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Covid-19 cripples local IT supply chains

PAUL RUINAARD, Nutanix

Nearly three quarters of companies are reporting supply chain disruptions. 

In March, the Institute for Supply Management (ISM) revealed the first-round results of a survey focused on the effect of Covid-19 on business and the supply chain.

It says nearly 75% of companies report supply chain disruptions in some capacity due to coronavirus-related transportation restrictions, and more than 80% believe their organisation will experience some impact because of Covid-19 disruptions.

Of those, one in six (16%) companies say they are adjusting revenue targets downward an average of 5.6%.

“The story the data tells is that companies are faced with a lengthy recovery to normal operations in the wake of the virus outbreak,” says Thomas Derry, chief executive officer of ISM.

Gartner says as coronavirus continues to spread around the world, the economic symptoms are emerging.

It says more than a dozen global firms have announced they will miss their financial goals for the upcoming quarter due to the combined impact of supply chain disruptions and dampened customer demand.

“The value of digital channels, products and operations is immediately obvious to companies everywhere right now,” says Sandy Shen, senior director analyst, Gartner. “This is a wake-up call for organisations that have placed too much focus on daily operational needs at the expense of investing in digital business and long-term resilience.

“Businesses that can shift technology capacity and investments to digital platforms will mitigate the impact of the outbreak and keep their companies running smoothly now and over the long term,” Shen says.

The IDC says the outbreak is a rapidly evolving situation and one that has significant human and economic impact.

“Understanding how any production shutdowns affect the supply chain, and how that, in turn, flows upstream into the ODM and OEM environments, will be a leading indicator of broader server and storage system market performance during early 2020,” says Sebastian Lagana, research manager, Infrastructure Platforms and Technologies at IDC.

Derrick Chikanga, an IT services analyst at Africa Analysis, says the virus is now affecting the manufacturing and shipment of IT equipment and components, particularly from affected regions in Asia, Europe and the US.

 

“Some manufacturing plants in these regions have been either shut down or are operating at minimum capacity. Furthermore, workers who have been exposed to the virus have been quarantined, and this has affected the overall supply of key components worldwide,” he says. Crippling effect

Nonetheless, the impact of coronavirus on the local IT sector is yet to be fully felt. “However, should the virus continue spreading, especially in key Asian and US markets, then this could have a crippling effect on the availability of most goods such as personal computers, printers, mobile devices and networking technologies.

“Much will depend on the level of downscaling by manufacturers such as Samsung, Huawei and Apple. However, continued disruptions in production will likely create shortages in both consumer goods and enterprise technologies.”

Huawei recently said the coronavirus outbreak would not affect the supply of 5G telecoms equipment to its customers after its factories resumed production.

Says Paul Ruinaard, regional sales director at Nutanix Sub-Saharan Africa: “Critically, we need to stick to our knitting. We are IT professionals that deliver IT goods and services. We're not medical experts, so we need to follow the markets and the experts and take calculated business decisions that factor in the same type of risk indicators as if we were dealing with a recession or a natural disaster. We know supply and demand is challenged.

“At the moment, global supply chains are really stretched as a result of this pandemic, which is going to force the local channel to rethink our global operating models centred on remote working.”

However, he believes that from adversity comes opportunity and the local channel may see some new technology models emerge.

“Companies that will come to the fore are those that have already geared themselves to work remotely and have business continuity plans in place.

“We don’t know what we don’t know. To date, we're only seeing the tip of the coronavirus iceberg and we have no idea which way it’s going to swing. As an industry, we need to put our heads down, deliver the solutions our clients need to sweat their assets, use the cloud, build more software-defined solutions, and leverage professional services via the cloud or remotely to ensure they keep the lights on.”


 

 


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