Tumbling dollar and Nasdaq puts IT managers in driver's seat: Gartner

Turbulent economic times, a plummeting Australian dollar and Nasdaq stock market have put IT managers in an even better position to negotiate strongly and make deals with vendors, according to a Gartner analyst.

"I think IT managers should be prudent, look at their negotiation skills with vendors and remember the key person within the deal is the person that holds the purse strings," said Phil Sargeant, research director, servers and storage for Gartner.

"They should increase competition within their organisation for better prices. Instead of going to the usual vendor, go to three or four and see what deals are around."

Sargeant said the present economic situation in Australia was an interesting one, with the drop in the Australian dollar competing with the effects of the decline in stock market value for vendors on the Nasdaq.

Greta James, research director RAS, for Gartner agrees. "I think the effect of the dollar and the Nasdaq is unlikely to impact [on software costs] this financial year, but that also depends on when a company's fiscal year ends, which may be September for many vendors."

"However, the drop in the Nasdaq will mean many companies will be trying to get their revenue up at the end of their fiscal year."

James said only if the currency remains low against the US dollar would we see a price rise filter through by the end of the year, but this would be balanced against the competition aspect of the Nasdaq.

Alison Dodd, director enterprise and solution marketing for Microsoft, said the company was currently monitoring the Australian exchange rate and had already made a price increase in December last year.

"We have no plans for a price increase. We think the dollar will regain its value and that it is a short-term thing. From an organisation point of view, it is too early to tell."

Effects of the economic conditions on the hardware market within Australia will be similar to the software market, however Sargeant sees the ball definitely in the IT managers court for the time being.

"I think the effect of the dollar and the market crash will kick in towards the end of the fiscal year and into the next. However, a lot of companies still have stock at the 'old' price and we will probably see vendors approach IT managers with special deals."

A spokesperson from Hewlett-Packard declined to comment on how it thought Australia's current economic situation would affect hardware prices.

Sargeant said for the majority of hardware companies in Australia which pay in US dollars, the drop in the Australian dollar exchange rate will have a marked effect on the end user.

"But we also have another factor in play in Australia, the GST. If there has been an exchange rate decrease of 11 per cent, there will be a price increase of 12.2 per cent, the GST effect. This is if the transfer pricing stays constant and there is just the exchange rate drop."

Sargeant said compounded with the decline of the stock market value, some companies will want to shift products and drop their prices.

"In product sectors that have not focused on volume, such as the higher-end server and storage market, I think the prices will go down."

Sargeant said prices would not drop in the PC market as many [vendors] concentrate on value and market share over revenue. It has got to the point that companies can't keep doing this as there is nothing in it, she said.

"A number of companies won't be able to drop their prices and will have to change their outlook."

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