A perfect storm of macroeconomic pressures—including U.S. labor shortages, overseas manufacturing issues and port blockades—have created a supply chain crisis that is impacting businesses across all industries. While some of these concerns were already affecting enterprises prior to COVID-19, the pandemic amplified and accelerated many of the impacts—and created new ones.
The automotive industry has had a well-publicized supply chain struggle. The inability to acquire chips and other components brought new car sales to a grinding halt, ultimately causing a pricing war that has resulted in 82% of new vehicles selling above MSRP.
Technology has been particularly hard hit by supply shortages. The pandemic-induced increase in digital transformations created a demand for IT products that greatly outpaced their availability as enterprises quickly executed IT strategies to support the near-instant shift to a remote workforce.
As enterprises continue to adopt digital transformations to support evolving business requirements, sourcing already limited quantities of IT equipment results in a textbook supply-and-demand scenario in which prices climb in alignment with increasing demand and shrinking inventory.
The Supply Chain Disrupts Digital Transformations
To ensure enterprises have the necessary equipment to complete their digital transformations, project planning cycles have lengthened from the traditional 6-12 months to 12-24 months, requiring more complex forecasting strategies. Enterprises that operate their own data centers need to be prepared to anticipate their needs and market demand over this longer timeframe in order to build, manage and evolve their IT deployments to meet business requirements.
Enterprises that do not plan appropriately risk significant project delays as they wait for backlogged products to arrive. They will also pay more as prices continue to rise in a demand-driven market. However, sourcing equipment early to minimize costs and secure delivery is not as easy as just placing an order. This strategy is only viable if the enterprise can accurately predict its future needs. Without this clarity, the enterprise could be unnecessarily laying out capital for inventory it does not need. The ability to plan into a more distant future with some precision can be difficult, but it is critical to limit exposure and wasted dollars.
These supply chain challenges are also projected to worsen as the supply crunch trickles down from large, expensive equipment to less expensive items and the components that larger equipment relies on to operate. As a growing inventory of products is affected, the probability of delays in digital transformations grows—increasing the likelihood that it will impact an enterprise’s productivity, revenue and customer experience.
The Competitive Edge of the Third-party Data Center
Colocation providers are certainly not immune to these challenges; however, they can generally address these complex dynamics more easily than enterprises that operate their own facilities. That being said, not all data center providers are equipped to offer the same level of support and vision to help enterprises navigate these challenges. Enterprises that leverage colocation services as part of their IT strategies must have a realistic understanding of the data center partner’s capabilities and the value they can offer around supply chain issues.
Sophisticated Planning Models
Extended project planning cycles require a more sophisticated planning model that many enterprises may not be comfortable executing. Third-party data centers’ core business is ensuring they have the infrastructure to support customers’ data center needs, now and into the future. As a result, their plans are finely tuned to assess flexing market demands and projected customer needs to appropriately source equipment for multiple facilities and remain ahead of the curve. The regularity with which colocation providers analyze the data center environment creates mature evaluation and procurement strategies that better equip them to address the complexities of the current supply chain.
QTS’ market proficiency allowed it to recognize the signs of the tightening supply chain. In 2020, the data center provider leaned in to purchase hundreds of megawatts (MW) of critical infrastructure—including UPSs, generators, switch gear and transformers—to support its projected needs for the upcoming future. This lean forward approach has enabled QTS to be prepared for recent supply chain pressures in the face of unprecedented acceleration of the business overall. This advanced planning model is also important from a cost perspective. By understanding its future needs, QTS is able to realize cost savings in some areas.
Bulk Buying
Buying at scale is an inherent purchasing strategy for third-party data centers that operate large and growing portfolios of facilities. These data centers have regular refresh cycles that require them to continuously purchase new equipment. They also expand their geographic footprints to accommodate emerging markets and customer growth. Buying equipment in bulk allows colocation providers to take advantage of lower costs.
With its North American and Netherlands data centers offering millions of square feet of space collectively, QTS procures equipment in volume that generates an intense buying power most enterprises cannot achieve on their own.
Supplier Relationships
Based on the frequency and size of their purchases, colocation providers develop strong relationships with their suppliers. QTS’ can leverage powerful partnership to continue to secure additional infrastructure to ensure it is prepared to support its customers and deliver on its commitments.
Core Values
The ethics and integrity of the data center partner is also important. In such a volatile environment, enterprises should have confidence that their data center partner will work to meet its verbal commitment for space and equipment while the contract is being written. With such scarce supplies, it is not unrealistic to think that equipment or space can be sold from underneath one enterprise and be given to another. Without a comfort level that the promised space and equipment is designated for it, an enterprise could be in the unenviable position of having to work with an alternative provider.
QTS roots its business on its core values, which include integrity, character and trust. The data center provider is committed to principled behavior that provides its customers with the confidence that it will follow through on its commitments. QTS also places tremendous focus on fostering trust with its customers to ensure a premium level of service. It is also dedicated to building and continually strengthening its customer relationships and the customer experience. This is evidenced in its industry-best NPS score of 90, which nearly doubles that of its nearest competitor.
Standardized Building Design
QTS’ standardized build design is intended to provide customers more flexible configuration options across its latest data centers. This model also offers a significant advantage in the face of supply chain issues. Utilizing consistent equipment across its facilities not only allows QTS to buy at scale, it also offers the flexibility and agility to move equipment between data center locations to align its supplies with market demand.
Support Customers
The forward-looking planning required to minimize the risk of supply chain delays, can be overwhelming to enterprises. However, colocation customers can lean on their providers to help gauge their existing and future needs to establish a project plan and timeline to achieve their goals.
QTS builds strong partnerships with its customers to gain insight into their evolving needs. Through frequent check-ins, quarterly assessments and ongoing, value-added conversations with its customers, QTS unearths its customers’ needs and business directions. This allows the data center provider to offer specific recommendations that address customer pain points and helps customers effectively plan projects to avoid procurement delays and escalating costs. As a result, customers can better manage their own risks and accomplish their goals.
