Will Coronavirus Impact IT Pricing?

By Kristian Tuinzing

Client Services Manager, NPI

March 03, 2020

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With the unknown but potentially severe global impact of the coronavirus (COVID-19), NPI has begun seeing ripples in the world of IT sourcing with some vendors citing “troubles” in their supply chains. Will coronavirus impact IT pricing?

Similar to what we saw when new trade tariffs with China were announced, there’s a mixture of overstatement and real strain on vendor operations. Here are three areas of specific consideration:

Hardware vs. Software/Services

While there’s real basis in worries of how coronavirus may impact hardware pricing, this sort of correlation doesn’t exist between global events and software/services pricing. Recently, Palo Alto announced a 5% price hike to their hardware products due to ‘tariffs’. However, not only did NPI witness uneven increases well above 5% in Palo Alto’s list pricing (in some cases going as high as 15%), we saw these increases were applied to the vendor’s software subscriptions and support costs in recent quotes. Even with real cost impacts, NPI finds it hard to justify using projected tariffs to justify increases to software and services that come out of California, India and other geographies – but not China. NPI recommends clients stay updated on how best in class pricing targets continue to move as vendors change price lists and policy.

Cautions on ‘Stock Issues’

Another issue we’re hearing clients and vendors talk about is available stock/inventory. With concerns that manufacturing will be impacted for months, vendor sales teams could convince businesses to buy more units than can be deployed right away. NPI recommends being vigilant in exploring alternatives when purchasing commoditized hardware at high volumes.

In certain cases, NPI expects the struggles of market leaders could open the door for competition. Many manufacturers are still operating at a limited capacity, and NPI anticipates impacts to preferred vendors for niche products like ruggedized tablets or POS equipment to force clients to consider alternatives.

Extra Attention to Collaboration Providers

While much of the global economy looks to be negatively impacted by coronavirus, vendors of collaboration tools see this as an opportunity. Zoom Communications, Slack, and to an extent larger OEMs like Cisco or Microsoft could decrease pricing flexibility for relevant tools and product lines as they seek to capitalize on this demand spike. NPI advises clients to keep multiple solutions in the mix during major purchases, as the numerous vendors in the space offer a competitive atmosphere.

In summary, NPI advises the market to take everything with a grain of salt mixed with a grain of truth, and to treat each major purchase as an opportunity to test if what vendors are saying is fully rooted in reality or not. And don’t forget to wash your hands!