How Shortages and Higher Prices May Affect Your IT Purchases

Small and medium-sized businesses have faced a wide range of challenges over the past two years. COVID-19 lockdowns, Russia’s invasion of Ukraine, and other factors have resulted in unprecedented workplace disruptions, serious supply-chain problems, high fuel prices, and rising inflation. The pandemic closed electronics factories around the world, and remote work and learning created a sudden upsurge in the demand for laptops and other business and home office technology products.

If you’re considering installing a new network or upgrading your existing network, you may encounter out-of-stock products, long lead times, higher prices, and missed shipping dates. Let’s take a look at the impact IT product shortages and inflation may have on small and mid-sized businesses and ways for your company to address these challenges.

Less Availability of IT Hardware

Inventories for a wide range of IT hardware are currently at historically low levels. The manufacture of many IT products has been significantly restrained by the ongoing global shortage of computer chips. During pandemic lockdowns, many Asian chip manufacturers shut down their factories, which quickly depleted worldwide stocks. The lack of computer chips over the past two years has adversely affected many businesses, with the automotive and computer industries being hit particularly hard.

Low inventories are not limited to devices containing chips. Other shortages include mature nodes used for display driver ICs and touchscreen controllers, as well as USB ports. Pandemic shutdowns also created a sudden surge in people working from home and remote learning for students. Demand for laptops, monitors, docking stations, and peripherals skyrocketed as businesses and parents scrambled to accommodate these new arrangements. As a result, the specific models you desire may not be readily available.

Longer Waits for Common IT products

Chip manufacturers have ramped up their assembly lines, but the supply of many types of chips will continue to be inadequate for the rest of 2022. Some component lead times will likely stretch into next year, affecting the supply of servers, workstations, firewalls, network-attached storage, and other common IT products. For example, the lead time for server LAN chips is currently about 40 weeks, and the current delivery time for field-programmable gate arrays is about a year. The overall server market supply is improving. Shipments are expected to increase significantly, starting this quarter, but lead times can stretch from three to four months.

Higher Prices for IT Products

Businesses looking to make IT investments this year should expect to pay higher prices than pre-pandemic levels. The combination of a low supply of electronic components and a high demand for IT products — coupled with the highest inflation rate in decades — will make IT products more expensive. As an extreme example, one distributor recently reported that a top chipmaker was charging $230 for a single chip that cost $7 in 2019. Overall, chip prices have risen from about 15% to as much as 100%. Price increases for components are reflected in the prices of servers, laptops, and other technology products.

What Can Businesses Do?

If your business needs a network upgrade, you should start planning earlier than ever and be prepared for potential delivery delays. Now is the time to finalize your plans and establish your order’s place in line. It will require more effort and be more expensive than in the past, but the sooner you get started, the sooner you’ll have your new network up and running.

If new equipment is hard to find or too expensive — or can’t be delivered on your timetable — you may want to consider these options:

  • Be flexible regarding specifications for new equipment.  Substituting just one component can have a positive effect on delivery time and price.
  • Optimizing your existing hardware. Many businesses underutilize their equipment, so you may be able to consolidate connectivity to take full advantage of your excess capacity.
  • Buying refurbished equipment. Certified refurbished equipment comes with warranties and other benefits, and it can significantly reduce lead times — perhaps to a week or two rather than several months or more.
  • Switching to a cloud solution. Moving to the cloud transfers many hardware headaches to your solution provider, who may have excess capacity or be better situated to add hardware.

Finding the Right Partner

For small and medium-sized businesses, making technology purchases has never been more complex than it is in the current market. The good news is that a trusted partner can help you navigate through these unique circumstances. The technology experts at DWD Technology Group have been helping businesses throughout the Midwest find and implement the best possible hardware and software solutions for more than 30 years. For more information about cloud services, hosting, and planning for technology purchases, contact us today!