IT Supply Chain Developments and Their Impact on Buying Decisions

Here is this month's post in Al Nagar's, Head of Benchmarking, KnowledgeBus, Mercato Solutions, series of advisory pieces on recent movements and impactors within key IT product categories, keeping you abreast of the latest developments and helping you support your purchasing decisions.

April was a busy month for businesses. The build-up to the election, the start of a new public sector financial year and ongoing currency woes saw buying teams contend with multiple challenges when purchasing IT equipment. Currency issues were perhaps the biggest hurdle, with the exchange rate prompting price rises and falling sales across Europe.

The weakening euro is a prime example of how changeable currencies can influence the whole IT supply chain and impact the end product price.

Exchange rates

The euro finished lower than it started against the pound during April. Beginning the month at 0.7276, it rose rapidly to 0.7358 by the end of the first week of the month. From there it began a steady slide, reaching a monthly low of 0.7149 on April 29. The euro rose slightly the following day before finishing at 0.7170 at the end of the month.

The euro’s fortunes against the US dollar told a very different tale during April. Starting at 1.0772 at the beginning of the month, it experienced a similar rise against the pound, climbing to 1.0986 on April 7. From there, it fell further, bottoming out early at 1.0580 mid-month before finally finishing well above its April 1 price, at 1.1028.

The sudden decline of the euro after April 7 against both currencies was put down to problems in Greece. The country's new government sold €1.14 billion worth of Treasury bills, raising sufficient funds to pay international creditors, but providing only a temporary fix, raising concerns that the country could exit the Eurozone in the short to mid-term. Concerns over the strength of the US recovery, compounded by week Q1 figures for US GDP, helped to drive the euro’s value against the dollar.

Phones and Tablets

Samsung cemented its leadership status in smartphone sales, following strong shipments during the first quarter of 2015. According to IDC, this was largely due to a renewed focus on low-cost smartphones. These devices are largely favoured in emerging markets, while the brand’s flagship higher-end devices are more commonly purchased in the developed markets. Samsung announced $2.5 billion profits on revenues of $24.1 billion for its smartphones.

Rivaling Samsung was Apple, who experienced its strongest quarter ever, shipping 61.2 million units in Q1, thanks to larger screens on its latest phones. The trend for larger screens is one that we’re seeing a greater uptake in, including the growing popularity for 'phablets' as a middle-ground between the two devices.

iOS is continuing to gain popularity in Europe’s five largest countries, according to a recent report from Kantar Worldpanel ComTech, gaining 1.8% over 2014 to reach a 20.3% market share. The research revealed that 34% of Apple’s new customers switched to iOS from Android. Apple also did particularly well in China with unit shipments growing 63% in emerging markets. Despite this, and recent research, it seems that Android still rules the roost in Europe, with a 68.4% market share.

Traditional PCs

April saw Gartner predict that PC prices will rise by up to 10% thanks to the effects of currency devaluation against the US dollar. This was big news for the product sector, with Europe and Japan to be particularly hard hit. Margins are likely to fall overall, with vendors reacting by selling PCs with fewer features in a bid to keep the prices down. Gartner foresees larger businesses investing in, and prioritising, other IT budgets hit by currency-driven deficits. Smaller businesses looking to refresh will likely select cheaper, consumer PCs.

IDC also noted the currency-driven price increases, stating that the PC market in Western Europe fell 2% in shipment during the year’s first quarter following a decline in the commercial market.

Price fluctuations often prompt businesses to make new purchasing decisions, including investing in a device with fewer features to keep costs down. When buying a new device, the question has often been ‘how much money do I have and what can I get for it?’ While price is an unavoidable factor, it’s important that procurement teams look more closely at what they’re trying to achieve and what the best tool for the job is. In doing so, they can avoid purchasing over-specified or irrelevant products, making smarter buying decisions that impact the bottom line.

 

Stat of the month: April 3, 4, and 5 each saw just over 7,100 new products launched each day.

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