The Data Center Industry Begins to Feel the Supply Chain Pinch

Supply chain disruptions are tough on everyone. But the digital infrastructure sector faces a particular challenge, as it must manage the supply chain crisis during a period of dramatic growth amid a pandemic-driven shift to digital service delivery and distributed computing. Pre-ordering and inventory management kept the data center industry on schedule in 2020 and 2021, but can this continue as supply chain disruptions persist?

Our panelists include Sean Farney of Kohler Power Systems, Michael Goh from Iron Mountain Data Centers, DartPoints’ Brad Alexander, Amber Caramella of Netrality Data Centers and Infrastructure Masons, and Peter Panfil of Vertiv. The conversation is moderated by Rich Miller, the founder and editor of Data Center Frontier. Here’s today’s discussion:

Data Center Frontier: How would you assess the state of the data center supply chain? Are the global supply chain challenges impacting the delivery of data center capacity?

BRAD ALEXANDER,
DartPoints

Brad Alexander, DartPoints: The data center supply chain is extremely strained currently. Transportation bottlenecks, massive labor and material shortages, and the increasing cost of critical components are causing roadblocks in both new construction and expansion. For example, we are currently going through an expansion project in one of our markets. The project is 14 percent over budget due to increased labor and components costs and is five months delayed because of generator shortages. Smaller components such as servers and storage are being delayed an additional eight weeks, and we have seen delays as long as seven months for various pieces of core networking equipment. Nearly every hardware vendor has increased costs by 7-12 percent since the beginning of 2022.

I feel the industry has built considerable capacity in the cloud and major data center markets over the last three years, and a critical capacity constraint has not yet fully been felt. However, customers may soon have to rely on more regions or multiple providers to meet capacity requirements. Smaller markets where the peak capacity was only a fraction of the larger markets are feeling the delays in expansion as these edge markets are gaining more and more traction.

AMBER CARAMELLA,
Infrastructure Masons and Netrality

Amber Caramella, Infrastructure Masons and Netrality: The supply chain continues to struggle, considering extensive global shortages of labor, materials, and equipment resulting in longer lead times. Shortages and impact vary across regions and types of equipment.

Broadly, I have seen supply chain shortages and shipping delays affect delivery time frames with new data center builds and bringing new capacity online.

Capacity planning, creating, and executing strategies is critical. Key strategies include ordering equipment ahead of time — not only when needed and storing extra inventory. Expand your supplier list to provide optionality for the availability and delivery of equipment. Establishing a roadmap, capacity planning, relative to your data center needs is paramount.

SEAN FARNEY, Kohler Power Systems

Sean Farney, Kohler Power Systems: Supply chains everywhere are feeling pressure right now. Everything from basic materials like lumber, steel, and copper to microchips are in short supply, with doubling of delivery times in last year. Some equipment providers are even selling manufacturing production slots on their assembly lines!

In the meantime, data centers have been facing a tidal wave of demand. This has impacted the priority of what we can do today. Companies are needing to closely evaluate their processes to ensure they are operating existing facilities in the most efficient way possible. For example, sustainability is a priority to all of us in the data center space; we all have goals to be net-zero within a few years.

With the constraints we’re facing, many are having to double down on efforts to make efficiency upgrades and revisit operating procedures. Even in challenging circumstances, data center operators are finding ways to meet capacity demands, bring power usage down, and turn it all into a model that they can effectively sell.

PETER PANFIL, Vertiv

Peter Panfil, Vertiv: The pandemic has created disruptions in the supply chain, as has the way data centers responded to it. Many are taking a “bounce forward” approach in which they are conducting major modernization and upgrades so they can come out of this period stronger and more resilient than they went into it. That has put further pressure on the supply chain.

Vendors across the value chain are working with their customers to get ahead of supply chain issues through proactive communication, longer term project planning, and enhanced maintenance practices that extend the lifecycle of existing equipment.

MICHAEL GOH,
Iron Mountain

Michael Goh, Iron Mountain Data Centers: Supply chain challenges are visible in the data center industry. This is the case in other industries as well because of the shortages that occurred during COVID. We are coping well, but we see new capacity coming online at a slower pace.

In a fast growing and high-demand industry such as the data center industry, new capacity lead times are taking longer than before COVID. We also see this with any sort of equipment that needs a semiconductor to function.

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