Wednesday, September 27, 2023 Sep 27, 2023
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CRE Opinion

Data Center Supply Chain Struggles

Cushman & Wakefield Data Center Advisory Group exec Ali Greenwood says it's time to make a strategic capacity plan.
By Ali Greenwood |

Data centers have seen explosive growth year-over-year, and it looks like there’s no end in sight to the insatiable need for data as we continue to live in an increasingly tech-driven world. From work-from-home and the rise in telemedicine to FaceTime connections, explosive growth in financial trading, internet conferencing, virtual schooling, online gaming, and IOT—the list goes on and on. We utilize technology from the moment we wake up every morning, relying more and more on the critical infrastructure that enables our increasingly technology-dependent lives.

Ali Greenwood

Despite its strong performance relative to traditional real estate sectors in the face of COVID-related disruptions, the data center industry has not been exempt from many of the challenges brought on by the global pandemic. Specifically, the data center industry has experienced significant strain on its global supply chain, spurred by global labor shortages, manufacturing constraints, and general transportation disruptions. In an industry where timing and speed-to-market are especially critical for essential operations, maintaining a robust supply chain is essential for data center operators and users alike to meet and satisfy user demand.

Like most of its traditional real estate counterparts, data centers rely heavily on many of the commodities that have experienced significant supply chain headwinds in recent months: steel, lumber, aluminum, copper, chips, and more, to build and operate. However, unlike office or industrial facilities, data centers rely on these commodities to manufacture the critical infrastructure components that enable global connectivity. For a data center user or operator, a slight disruption in the upstream supply chain could have a significant financial impact.

Currently, all major lead time data center equipment items (i.e., RPPs, backup generators, etc.) are at least six weeks delayed due to labor and material shortages—and that’s for the major data center providers that yield major-scale buying power across the global supply chain. Imagine the lead time impact on an enterprise user who may buy just one generator or five RPPs a year?

In addition to increased lead times, the industry also sees a double-digit increase in commodity costs and a 5-to-10 percent increase in data center infrastructure costs. Further, the tightened labor market for skilled workers with relevant data center experience has presented unique challenges for both data center operators and enterprise data center users.

Establishing a road map around your data center needs and critical timing is paramount in the current environment. For data center users, strategic capacity planning is more critical than ever, and relying on established third-party colocation providers with superior procurement power in the supply chain is a deployment strategy that should be strongly evaluated.

Forecasting future needs is critical in staying ahead of current and future supply chain disruptions in any industry. In the data center world, users who take advantage of the services and supply offerings of reputable, experienced, and scalable colocation providers will surely emerge on top.

Ali Greenwood is the executive director of Cushman & Wakefield’s Data Center Advisory Group.

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