The ongoing disruption of global supply chains is driving up the cost of data center infrastructure equipment, putting vendors in a perpetual state of juggling between trying to satisfy their largest customers – who are building more and more data centers – and keeping their own bottom lines intact.
“Market's red hot, people want the products, prices are going up, and you can't get that stuff, and it's a perfect storm,” Rob Johnson, CEO of Vertiv, one of the world’s largest data center equipment makers, told DCK in an interview for The Data Center Podcast.
The chip shortage is just one part of the supply chain crunch caused by the pandemic. If you’re a company like Vertiv, which sells a lot of data center cooling equipment, you’re struggling to buy enough fans, for example. Lithium-ion batteries (used in data center UPS systems) are hard to come by, as well as materials, be they steel, copper, or plastic, Johnson said.
Freight is one big part of the cost increases. Spurred by a combination of supply chain disruptions, post-lockdown spikes in demand for international shipping, bottlenecks at large ports, and blockage of the Suez Canal, the average price of shipping a container from one country to another has quadrupled from this time last year.
Sophisticated Pricing Is Key in Data Center Supply Chain Crunch
He couldn’t say by how much prices have increased, since pricing decisions are made on a case-by-case basis at a local level.
“We're just trying to recover what our costs are – that are going up – so that we can take care of our share owners,” Johnson said.
Clients have been understanding. “Our customers and partners are pretty good at understanding what’s happening in the market,” he said.
Vertiv salespeople use analytics to make pricing decisions. A sales rep can input a suggested price for a product into the pricing system and the system predicts whether they might lose or win the deal at that price level, for example, or let them know that the price is too low for that market.
“It's something we do pretty precisely, and we try to do it in the spirit of partnership, so that we're not taking advantage of our customers at this time,” Johnson said.
Listen to our full interview with Rob Johnson, CEO of Vertiv, on The Data Center Podcast. Besides the supply chain crunch, we talked about the pandemic’s impact on Vertiv’s operations, the company’s strategy in the hyperscale data center market, and the latest in data center technology innovation.
Listen here or anywhere you get your podcasts and be sure to subscribe!
Apple Podcasts | Spotify | Google Podcasts | Stitcher