By Mike Styer, General Manager at Breakpoint
No sooner had the world begun returning to some semblance of pre-pandemic normal than we found ourselves facing a plethora of new challenges. New disruptive forces are coming at us from all sides, creating a ‘superstorm’ that is already impacting forecasting, budgeting, IT provisioning and overall digital strategy.
The semiconductor supply is constrained. It dovetails with inflation, the rand-dollar exchange fluctuations, interest rate hikes, soaring fuel costs and loadshedding. This creates uncertainty about how to manage the hybrid and remote workforce in a future-proof way and makes forecasting, even six months ahead, challenging.
A key problem we’re seeing in South Africa now is the impacts of the silicon shortage. Certain servers have a lead time of 12 – 15 months or even longer; but virtually every order has some component of delay.
This has an impact on multiple areas – including IT departments which may be seeking to replace end of life equipment. It also affects finance, where approved budgets must now flow into a different budget cycle. And carrying over increased costs from one budget cycle to another is not an ideal business practice.
Unfortunately, the ongoing silicon chip shortage and supply chain disruptions, exacerbated by fresh Covid outbreaks in China and the war in Ukraine, look set to drag on for some time to come. Chip production and shipments have a backlog of one to two years made worse by a shortage of the neon needed for photolithography in silicon chip manufacturing. More than half the world’s neon is made by firms in Ukraine. As a result, the IDC expects semiconductor supply to remain constrained this year.
Hybrid or not?
Hybrid work models, widely thought to be here to stay, are still under debate in many South African organisations. This uncertainty has made provisioning infrastructure a challenge.
As the pandemic waned, some organisations called employees back to the office, while others opted to downscale their premises and continue with the remote work model. The rising fuel prices meant that work from home was better for many employees, but load-shedding made work from home difficult for others, making it impossible for companies to settle into a new working model.
South Africa’s inflation rate, now at its highest level in 13 years, along with increasing interest rates, electricity hike, and global increases in the costs of IT, are yet another challenge facing the C-suite. Recent IDC data indicates IT inflation in the order of 18-20% in enterprise client items (laptops and PCs) over the past two years. It also showed 10-15% increases in server and storage pricing, and 5-7% increase in enterprise software pricing.
Becoming ready for anything
A superstorm is brewing across logistics, technology, staffing changes, financial changes, and looming fuel, food and technology shortages. In short, the world is in a volatile situation.
Organisations need to be prepared to change, and they need to develop a mentality that change is inevitable, rapid, and often big and unexpected.
They will need to be more flexible, and provision for a changing business landscape with a fluid budget and more safety nets.
Companies must accept that there will be extended lead times for technology, and they must plan further ahead, with longer budgeting and forecasting cycles. They may need to introduce an N+1 budgeting process and look at equipment reaching end of life in 2024 and budget for those orders in 2022 to accommodate delays.
Organisations may also need to look at workarounds to support productivity and innovation despite the constraints of delays and inflation. There might include looking at alternative hosting environments and inventive methods of sweating and supporting ageing assets.
Breakpoint can advise and keep customers up to date on the fast-changing technology environment. We are well placed to help them source alternative solutions, if necessary, and advise on constraints. We can make recommendations on what customers should be investing in now for delivery in future budget cycles. We can also help organisations sweat their assets and manage costs, to ensure a stable environment that supports continuity and innovation.