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Covid-19 Pandemic Interrupts Server Supply Chain

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Internet infrastructure provider Heficed reports that the scarcity of network servers is felt on a global scale. It confirms the fear that we felt during our discussion with  Rob Hirschfeld, Founder & CEO, RackN.

“The sudden stop of operations in China had a drastic effect on the industry, immensely limiting the available hardware supply,” said Vincentas Grinius, CEO of Heficed.

Some key findings of Heficed .

  • The Covid-19 pandemic compromised the production and distribution of hardware needed to sustain the server supply chain by forcing a temporary shut down on some of the largest manufacturers based in China. This resulted in a rapidly growing demand, which can be hardly sufficed by the current stock supply, leaving companies, which require resources to build and maintain network infrastructure, unable to scale their business.
  • When the pandemic escalated, most of the factories shut down in an attempt to prevent further transmission of the disease. China is at the forefront of the industry, as data processing machines and their components are among the top exported goods. Inability to staff the production lines and continue work during lockdown created a significant server supply shortage in the market. Although businesses are restarting their work, they still have a long way ahead to mitigate the damage done to the industry.
  • Businesses, reacting to the situation in China, started looking at other major markets, such as the United States, in hopes of acquiring the necessary resources. However, this left them facing another problem – delivery. Although the government did not restrict global trade, according to Grinius, delivery companies either doubled the price or stopped such shipments entirely.
  • The interruption in the network infrastructure supply affects all members of the business chain. Hosting companies, which did not take care of their hardware needs in advance, will be forced to hold back their operations; the lack of technical capacity to onboard new clients will render them unable to unlock potential revenue sources. Consequently, it will impair the quality of service for the end-user: each client’s data will have to share the same servers, which, without the possibility to upgrade, may lead to a lag in information processing.

“We usually stock up for at least a few months in advance, which proved to be a vital decision, which allows us to maintain our operations on a pre-virus capacity. Other hosting providers aren’t so lucky, as most of the storage facilities have been emptied clean, so you can’t simply stock up on required resources,” added Grinius.

“Delivery is no longer a rational choice. Prices for shipping rose from a few hundred to a few thousand dollars: if you would compare it to our previous delivery expenses, costs jumped by at least a 150 percent,” stated Grinius.