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10 Reasons IT Prices Will Drop in 2017

There will be no letup in the reduction of prices for IT products, technical services, and network services in 2017.

The contraction of deal prices will be evident in equipment, including switches, routers, security, unified communications and servers. Cloud services will feel the downward effect. And network services, including SIP trunking, will continue their slide. Technical services are a panoply of things that account for 20-50 percent of vendors’ revenue, and their prices are moving as well.

There are 10 reasons 2017 price will decline, all of which benefit customers.
Globalization – The US consumes 40% of the world’s information technology production. Vendors from all countries, but notably Asia and Western Europe, do not ignore this opportunity to expand their addressable market. 
Distribution – Distribution of products and services is improving. We are observing 20 distinct sales channels for information technology products and services. More than five hundred thousand channel partners compete for sales, and low prices are a key to sales. Vendors are also getter better at adding sales channels.
Professional Services – These have yet to catch-up. Managed services, as well as those for planning, design, implementing and operating often elude equipment companies and service providers. Less than maximum sales of professional services puts pressure on vendors to price-down their offers.
Churn – Bundling, ecosystem partners, and contracts, keep many prospective customers out of the market. This reduces the total addressable market for all vendors; and it translates to less churn. Additionally high quality products, with less spinning media, reduce the failure and replacement rate.
Shrinking IT Budgets – All 19 vertical industry markets followed by Eastern Management Group are under pressure to hold-down expenses for 2017.
Earnings Pressure – Quarterly earnings pressure on vendors has never been so great. The technology industry’s increase in private equity ownership, and stockholder pressure on quarterly sales increases the emphasis on getting stuff out the back door. Reductions in R&D spending, again due to earning’s pressure, can quickly reduce the competitiveness of a vendor’s products. Reducing prices is an instrument for keeping sales moving.
Newcomers – The ability of newcomers, vendors with better or alternative approaches to technology, can sell-for-less. Disrupted, established, vendors are pressured to cut prices in order to keep-up.
Margins – Technology company gross margins of more than 60% are common. So are dealer discounts of 42-45%. Information technology margins have a lot of wiggle-room for customer negotiation.
Deal Prices – Vendors’ partners have more discounts they can pass-on to customers, to close sales. Terms like list and street price will have less meaning this year, with the rise in front-end and back-end rebates, dealer registration, SPIFs, co-op funds, and special promotions, in an ever growing list of customer discounts. What will matter to customers, and vendors, are competitors’ deal prices since they reflect the involvement of multiple tiers of rebates.
Competition – As products and services are less differentiated, as barriers to entry are lowered, more competitors will be in the 2017 market. This is partly why all markets have become commoditized.
Eastern Management Group tracks prices and discounts on more than 3 million technology services and products, through our Monitor database. We would be glad to discuss your needs and how we may be of assistance. Here is how you can contact us

3 New SIP Reports Now Available

3 new SIP reports, each with 5-year market forecasts covering 2016-2020, were released by The Eastern Management Group on February 15, 2017.

The 3 reports are:
  • SIP Trunking Global Market Analysis and Forecast 2016-2020
  • SIP Phones Global Market Analysis Forecast 2016-2020
  • SIP Global Market Analysis and Forecast 2016-2020
Read about the new SIP reports....here


Street Price Database

Eastern Management tracks list and street prices for several million communications products and services worldwide. With real-time price updates we can help your business set and monitor list and street prices for your entire portfolio.  Our price database also stays up-to-date on discounts, rebates and other vendor incentives....more




Hosted PBX Companies Have Boundless Growth Opportunities

Having the right go-to-market strategy will double or triple annual sales of even the most successful and established UCaaS providers. In other words, companies shouldn’t settle for 20-30% annual sales growth. Eastern Management Group research shows that 100% year over year growth is an achievable target for hosted PBX companies, as we have proven for many of our clients.

While the formulaic process of using indirect marketing to usher leads to a contact center, where deals are closed, has been a good one; the model requires much more for annual sales to double for one, two, or three consecutive years. A go-to-market model should be aggressively supplemented.  

Hosted PBX companies almost always use fewer partners, of different types, less effectively, than is required to maximize sales. This deficit has a breaking-effect on provider revenue. Our research identifies 19 qualified sales channels to make UCaaS sales for providers. We have found that putting the channel mix together, having the optimal number of partners for each channel, and properly using partners can increase sales up to threefold.

The barriers to entry for new hosted PBX providers have now dropped to almost zero. We anticipate a thousand UCaaS companies being in the global market, vying for go-to-market resources. 

We would be glad to discuss our experiences, and your go-to-market strategy and tactics, to help you build your hosted PBX business. Contact us   

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