Pricing Power On The Upswing

Renewed pricing power is a welcome trend for executives who have struggled to boost profits solely by cutting costs. For the channel, it should help juice up business investment, including spending on technology equipment and services.

Several factors are giving businesses the ability to raise prices. The weakening dollar is making imports more expensive, easing the pressure on domestic producers to cut prices to remain competitive. China has gone on a spending binge in an effort to grow its economy, increasing the demand for a wide range of commodities and other basic inputs. And U.S. consumer spending remains strong.

By boosting profits and easing the need to hold back on capital investment, renewed pricing power will give businesses greater ability to increase technology spending.

Small businesses, in particular, are benefiting from this trend. In March, 30 percent of small businesses raised their prices, more than triple the percentage that lowered prices, according to a survey by the National Federation of Independent Business. Within that overall 30 percent, 43 percent of finance, insurance and real-estate firms raised prices, as did 34 percent of construction firms, 32 percent of retail companies and 25 percent of manufacturers.

But the renewed trend in pricing power does not extend to all sectors. Transportation remains under significant pricing pressure, as do the telecommunications and computer industries,another plus for solution providers. Increased sales revenue and lower costs for basic technology products could lead to a best-of-all-worlds situation for profits.

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