How Supply Chain Shortages Affect Data Center Providers

2 Mar 2022 by Michael Kriech

Since COVID 2020, an issue affecting many industries worldwide has been shortages in supply chains. For example, General Motors, a giant in the automotive industry, is still struggling to manufacture cars. Moreover, most of the vehicles this once booming company ships out now lack modern features.

Companies that manufacture electronic devices such as computers, smartphones, and even appliances like refrigerators need chips and semiconductors.

A vertical that hasn’t been struck that hard, but still feels the effects, is the data center industry. The effects of the supply chain shortages have greatly compromised availability and timing for data center operators;however, it's also helped prices increase significantly.

So, what started the current supply chain crisis, what’s happening right now, and what’s to come in 2022 for colocation providers?

How the Current Supply Chain Crisis Started

Everything started when the pandemic began to be a glaring issue worldwide. Permissions and policies of manufacturers tightened up, so production levels went down.

Another tipping point was the transition to the remote work arena. Many people had to make huge investments in equipment to work from home, and enterprises had to as well. The massive influx of users in companies like Zoom that offer video calls had to spend lots of money updating, upgrading, and expanding their existing servers.

Issues Still Plaguing the Global Supply Chain

Two years have passed since 2020. The transition to remote work has made companies adapt to technologies from all sorts of areas and businesses. Data Center Operators are leasing more space more than ever, making huge profits. Despite record years for some operators, the supply chain it’s still struggling.

A massive shortage of Semiconductors is continuing worldwide. It's become such a concern that even the US government has seriously considered an influx of money to strengthen the semiconductor factories domestically. Some experts expect that this shortage will continue throughout the second half of 2022. Other more pessimistic forecasts say it will stretch all the way to 2025.

Where do Data Center Operators Fit Into the Supply Chain Crisis?

As one of the industries that benefited the most from the influx of remote workers, Data Center Operators have made huge earnings and this trend has shown no signs of slowing down. However, providers are still are struggling with shortages.

Companies had to resort to experience and relationships to avoid delays and face complications such as increasing cost, problems with redundancy, freight inflation, and the extra work to meet these expectations.

In recent years, hosting providers have adapted some guidelines to maintain their operations without too much disruption.

Planning Ahead

One of the solutions for Data Center Operators to mitigate these situations is to plan for the future. Many companies like Iron Mountain, Switch, and CyrusOne are already actively planning for what supply chain trends in 2023 are going to bring and prepping accordingly.

The good news for data center providers is that companies that manufacture CPU servers are prioritizing industries that secure a big margin, so in regards to that, they haven’t suffered. However, it’s not the same case in other components.

Resistors, analog semiconductors, wires, and other smaller components are the final pieces of the puzzle when it comes to the assembly of data centers. These are the components that need to receive extra attention to ensure that operations continue without interruption.

Partnering with Hardware Manufacturers

Another move that has helped to improve the supply chain for data center operators is to purchase or partner with hardware manufacturers to help them scale manufacturing and get the essential components faster.

This option is not new. Most companies have been doing this for years, and it’s a common strategy to scale. Businesses have the opportunity to partner with new third-party suppliers to secure more fronts using this measure. Although this strategy isn’t a new one, we’re seeing more and more companies go this route as organizations that have traditionally ignored this option now no longer have that luxury.

Storage in Warehouses

Many companies are beginning to maintain storage of essential hardware in warehouses as a preventive measure to answer supply demands for future clients. For organizations that aren’t looking to partner with or purchase hardware manufacturers, this is the ideal strategy. The goal should be to purchase an excess of crucial hardware in advance and store away for future use, easier said than done in today’s supply chain landscape.

The opportunities surrounding ongoing demand for colocation space can be intimidating, but if you are proactively planning ahead, you will benefit from this method and enable your business to have the opportunity to serve more clients.

Author

Michael Kriech

Michael brings twenty-three plus years of IT and telecommunications experience to Datacenters.com. With a wide range of expertise, Michael assists his clients in determining the best solutions needed for their technology roadmap. As information technology infrastructure evolves, Michael continues to suggest and present comprehensive, stable, and scalable solutions. This helps clients take advantage of the best and latest technologies that support company objectives while freeing up time to concentrate on core competencies. With a passion for helping organizations meet their goals, Michael is willing to go the extra mile to support his clients. A Navy Veteran and proud husband and father, Michael and his wife (Jessica) spend their spare time raising puppies as a volunteer for Canine Companion for Independence (CCI).

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