A Global Chip Shortage is No Need to Panic – Help is on the Way

As data centre hardware lead times stretch out to 52 weeks, companies face the stark choice of either pausing projects or finding an alternative.

The semi-conductor industry recently garnered international attention as the world discovered the technology that enables remote working and business continuity are powered by chips. The sudden increase in demand for chips to power remote workforces meant that supply chain capacity couldn’t cope. Now, a domino effect is underway, with the repercussions from the global chip shortage having an increasing and measurable impact on the hardware lead-time for business-critical projects.

However, the very nature of these projects is often such that any delay in their deployment can have severe enough consequences to make them unattainable. As a result, we are seeing an increasing pivot to the cloud to accelerate business-critical projects, increase agility, and enhance business resiliency.

Reaching crisis point

The global shortage in semiconductor chips hit what has been termed ‘crisis point’ by analysts in April. While production has now largely scaled back up to normal, pent-up demand has been exacerbated by increasing volumes of orders from expanding business sectors such as automotive and consumer electronics, with sudden spikes in demand for laptops, phones, and other devices that facilitate remote working models.

The result has been two-fold. First, there is a classic macroeconomic squeeze of shortages and rising prices that has hit multiple markets at the same time, from high-end data centre deployments to consumer durables. Foxconn, the world’s largest contract electronics manufacturer, has predicted those shortages will last until at least Q2 2022. Secondly, it has left the entire chain sensitive to shocks, with events from extreme weather to a factory fire in Japan, and US sanctions on China all having their impact.

This looks to be a challenging environment that could last for the duration of 2021 and beyond. Some even question that 2023 for a return to previous capacities may be too optimistic, suggesting that this could be a new normal. The fallout of this ongoing situation could be extensive, and the shortage of available data centre hardware is directly affecting organisations with on-prem IT that need to add capacity for new projects/workloads.

Businesses are therefore left with a few choices — either pause programs, bring forward financing, or consider the public cloud as an option in the short term.

Refinancing

For organisations whose operations can’t be easily shifted onto the cloud, the chip shortage is a challenge but a surmountable one. We are likely to see rolling shortages for the foreseeable future, meaning that companies will have to flexible about sourcing hardware if they want everything they need.

For most organisations this will mean, where possible, changing finance timelines and working with suppliers to move usual supply timeline. If you usually plan your IT purchases for September, for instance, it might make sense to talk to your supplier and finance department to see if hardware can be sourced over the summer, where demand is traditionally lower. Committing to this type of flexibility enables IT departments to ensure their systems that can’t be automated or moved to the cloud are safe and stable, as well as being prepared for when the next chip shortage inevitably comes.

Considering the cloud

Public cloud can provide a cost-effective and rapid fix for the new projects and workloads that can’t be accommodated due to the chip shortage. Moving to the cloud provides plenty of capacity for data centres to operate, simply spinning up servers with their chosen cloud provider and shuttering them when eventually no longer required — all achieved with none of the cost penalties that would be associated with such a move on-prem.

Contrary to popular belief, the current semi-conductor shortage is a solvable issue. One solution is to bring forward purchases of servers and semi-conductor reliant hardware, either with existing capital or through financing options. However, for companies that can’t, or don’t want to, go down this route, the cloud provides an alternative solution. During the pandemic, sales of public and private cloud increased almost 10% — and many aren’t going back.

“It is important to recognise that moving to the cloud doesn’t have to be an all or nothing approach,” comments Mark Benson, Platforms Head of Business Development at Logicalis UK. “Logicalis recommends moving the workloads you need to prioritise staying competitive and using flexible financing options to ensure your business can weather this storm and future shortages. However, it should be acknowledged that there are also complexities to cloud deployments, especially large ones, at both the transitional and operational stages. Organisations should partner with an expert who can firstly help manage the move to the cloud and then offer a continued expert managed service provision.”

Businesses can work with an expert partner to determine costs and outcomes before they get started. An expert partner will then manage the initial move to the cloud and offer a continued managed services provision. Only by leveraging the full power of cloud, can organisations get ahead, and stay ahead, of competition who may also be suffering.

With security, maintenance, and scalability built into the cloud, it’s ideal for companies that can’t get a hold of the hardware they are looking for. Trade wars, supply problems, sanctions, and other causes of the semi-conductor shortage are unlikely to go away anytime soon. With the future looking challenging for semiconductor supply, a move to the cloud prepares a business for this unfortunate reality – and whatever obstacles it may bring.