1 November 2016
Are big American firms right in putting up its prices to account for the recent decline in sterling?
I don’t think so.
It’s been a few days now since Microsoft first announced it was going to increase the prices of many of their products and services, particularly their cloud offering, by up to 22%.
This is invariably going to have a huge impact on British businesses and the customers who will, no doubt, have price increases too. These are British businesses that have had so much to contend with over recent months and who are already feeling the pressure of uncertainty.
How will they manage to deal with a price hike of this size? How soon will they have to change their own prices? And how many customers are they likely to lose because of it?
When this price rise comes in at the start of next year, it affects thousands of businesses, as well as the tax payer. Because the Ministry of Defence uses Microsoft’s cloud services, this hike could cost the government tens of millions of pounds a year. This is money we could use for so many different purposes!
As an entrepreneur, it’s not the first time I’ve experienced a supplier introducing a sudden price rise. Our eCloud range is a full-service cloud offering, designed, built and hosted in the UK and we’re proud to own the end-to-end supply chain. But a few years ago, when we were outsourcing our data centre provision, we were subjected to an extraordinary price hike ourselves from Telecity when they acquired two data centre companies that we then used.
At that time, I’d just read Ray Kroc’s book, Behind The Arches, and could see how his business model owning the properties that the MacDonald’s restaurants were in, guaranteed his business was able to remain competitive in years to come, regardless of the economic climate.
We hunted for the land and buildings to lay down the foundations of the future about five years ago and avoid the knock-on effects of another price rise. UKFast now owns four dedicated data centres and the land they sit on in Trafford Park. As prices continue to rise, controlling the largest and most expensive element of the cloud food-chain helps us protect our customers.
However, I know what it feels like to try and grow a business, while still depending on external factors. A significant percentage of our overheads are linked to the exchange rate in one way or another, whether that is Dell servers or electricity. We are in a difficult spot, but I believe times like these define us as a business and demonstrate how we are different.
In my opinion, this is a moment for British businesses to focus on buying British and for entrepreneurs to stand up and help each other out, even if it means we have to swim a bit harder to help our clients maintain the same service for the same price.
I’m not going to kick the British economy because of an American giant is piling on the pressure. Now is the time to show what we Brits are made of and keep our proud reputation as a world-leading economy.
What do you think about price changes because of the sterling fall? Have you been affected by price rises?