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British businesses hit by Microsoft’s 20% post-Brexit price hike

Fred Isaac

Fred Isaac
Oct 25, 2016


Microsoft has announced price rises of up to 22% for British businesses that use the its products and software.

The company blamed the rise on the collapse in the pound’s value following the EU referendum result.

From January 2017, most cloud-hosted services, including Azure, will increase in cost by 22%, while locally hosted software will increase by 13%.

Microsoft’s cloud-based subscription version of the Office program, Office 365, has become increasingly popular.

The move, which will apply only to new purchases, is likely to hit thousands of businesses and government departments – although home consumers will not be affected.

Here's what you need to know:

 

I’m a small business owner, can I beat Microsoft’s hike?

The price hike will only apply to new purchases and kicks in from January 1.

Get your subscriptions renewed ahead of this date if you can to beat the hike.

 

Why has Microsoft raised prices?

Since the Brexit vote, the pound has collapsed 18% against the dollar.

A weaker pound means it costs more to produce a product –from hardware such as memory to buying domain names, licences and subscriptions.

To offset this slump, businesses like Dell, Apple and Microsoft say they have been forced to raise prices.

Microsoft said the rise would bring its prices into line with those in the Eurozone and that it was akin to adjustments in pricing it has already announced in Norway and Switzerland.

Business customers will only see prices rise if they buy directly from Microsoft, but it’s highly likely third-party sellers raise prices to reflect the headline increase.

 

What does it mean for British businesses?

Businesses that sign up to Microsoft services such as Office suite, which includes Word, Powerpoint, Outlook and the Office 365 cloud platform, face having to pay higher costs.

The fact that the price hike will not apply to existing contracts will delay the blow for businesses currently using Microsoft services.

Companies that currently have subscriptions, and then renew next year, will be forced to renew at the higher price. 

Many will feel hamstrung by the price hike; moving to a new cloud provider is not as simple, say, as switching energy.

 

What can the government do to help?

The government said it was working to secure the best price for taxpayers.

Government departments including the Ministry of Defence, and an NHS trust, use Microsoft services.

A spokesman for the British Cabinet Office said: "Where we are made aware of proposed price changes for a specific supplier we will work closely with that supplier to identify ways to mitigate any increases in price.”

                                                                 

Is Microsoft's price rise necessary?

Whilst most tech firms have raised prices, Microsoft’s is particularly steep.

Apple and Dell both confirmed smaller price increases of up to 10 per cent.

We’ve asked Microsoft why, considering its Azure service recorded revenue growth of 116 per cent, the price hike is so steep?

To boot, Amazon has said it has no plans to raise prices for its enterprise products, instead suggesting a price drop as recently as August 2016.

When we spoke to Microsoft, it repeated that the move was to "harmonise prices across the EU region". 

It said periodically conducted a 're-evaluation of prices (based on large fluctuations of currency), but wouldn't comment on how regularly they re-evaluate, or whether there is even an established cycle for reassessment (every third Q, for example). 

Businesses will feel Microsoft has chosen a convenient time to 'reassess' pricing, with the pound plummeting. Where, for instance, was a reassessment and a discount for companies when the pound was strong against the dollar in July?  

 

Have other businesses raised prices?

Other businesses have cunningly raised prices and avoided an announcement. 

Apple, for example, snuck in a price rise when it released the new iPhone, which is being sold for £599 – a rise of 11% on the previous model. 

And you probably read about the spat between Unilever and Tesco over the price of Marmite. 

Are you a business owner? Let us know if you’re concerned about Microsoft’s announcement, and how it will affect your business, in the comments section.

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