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Will your software costs rise due to tariffs? |
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Given the news about the tariffs imposed on April 2, business owners of all sizes are examining their costs. As of now, software has not been targeted, but we need to monitor the situation.
Here are two opposing views on how tariffs could affect your software costs.
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View 1: You can’t tariff a digital product
Incepta Solutions' opinion is that it would be a logistical nightmare to impose tariffs on software because:
- Software is a digital product, which is delivered via networks and the cloud. Tariffs (mostly) apply to physical goods which travel across borders and customs.
- Software delivery (using subscriptions, licences or the cloud) is a service. As such, it would be difficult to define under traditional trade rules. Tariffs don’t apply to services.
- While software could be included under the United States’ Harmonized Tariff Schedule, it would be difficult to regulate or control digital downloads.
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View 2: Software itself won’t be targeted, but its access will
Software, especially SaaS, is accessed online. This means delivery via servers, networks, and data centres.
When tariffs are imposed, the cost of building or maintaining data centres increases.
Data centres require high amounts of electricity and tariffs on energy imports could raise electricity prices. Already, tariffs have been applied to networking equipment and semiconductors, as well as cooling units and server racks.
This in turn will affect companies like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure, all of which store SaaS products.
If data centres face tariffs on servers or energy, the following could result:
- Cloud providers (AWS, Azure, etc.) pass on higher costs to SaaS vendors.
- SaaS companies raise their subscription prices or limit free-tier features to stay profitable.
- Customers (businesses and individuals) become more cost-sensitive, potentially delaying or cancelling software purchases.
- Software companies face reduced profit margins, leading to higher operational costs.
- This could mean slower upgrades to software, cut backs to customer support, as well as reduced features.
- Smaller software providers would not be able to compete, leaving customers at the mercy of potential monopolies from the big software players.
Watch this space for future news.
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The Libby e-reader app was my lifeline during COVID. The app is available to borrowers from most libraries in North America, giving you online access to all types of media - books, magazines, audiobooks - all for free.
Access to Libby is now in jeopardy (in the USA at least) due to new cuts to the federal Institute of Museum and Library Services.
From Wired.com: "The Trump administration, working in coordination with Elon Musk’s...Department of Government Efficiency, has gutted a small federal agency that provides funding to libraries and museums nationwide.
In communities across the US, the cuts threaten student field trips, classes for seniors, and access to popular digital services, such as the ebook app Libby."
What's happening to prevent this: On April 1, Michigan Attorney General Dana Nessel joined a coalition of 20 other attorneys general to sue the Trump administration. The lawsuit aims to stop the dismantling of three federal agencies that support public libraries and museums, workers, and minority-owned businesses across the country.
More to come on this story.
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Due to concerns about changing algorithms reducing the effectiveness of advertising on social media, more small business owners are turning to Reddit.
If you're searching on Google, you'll notice that Reddit pages come up on the first page. This makes it a viable forum for marketing your business.
MarTech has provided a comprehensive guide to help readers understand the platform.
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Thank you for reading!
Temi |
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