Rupee depreciation pushes SW prices up 5%

Meghla Kathju

New Delhi, Sep 6

Packaged software prices have increased to the tune of roughly five- percentin the past month as a result of the devaluation of the rupee against thedollar. Whereas in the hardware sector, the price increase caused by the rupeeslide is offset by the periodical price cuts by manufacturers, the softwaresegment does not have this advantage. Thus the increase in prices is moreevident 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 inthese products is barely two to three percent, dealers are unable to absorb theprice increase, and it is passed on to the customer. In slow moving products,where the profit margins are substantial, the dealer absorbs the price increaseto some extent. Explaining further, Alok Gupta, Director, Softmart, said,"Products like Windows, Office, etc are pure trading and fast movingproducts. They are not stocked by dealers, so any fluctuation in the dollarreflects in their pricing instantly. On the other hand, distributors and evendealers keep stocks of products like Corel, Adobe, Macromedia, etc. So, till theold stocks last, the price is not affected."

Agreed Pradeep Kamath, VP (Marketing), Ingram Micro India, "Microsoftproducts are ordered on a case-to-case and almost daily basis, so they areaffected 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 companyhas increased the dollar price also by five percent. Whereas Windows 98 wasavailable 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 toRs 7,400.

Vishal Bindra, Director, Acpl, distributor of Trend Micro, had to pay anextra Rs 42,000 approximately, because of the sudden increase in the dollarvalue. To play safe, now he has started quoting the prices in dollars. "Itis better to give the price in dollars and then charge the customer on theprevailing exchange rate. This way, the customer does not feel cheated and wedon’t lose out on anything."

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

However, Kamath of Ingram Micro does not agree to this. Said he, "We dobail out our dealers in such cases. Though most of them do not face suchsituations because they follow a ‘just in time’ policy, where they order asand 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 somethingelse, like a marketing program, or some other product." (CNS)