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

DQW Bureau
15 Sep 2000

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)