prices. But how are UK resellers and MSPs approaching this thorny topic?
We already pre-empted price increases
Scott Nursten, CEO, ITHQ
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
We already pre-empted price increases. Around April and May of this year, we foresaw an inflationary environment as a result of the supply chain issues we were seeing, first due to the Chinese lockdown and then through the start of the war in Ukraine. All the signs were there for inflationary rises, and we hadn't put our prices up for two and half years - so we had some catching up to do. In short, it wasn't a critical moment for our business. It was more about maintaining profitability and service levels.
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
We don't expect to absorb the costs. In the cyber resilience game, the quality of the output is what counts. Absorbing costs would mean doing less work per customer or cutting corners somehow. Something would have to give, and we can't let our clients down; our job is too important.
What's the right approach…should price rises be done in one go, or in stages, for instance, and to what extent will your strategy vary when it comes to consultancy, managed services and product resale?
Most businesses use a cost-plus model for product sales. So, if vendors raise prices, their output price goes up automatically. With managed services and consultancy, we made slight increases at the start of the year as previously mentioned; we did it in one go. I don't think staging price increases helps. Having your prices go up multiple times in a year is more painful for the client, in my opinion. I prefer to take one run at price rises, explain why it's happening, be clear about how input costs have gone up. I always think you should be transparent and authentic with your clients, explain that it's about maintaining service levels. Get it done and move on.
HPE's CEO recently described HPE as a ‘market leader' when it comes to price rises. Is it better to lead or follow?
I don't even know what that means! To say that you are the market leader when it comes to price rises sounds like the dumbest statement ever. Why would you want to be known as the business that leads with price increases? What about leading with innovation and technology? Our approach is to solve for the customer. There's no ‘better to lead', or ‘better to follow' with price rises; it has to be based on service levels. To effectively solve problems for our customers we need a certain amount of resource and headspace. Solving those problems is the only thing that matters. The only question should be: "Is the price right for the problem we're solving?". It could not be less about whether we are the first or last to raise prices.
When dealing with big increases in your overheads and the price of the products you carry, what's your top tip for protecting margins while - at the same time - keeping customers happy?
My top tip is super easy: be transparent. We are pretty much an open book with our clients. We show them almost everything. We discuss our staff costs, our salary costs, input costs, and we're transparent on margins. For us, protecting our margin is a by-product of delivering a good service. We want to protect both our customers and the customer experience. I believe if we do that, the margin will follow.
"We have typically increased wages ahead of inflation and have had no choice but to pass this onto our customers". See what Flow Communications CEO Etienne Greeff has to say on the thorny topic of price rises on following page...
8 UK partner leaders reveal how they are tackling price rises
HPE's CEO last week urged partners to follow its lead and raise prices. But how are UK resellers and MSPs approaching this thorny topic?
We have typically increased wages ahead of inflation and have had no choice but to pass this onto our customers
Etienne Greeff, CEO, Flow Communications
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
We have experienced huge wage inflation as we know that there is huge financial pressure on our employees. This is especially acute for the more junior members of staff. We have typically increased wages ahead of inflation and have had no choice but to pass this onto our customers.
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
We have absorbed most of the price increases but are a commercial business after all. Our biggest cost by a wide margin is our staff cost so there isn't a lot of room for manoeuvre. As an executive team we have voluntarily deferred a significant portion of our wages to ease the situation.
What's the right approach…should price rises be done in one go, or in stages, for instance, and to what extent will your strategy vary when it comes to consultancy, managed services and product resale?
From a price increase point of view we have reduced margin on product. With service we have looked at individual customers but believe that it is best to only do increases infrequently rather than death by a thousand cuts.
HPE's CEO recently described HPE as a ‘market leader' when it comes to price rises. Is it better to lead or follow?
Not sure if I want to be known as market leader in price increases. I spend more time worrying about our own customers and staff than benchmarking against industry. These issues matter to staff and customers and should not be PR fodder.
When dealing with big increases in your overheads and the price of the products you carry, what's your top tip for protecting margins while - at the same time - keeping customers happy?
I would concentrate on the areas where you truly add value and re look at your service and asks which parts are not used or valuable. In times of recession efficiency is king and only the fittest will survive .
To raise or not to raise? Where does Core's CCO Rye Austin stand on the subject? See next page for more...
8 UK partner leaders reveal how they are tackling price rises
HPE's CEO last week urged partners to follow its lead and raise prices. But how are UK resellers and MSPs approaching this thorny topic?
Being the first to make a move is less critical to us than making the right move
Rye Austin, chief commercial officer, Core Technology Systems
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
Products and licenses are always quoted in real time at then correct sale price with quotes valid for a limited time only. It's too risky to work any other way. As a result, we're immediately passing on increases (or savings) to customers for products and licenses.
With tighter hardware margins and price variations it's critical for us to get this right and it makes no sense for us to hold stock.
Our service price changes will be at renewal time for existing customers and immediately for new business.
HPE's CEO recently described HPE as a ‘market leader' when it comes to price rises. Is it better to lead or follow?
Being the first to make a move is less critical to us than making the right move, at the right time for our business and customers. We're continuingly striving to drive up efficiency through good process and automation. Investments in tooling and our shift left strategy is also paying dividends. The investments ensure we can remain competitive with high quality service, but it's always sensible for us to regularly review pricing and adjust where necessary. Customers always seek a great deal, but they also want to know suppliers are not cutting costs so low it effects the service or long term viability.
Which large reseller is looking to renting and remanufactured hardware to help its clients negotiate price rises? See following page...
8 UK partner leaders reveal how they are tackling price rises
HPE's CEO last week urged partners to follow its lead and raise prices. But how are UK resellers and MSPs approaching this thorny topic?
The solution is to explore options like alternative solutions
Darren Beasant, managed services director, Bell Integration (pictured) and Mark Nicholas, sales director, Bell Integration
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
Costs for both labour and products are increasing, especially with the shortage of hardware due to Far East chip supply issues. For Bell and other resellers, there is increasing additional pressure from customers needing to drive down their own IT spend. This leaves the service provider/reseller squeezed in the middle.
The solution must be to work closely with the customer, and explore options like alternative solutions, renting or finance solutions, re-manufactured hardware, automation, right shoring and being honest with everyone in the supply chain about the impact of the current macroeconomic situation.
We therefore should be constantly looking to collaborate in this way with customers and trying to leverage such options to create efficiency and value. The real difference here is they become a "must do" mitigation to the (currently significant) challenge of cost pressure as opposed to an opportunity to grow/enhance margin or provide additional value to customers.
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
While absorbing the cost is an option in the short term, longer term this cannot be a sustainable solution. Indeed, as a reseller we are normally in control of a very small percentage of the overall cost relating to hardware and software, and therefore there is little ability on our part to control and absorb. Helping our customers by ensuring they are getting the exact fit solution is key, their businesses are all under cost pressure, so this is the time to examine their requirements and usage and make sure it fits the needs of their business today. Offering alternative innovative solutions is of much more value in the medium to long term, than trying to absorb cost increases.
From a services perspective we do not believe that many, if any, organisations are operating with margins which would allow them to absorb the current cost inflationary pressure for anything but a very short period - eight per cent pa compound cost increase are just not manageable in multi-year contracts. Significant investment in a combination of right shoring, automation and other efficiency initiatives will be needed for most organisations unless they have the luxury of index linked pricing or the ability to pass these costs on to customers.
When dealing with big increases in your overheads and the price of the products you carry, what's your top tip for protecting margins while - at the same time - keeping customers happy?
Working with the customer and being honest about the cost of delivering products and services, providing advice and guidance around the best solution to meet the current business needs, and using new innovation to drive out costs. An "open book" transparent dialogue on the customers' requirements, solutions, cost drivers and a commitment to work together to find mutually beneficial solutions is the only way this can happen.
Once businesses have eliminated any excess spend any reduction from that point will impact risk, capability or capacity and those type of decisions we believe need to be made in a collaborative way if they are going to be both fully understood and successful.
Energy costs in the datacentre, labour costs in delivering services must all be examined to make sure we are not simply a fulfilment channel, but rather we act as a truly vendor independent adviser to the customer around the best way to reduce their overall costs, while delivering the services actually needed by the business today.
Read Sapphire Systems' CSO Chris Gabriel's hot take on price rises on the following page...
8 UK partner leaders reveal how they are tackling price rises
HPE's CEO last week urged partners to follow its lead and raise prices. But how are UK resellers and MSPs approaching this thorny topic?
Software is obviously less impacted by inflation increases
Chris Gabriel, chief strategy officer, Sapphire Systems
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
Software vendors are passing on some cost increases for software maintenance and of course we have to pass those through, but we take an intelligent approach to our customers and our partnership. Software is obviously less impacted by supply chain, freight, and other inflation increases so most of our vendors are taking an intelligent approach to price rises.
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
I think most customers recognise that inflation is impacting the whole country, so we are reflecting cost increases we have to pass on, but also ensuring we are as efficient a business as possible so we can deliver to our customers in the most cost effective way we can. We have been driving efficiency measures as a business and also adopting internal automation to ensure we can be a partner who delivers real value in a way that optimises the cost to the customer.
When dealing with big increases in your overheads and the price of the products you carry, what's your top tip for protecting margins while - at the same time - keeping customers happy?
Be efficient inside your business. Customers will understand a price rise as long as they see you acting in an efficient and fair way. The most important point is to be transparent and honest.
"Costs across every area are only going one way. Up!! Utilize managing director Guy Hocking weighs in on the following page....
8 UK partner leaders reveal how they are tackling price rises
HPE's CEO last week urged partners to follow its lead and raise prices. But how are UK resellers and MSPs approaching this thorny topic?
Costs across every area are only going one way. Up!
Guy Hocking, managing director, Utilize
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
As a managed service provider, reviewing our costs is something we are conditioned to do regularly. Be it hardware, software, overheads or the largest part of our cost base, our people. Everything is tracked and monitored closely in order to maintain margins. Costs across every area are only going one way. Up!
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
We generally absorb any cost fluctuations in the short term. As a managed service provider, the largest portion of our cost is our people, so this opens a whole different conversation around salary reviews and how we pass these direct costs onto clients. We then review all fluctuations cumulatively, over the medium term, and adjust our pricing strategy accordingly.
What's the right approach…should price rises be done in one go, or in stages, for instance, and to what extent will your strategy vary when it comes to consultancy, managed services and product resale?
Businesses need to be able to budget as far in advance as possible. So, for me, it is all about predictability for the customer. This can be achieved through clear and timely communication, along with transparency in your strategy. Indeed, we have always found that building an open and transparent relationship with clients builds long term trust and loyalty. Strategy might vary with certain cloud solutions and software - especially when consumption based - or those products affected by foreign exchange rates. In these instances, we would generally pass on such cost fluctuations in the short term, ensuring timely communication to customers before doing so.
HPE's CEO recently described HPE as a ‘market leader' when it comes to price rises. Is it better to lead or follow?
Being in touch with your market, your customers and therefore your pricing is paramount. For me, it is not about leading or following but rather understanding your customer. If you remain in touch with them, you will do the right thing both by your customers and your business.
When dealing with big increases in your overheads and the price of the products you carry, what's your top tip for protecting margins while - at the same time - keeping customers happy?
Firstly, know your numbers. Analyse every aspect and discuss them daily with your team. Secondly, spend time with your clients. Even when you're a leader running your business, try to maintain regular and direct contact with (at least) a handful of customers and don't assume anything - listen carefully to their feedback! Finally, communicate, communicate, communicate. Let your customers know of any price adjustments as soon as practically possible.
Price rises are "inevitable" according to our final partner boss. See next page for more...
8 UK partner leaders reveal how they are tackling price rises
HPE's CEO last week urged partners to follow its lead and raise prices. But how are UK resellers and MSPs approaching this thorny topic?
Price rises in our space are inevitable
Rob Quickenden, CTO, Cisilion
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
Price rises in our space are inevitable given the current economic state and inflation. This situation is of course not great, but as product and services business, I believe there is a huge opportunity to help our customers balance the books and use the price rises as an opportunity. There is an opportunity to "do more with less" by reviewing the long list of vendors and products they use and consolidating where they can. There will be better deals to use more "suites" of products from the same vendor than buy point products. Vendors will often "help fund", "support" or "sponsor" customers' technology partners to deploy and displace third-party products. Ultimately best of suite can prevail over point products in most cases. Capex, Opex and operational costs can all reduce.
As an example, we have a range of services to help customer adopt the technology they have invested in (reducing shadow IT) - which drives RoI and vFM, consolidates overlapping tech and optimises what they have, from cloud spend to enterprise agreements to maintenance agreements.
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
Headcount cost is the hardest. Employees need to pay their bills so there is pressure on them from families to earn more. We are investing more in grads and less experienced people that have the right attitude, commitment and passion to succeed. There can be no senior without juniors, so building for tomorrow is key in the war for talent. We of course have to pass on price rise to customers for hardware and software that we re-sell, but we are actively driving conversations to help - as per the example above - consolidation of multiple vendors, technology adoption and optimisation services.
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
Price fixing is something many customers want to have as this leads to certainty. Just like a fixed-rate mortgage, helping customers to control spend and avoid bill shock (especially for cloud services) is key. Global giants like Microsoft and Cisco for example (IMO) can afford to ride the wave a little before they apply currency variations to pricing. They should be focusing (like partners and MSPs are) in looking after and retaining customers rather than just increasing prices - customers will jump at the sign of something cheaper when budgets are tight - in the long run loyalty and partnership should continue to be what keeps partners and vendors trusted.
HPE's CEO recently described HPE as a ‘market leader' when it comes to price rises. Is it better to lead or follow?
We are not sheep and each business and customer is different. If you know your customer, know your business and know what it right, it doesn't have to be one size fits all. For a giant global firm, they are more likely to have to do in mass, but for smaller, more agile businesses, i think it's about trying to do what is right. Prices will rise in some areas - they have too, but if we continue to add more value - we can mitigate the impact.
When dealing with big increases in your overheads and the price of the products you carry, what's your top tip for protecting margins while - at the same time - keeping customers happy?
It's all about breadth and depth. If you sell one thing to a customer, there's not much you can do if prices rise or if you have cut your margins to keep the customer. It's all about value. Know the customer. If you can be more than a seller and a transactor, you'll build trust and find other ways to help your customers. Lot of customers don't get the value they should from their current suppliers - when we feel the squeeze we look elsewhere. Don't be the reason they look elsewhere and even better, be the reason people turn to your business. People buy from people - people they trust.