Rupee depreciation pushes SW prices up 5%\SW prices up 5%

Meghla Kathju
New Delhi, Sep 6

Packaged software prices have increased to the tune of roughly five- percent
in the past month as a result of the devaluation of the rupee against the
dollar. Whereas in the hardware sector, the price increase caused by the rupee
slide is offset by the periodical price cuts by manufacturers, the software
segment does not have this advantage. Thus the increase in prices is more
evident and discernable here.

The price fluctuation is most visible in fast moving and low value products,
majority of which are incidentally from Microsoft. Since the profit margin in
these products is barely two to three percent, dealers are unable to absorb the
price increase, and it is passed on to the customer. In slow moving products,
where the profit margins are substantial, the dealer absorbs the price increase
to some extent. Explaining further, Alok Gupta, Director, Softmart, said,
“Products like Windows, Office, etc are pure trading and fast moving
products. They are not stocked by dealers, so any fluctuation in the dollar
reflects in their pricing instantly. On the other hand, distributors and even
dealers keep stocks of products like Corel, Adobe, Macromedia, etc. So, till the
old stocks last, the price is not affected.”

Agreed Pradeep Kamath, VP (Marketing), Ingram Micro India, “Microsoft
products are ordered on a case-to-case and almost daily basis, so they are
affected most by any forex fluctuation.”

The price of some of the Microsoft OEM products have increased by 10 percent,
because, apart from the price increase due to the rupee devaluation, the company
has increased the dollar price also by five percent. Whereas Windows 98 was
available for Rs 3,150 two months ago, it is available for at Rs 3,500 today.
Similarly, Windows NT Workstation has increased from Rs 6,600 two months ago to
Rs 7,400.

Vishal Bindra, Director, Acpl, distributor of Trend Micro, had to pay an
extra Rs 42,000 approximately, because of the sudden increase in the dollar
value. To play safe, now he has started quoting the prices in dollars. “It
is better to give the price in dollars and then charge the customer on the
prevailing exchange rate. This way, the customer does not feel cheated and we
don’t lose out on anything.”

Another problem that dealers face is in rate contracts, especially with
government tenders. If a particular price has been quoted in the tender, they
have to stick to it. But they have to incur losses if there is a sudden price
increase. Said Gupta, “The distributors don’t take this fact into
consideration. They charge us on the new pricing, so either we have to squeeze
on our margins or in some cases, incur losses.”

However, Kamath of Ingram Micro does not agree to this. Said he, “We do
bail out our dealers in such cases. Though most of them do not face such
situations because they follow a ‘just in time’ policy, where they order as
and when required. But, if such a situation arises, we try and make up to them,
if not at that time with that product, then at a later stage with something
else, like a marketing program, or some other product.” (CNS)

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