No. 1: Supply Chain Disruptions Create IT Product Shortages, Accelerate Cloud Adoption

Supply chain disruptions, leading to product shortages and order backlogs, created major challenges for the IT industry in 2022 as vendors and solution providers worked to meet customer demand for servers, PCs, mobile devices and other systems.

And as the year progressed, there’s been growing evidence that supply chain problems may be having a more fundamental impact on the IT industry by accelerating the migration to cloud-based computing.

Supply chain problems were evident as early as the first year of the COVID-19 pandemic and became fodder for the nightly news in 2021 as container ships waited in line off the California cost to unload their goods. But disruptions in supply chains really hit the IT industry in 2022.

In February, for example, Xerox warned that it had a $300 million order backlog that it could not ship because of supply chain issues. That same month Dell Technologies said it was feeling the impact of shortages of integrated circuits and other components, including network controllers and microcontrollers, that go into the company’s PCs, servers and storage systems.

In April Apple warned that production shutdowns by key manufacturers in China could result in a major hit to sales for 2022. In November new pandemic lockdowns at the Foxconn assembly plants in Zhengzhou, China, impacted the production of Apple’s new iPhone 14 Pro and iPhone 14 Pro Max.

In May Lenovo warned that COVID-19-related production shutdowns in China would slow product shipments. And in July, citing supply constraints and logistics problems, market researcher IDC said global PC shipments fell 15.3 percent in the second quarter.

Networking tech giant Cisco Systems was among the IT vendors hit the hardest as product and component supply constraints caused the company’s order backlog to soar 130 percent year-over-year to $15 billion as of May – an all-time high – and

continued to grow through the summer. To mitigate the effects of the shortages Cisco worked closely with its key suppliers and contract manufacturers and paid significantly higher logistics costs to get products and components to where they were most needed.

“We’re not demand-constrained, we’re supply constrained,” said Cisco CFO R. Scott Herren during an earnings call in August. (In November the company reported that it had chipped away at the backlog during the fiscal 2023 first quarter as it saw an easing of supply chain constraints and component shortages.)

HP Inc., which reported a $10-billion order backlog in 2021 due to supply chain disruptions, hired a chief supply chain officer who is taking such steps as revamping the company’s ERP systems and developing better supply chain monitoring and forecasting processes.

Solution providers and MSPs are finding ways to survive – and even thrive – amidst the supply chain challenges. World Wide Technology CEO Jim Kavanaugh told CRN that his company tries to help customers better anticipate long-range requirements while being “creative” to meet their more immediate “mission-critical” needs. MSPs at the XChange August 2022 conference (put on by CRN parent The Channel Company) said they are battling the supply chain problem by tackling infrastructure upgrades in smaller chunks, working with customers to develop multi-year IT plans, and encouraging cloud adoption when products for on-premises systems aren’t available.

And that last trend may be the ultimate impact of the supply chain problem: An acceleration to the cloud (infrastructure-as-a-service, platform-as-a-service and software-as-a-service) by businesses and organizations who are unable to buy the equipment they need for on-premises data centers.

“When customers can’t get HPE, Cisco, Dell for months – sometimes we‘ve had customers that can’t get it for quarters – then what are you going to do? You’re going to spin it up in the cloud,” Jason Geis, CEO and co-founder of CloudWerx, a fast-growing Google Cloud partner, told CRN.

As 2022 drew to a close there were signals that some supply chain disruptions would continue into 2023.

In October John Tonthat, executive director at distributor Ingram Micro, said in a keynote speech at the GreenPages Cloudscape 2022 conference that while shortages of client devices were easing up, supply chain shortages in data center gear, including networking, compute and storage systems, would persist into late 2023. “It’s not getting better,” he said.

In November TD Synnex CEO Rich Hume, in an interview with CRN, likewise said that supply chain issues on the PC side of the business had diminished, but many parts of the data center and infrastructure side of IT were still experiencing supply delays.