Global supply chain crisis reaches data centers

2020 and 2021 were full of unprecedented events whose impacts continue to ripple. Among them is how the Coronavirus pandemic transformed how we live and work, leading to an explosion in the consumption of technology such as personal computers, phones, and game consoles.

As work and school headed online almost overnight, the skyrocketing increase in demand for online-enabled products also created a huge spike in our need for data storage and processing – and for the hardware that underpins it.

Unfortunately, the pandemic-driven tech trends coincided with rapidly accelerating pre-existing ones, such as artificial intelligence (AI), Internet of Things (IoT), 5G, and cloud computing, all requiring greater manufacturing and operation resources. Demand outstripped supply, putting immense pressure on the often complex global supply chains producing increasingly essential technological devices.

Let’s add to the mix commodity shortages, lack of skilled workers, production shutdowns (related to the pandemic and extreme weather), global transportation disruption, and artificial bottlenecks caused by politically-driven stockpiling of chips, and we have the recipe for a global supply chain crisis – one whose impacts have been felt in almost every industry worldwide.

How has the crisis impacted data center occupiers?

One of the most significant and ongoing implications of the supply chain crisis has been the semiconductor shortage. The automotive industry has been hit the hardest. As car manufacturers were forced to shut down their plants and halt orders from suppliers during the beginning of the pandemic, they scaled back on chip orders. They expected a decline in the demand for new vehicles. Meanwhile, the electronics industry experienced an increased demand for cell phones, computers, and game consoles. When the automotive industry came back online in the summer of 2020, which was earlier than expected, they faced a chip shortage.

Chip foundries gave priority to large, high-margin orders, such as those coming from technology giants like Intel. As a result, while some sectors such as the automotive industry suffered right away, data center occupiers such as web hosters and end-users had managed to escape the worst of the crisis, with the production of CPUs remaining stable.

But more recently, the supply chain crisis has been producing shortages of components essential for the manufacture of data center equipment. These shortages are now impeding the supply of networking switches and servers. As the situation is subject to constant change, impacts on data center clients have varied and continue to fluctuate.

Bill Wyckoff, vice president of hardware and advanced solutions at equipment provider SHI International, said the production disruption is ‘a universal problem that’s going to affect any organization looking to deploy or refresh equipment in the next 12 months.’

One impact has been long lead times on ordered equipment. With the OEMs not being able to source the necessary materials for production, the data center occupiers face extended lead times that have jumped from 4–8 weeks to many months.

Arista networks, one of the largest vendors of networking switches, reported lead times of up to 52 weeks for components due to the constrained supply chains.

With the increase in extended lead times, some companies have simply been unable to obtain the equipment they need. And the impacts trickle down to their customers, the customer experience they provide, and ultimately, their reputation.

In December 2021, Square Enix, producer of global gaming phenomenon Final Fantasy, was unable to acquire enough servers to cope with the demand from eager gamers wanting to play its latest release, Final Fantasy XIV. Director Naoki Yoshida cited the COVID-19 countermeasures, labor shortages, and semiconductor production shutdowns as the reasons for the shortage in high-performance servers needed to power the game’s expansion.

How can data center occupiers mitigate the effects of the crisis?

The longer the supply chain crisis and chip shortage continue, the less likely production will be able to spring back into shape and satisfy demand – and the end is thought to be months away.

But despite the pessimistic outlook, finding different ways to buy, configure and operate hardware offers hope for companies experiencing the impacts of the shortages.

The development team at Square Enix, for example, was able to mitigate some of the effects the shortage had by making software optimizations such as updating the source code to increase maximum logins per application.

Strategic capacity planning can have a significant impact in dampening the unpredictable effects of supply chain constrictions and fluctuations. Pre-emptive buying strategies which saw data center occupiers switch from ‘just-in-‘time’ to ‘just-in-‘case’ models before the pandemic helped businesses avoid wholesale disruption to their supply chains.

Another simple yet effective alteration to consumption habits that allows companies to source equipment even during component scarcity is buying refurbished. Without relying on new equipment which requires raw materials and production capacity, refurbished assets are available for purchase as and when they are needed.

When bought from a reputable vendor, refurbished hardware can offer the data center occupiers a more permanent, medium-term or even long-term solution. It can match or outperform new equipment as faults and glitches have already been identified and addressed during the reconditioning and testing process.

For companies seeking specific new models of hardware, refurbished can offer a temporary, short-term solution to cope with increases in capacity until new hardware becomes available again.

Conclusion

As the demand for digital technology continues to outstrip supply, it becomes increasingly important to find ways of using sustainable technology from the supply chain perspective.

Buying and deploying refurbished hardware and recycling equipment at the end of its useful life are both services offered by Ynvolve. We help companies avoid the worst impacts of shortages, now and in the future, by supporting a more circular IT economy that maximizes the use of existing resources rather than relying on the extraction and manufacture of new equipment.

If your company is searching for short-term solutions to mitigate the supply chain crisis’s impacts, please contact one of our experts today. Our full range of refurbished assets is ready to be deployed and installed.