Is your IT budget ready for 2025? Significant price increases are pushing European businesses to act
6. November 2024
European businesses are facing a new wave of price increases on the IT front, and the pressure on budgets will only increase in the coming years. From software licences to cloud solutions and cybersecurity, European CIOs are facing a time when IT spending will account for an increasing proportion of the company’s total costs. With future geopolitical changes, such as the recent US election victory of Donald Trump, organisations are forced to look for new, cost-effective solutions.
Price adjustments at the giants: Microsoft and Google lead the way
A clear example is Microsoft, who in 2023 announced price increases of up to 11% on their cloud and software services for a number of European markets, including Denmark. The explanations for the price increases were expressed as a way to adjust prices to reflect the dollar exchange rate and ensure global consistency.
Google has also increased the price of its services, and most recently, YouTube Premium subscriptions were increased by as much as 44% in Denmark.
Both examples indicate that businesses can no longer expect stability in their IT costs and must be prepared to deal with ongoing price adjustments from the big players in the market.
Rising dollar and newly elected US president create further uncertainty
With Trump’s return to the White House, the financial markets have already reacted: the futures market has pointed to a rise in the dollar and economists expect the price of US goods and services – which e.g. Denmark largely imports – to rise. This will make US IT services, which many Danish companies use, even more expensive, which could put further pressure on IT budgets. At the same time, there is speculation about new tariffs on goods from the EU and China, and retaliation could create even more financial pressure for European companies that rely on US technology products.
Inflation: A joker in the equation
The future development of inflation also plays a crucial role. The IMF and other economic institutions suggest that global inflation may continue to rise due to persistent supply chain issues, rising labour costs in major economies and – not least – expectations of tariffs. These pressures are likely to be reflected in technology prices.
In other words, it’s likely that price increases for IT services will continue over the next few years, making it essential for European companies to review their budget strategy.
Nearshoring as a solution to increasing pressure
Many European companies have already looked towards lower cost countries, such as Poland, Portugal and Ukraine, where IT competences are strong and wages are lower. By locating part of their development and IT tasks in these countries, companies can not only reduce their average costs, but also ensure greater flexibility in future budgets.
This approach creates a geographical spread in costs, making companies more resilient to fluctuations and increases in the domestic market.
A call for due diligence
For CIOs, now is the time to act and think long-term across their geographic cost structure. 2025 is upon us, and with current market trends, it’s more relevant than ever to prepare for how IT spending can be managed more effectively.
Most CIOs will probably be asked to revisit budget assumptions for 2025 and come up with savings proposals.
Nearshoring and flexible allocation of IT resources could be the way forward to ensure European businesses are better prepared for a financially challenging future.
Want to learn more about nearshoring?
Conscensia offers free advice on how to optimally structure your future nearshore setup. We can help you identify the right competences in nearshore markets and calculate savings, ensuring that your 2025 IT budget is adapted to current conditions, needs and opportunities.
