Dollar surge helps software vendors soak customers
Citrix, VMware jack up non-US price lists
Analysis US software vendors are jacking up their price lists in Europe, and are blaming the weak dollar for the hike.
Citrix earlier this month quietly told its customers that its suggested retail price on all products would rise more than ten per cent in its Europe, Middle East, Africa and Asia-Pacific markets from 1 September 2008.
This might seem counter-intuitive – the strong Euro and Pound would surely convert into more dollars as they wash back over the Atlantic.
Citrix sought to reassure its all-important channel resellers by offering this little nugget:
“The increase is a result of the rising costs of doing business globally, based upon the inflation of various currencies in comparison to the US dollar, upon which Citrix pricing is based.
”Citrix is committed to its distributor, channel reseller and customer relationships. We will continue to maintain the standards required to strengthen those partnerships as well as providing superior technologies and solutions that the marketplace demands.”
A spokeswoman at the firm added: “This is the first price rise in nine years and there’s no more planned for the time being.”
Citrix is the latest US virtualisation specialist to hike prices. It follows on from VMware’s decision in early July to contact partners and customers with the sobering news that “yes, prices have jumped. Blame the stupid economy, man.”
Fill your boots
On 11 July, VMware fans were told their pockets would be a little lighter from next month onward.
"VMware's list prices for products are in US dollars, which has weakened significantly relative to most international currencies in recent months. For example, the US dollar has declined against the Euro over the last year by nearly 15 per cent,” said the firm’s senior pricing and licensing director Ryan Knauss.
And he tried to bubblewrap it for shell-shocked customers unhappy about being saddled with the spike in pricing.
“In line with regular industry business practice, VMware is adjusting its international price list to appropriately reflect these recent currency fluctuations in local markets relative to the US dollar. We… will complete the transition by early September. There is no change to our pricing in markets that use the US dollar."
It's a move that flies in the face of VMware's widely-reported decision to offer its bare-bones ESXi hypervisor for free. The price change was the first major tactical play made by the company's new CEO, Paul Maritz, who previously worked under the Redmond flag.
Next, step forward Oracle. It too recently jacked up prices, and – you guessed it – cited the flimsy US dollar as the culprit.
What's that coming over the hill...
Somewhat more significantly, a certain multinational is on the horizon – and its approach, albeit delayed, seems to better underscore software vendors’ recent decisions to jack up their prices.
Microsoft is aggressively pushing its new virtualisation offering Hyper-V, as well as its latest database, SQL Server 2008. Citrix, VMware, Oracle and co. may not have anything to fear – today. But Microsoft has its sights firmly set on these markets.
So it appears that other vendors might just have bought themselves an insurance policy ahead of Microsoft potentially (or, even inevitably) surging ahead of the competition in the V game.
But, by pitting US prices against the rest of the world, vendors could paint themselves into a tight corner where they stand accused of profiteering, creaming off as much as they can before titan Microsoft enters the ring.
VMware strongly disagreed with such a notion. The firm's senior EMEA partner director Matt Piercy told El Reg:
"It takes a long time to implement a price change like that so we've made a decision to do this, we're gonna stick with the decision and if things go back the other way then we can re-look at this, but right now we have no choice to do this," he said. "The change hasn't happened yet so at this point in time I think it would be wrong of anybody to accuse us of profiteering."
We asked Piercy if channel players can expect to see further price increases in the coming months. "There's nothing else in the plan at the moment, nothing at all," he said.
Bada bing bada boom
There is one glaring problem with VMware, Citrix and anyone else for that matter basing their rationale for price rises on the limp dollar: US investment bank Goldman Sachs late last week adjusted its outlook on the currency by abandoning its ten-year long "bearish stance".
"Now the valuation and growth-driven improvements that we have been observing for a while have reached the point where they notably improve the medium to long-term outlook for the dollar," said Goldman Sachs, according to Reuters.
Meanwhile, the Euro traded at a near-six month low at $1.4779 last Thursday, just as the US dollar turned a corner. It has gained more than five per cent against the Euro so far this month, reaching its highest since February. The pound has been sliding against the dollar for the last fortnight or so.
Having moved the currency goal posts before the forex turmoil, the vendors could, if they wanted, try to justify further foreign currency price rises by saying the Euro and Sterling just ain't buying as many dollars as they used to.
Oh, and did we mention that Microsoft looks set any day now to lift virtual machine licensing restrictions to allow the ability to move a VM freely about physical servers? ®