Our budget for software and cloud services is set in October, in pounds, for a financial year that starts in April. Last year I finished about a hundred and sixty thousand pounds over it, without buying anything we had not planned to buy.
The difference was the exchange rate. When I went through the year's invoices with our treasury manager, about two point three million pounds of my department's spending, a little over a third of it, had been billed in dollars or euros: the cloud platform, the transport management system, the device management service, most of our security tools, and a long tail of smaller subscriptions bought on cards. Sterling had fallen about seven percent against the dollar between the budget round and the spring, and most of our large annual contracts renew in the spring.
What surprised the treasury manager was not the overspend. It was that she had never heard of the exposure. The company buys currency forward every month to cover fuel surcharges on our European routes and the trailers we import. Nobody had ever told her that IT had become one of the larger buyers of dollars in the business, and I had not thought of it that way either. Ten years ago almost everything we ran was bought from British resellers, in pounds, and owned outright. The move to subscriptions had moved the currency onto our invoices one renewal at a time, without anybody deciding that it should.
Each year my team now sends treasury a schedule of every contract billed in a foreign currency, with its renewal date and expected value, and the spring renewals are covered by forward purchases like fuel. The budget is set at a planning rate chosen by treasury, and any difference from that rate is reported as currency variance rather than as IT overspending. At each renewal we ask for a sterling price alongside the dollar one, and two suppliers quoted in pounds for a premium of under two percent, which we accepted.
None of this saved money on its own. It moved the surprise from my January budget meeting to a desk that exists to deal with it.
My department had been trading currency for years. Neither of us had noticed, because nobody involved thought of a software renewal as a purchase of dollars.
– Serguey Shinder
