IT Supply Chain Developments and Their Impact on Buying Decisions

computer ermess/Adobe Stock

Al Nagar, Head of Benchmarking, KnowledgeBus, Mercato Solutions, continues his series of monthly advisory pieces sharing recent movements and impactors within key IT product categories, to keep you up to date with the latest developments and help support your purchasing decisions.

In the months leading up to Brexit, my series of regular posts here have focused on how uncertain times can impact the IT channel – with the falling rate of the pound being a particular concern for many IT purchasing teams.

Fast forward to the present, and there is still very much a sense of waiting for the dust to settle. The UK is leaving the European Union but when and how this will take place remains unclear.  We have undergone a swift change of Prime Minister and a serious cabinet reshuffle, so we may get greater clarity sooner than initially anticipated.

Special focus: Brexit

It is highly likely that buyers will experience a sharp increase in IT product prices following the EU referendum vote. Within hours of the leave vote being declared, manufacturers and distributors began issuing warnings that they were about to raise prices, or that they would only hold their current prices while stocks last.

As the pound has tumbled to historic lows, manufacturers (who buy their components in US dollars), and some distributors who buy products in dollars and Euros, have had little choice but to increase prices if they are to protect their profit margins.

On the Friday the vote was announced, KnowledgeBus recorded more than 26,000 price rises in the UK IT product market. Unfortunately, this looks likely to be the starting point. Historically, price rises based on currency fluctuations do not tend to be immediate – there is usually an adjustment period in the weeks following.

Manufacturers may take a short term hit in the first month, but if they do there is every chance they will look to compensate further down the line. If this is the case, we can expect a price rise that exceeds the percentage fall in the pound against the dollar. Buyers must, however, ensure that uncertainty in the market is not used by suppliers as an excuse for charging inflated margins. Industry best practice, set out by the Society of IT managers (SOCTIM) states buyers should pay no more than a 3% margin.


Exchange Rate

The euro gained significant traction against the GBP in June. It enjoyed a slow and steady rise from 0.7715 on June 1 to 0.7943 on June 14. After a fall to 0.7661 by June 23, the euro shot upward, first to 0.8104 on the 25th and again to 0.8304 on the 28th, ending the month at 0.8291.

The European currency showed some similar trends against the US dollar, rising from 1.1150 to 1.1365 in the first week of June. It plateaued for a few days before falling to 1.1249 on the 11th. After a stable week the euro rose again, this time to 1.1336 on June 20. From there, it fell and rose again before falling hard from 1.1353 on June 23 to 1.1021 on June 27. It finished the month at 1.1104.

All reports on the Eurozone in June focused on the UK referendum. The aftermath of the EU vote saw the GBP plummet against all other markets. According to analyst firm Canalys, IT spending in the UK is now set to drop by 10% in 2016 and perhaps even more so by next year.


Phones and tablets

Smartphone sales are expected to grow just 7% YoY to 1.5b units in 2016, down from 14.4% growth in 2015. This is largely due to saturation in key markets and extended device life. According to Gartner, India is now the target market for sales, where it is forecasting sales to grow 29.5% in 2016 compared to the previous year. Meanwhile, Western Europe’s future growth will continue to slow.

IDC forecasts that shipments are expected to fall in 2016, with smartphones experiencing just 3.1% YoY growth, down from 10.5% in 2015 and 27.8% in 2014. Android is expected to grow another 6.2% this year compared to last – with 1.24b shipments and an 83.7% market share. Meanwhile, iOS will drop 2% YoY to 226.8m units and 15.3% of the market. This is raising alarms for Apple, and suggests the possibility of 2017 trade-in deals in order to help regain growth.

Significant developments have ensued for Apple in Beijing where iPhone 6 sales have been banned, due to claims of patent infringements on Chinese phones. The order is pending review by the Beijing IP Court, but must be causing some sleepless nights in Cupertino.



According to IDC, 3D printer shipments grew nearly 20% YoY in 2015, and are expected to experienced compound growth of more than 16% annually through 2020. Context also predicts that the global 3D printer market will reach over $17.8b in revenue over the next five years, with hardware alone to grow 38% each year from $1.8b in 2016 to $6.4b in 2020.

IDC also noted that the production printer market enjoyed 7.9% YoY growth, with shipment value increasing 1.4% to $1.2b. Global shipments of large format printers also grew in Q1, up 1.2% YoY, while revenue rose 7%. IDC also noted that HP held double the market shares of any other vendor with 40.5% and 33,100 shipments.

 Stat of the month: The largest amount of new products occurred on June 10, with 808 products coming to market in a single day.



Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.