Market Dynamics

• Most Network and Infrastructure companies remain at pre-pandemic or higher demand. 
• Component shortages are affecting availability and lead times for orders.
• We expect component shortages will start to subside as we end 2022 and into the first quarter of 2023.
• The 2020 extended pandemic created a huge demand shift to work from home (remote work) and appears to have changed the way we will work going forward.
• Collaboration tools such as Zoom, Microsoft Teams, Cisco WebEx, Google, and Blue Jeans have created extraordinary demand on company network infrastructure.
• We are seeing more and more applications move to cloud-based architecture also creating demand and capacity need.
• With requirements for remote work, we have seen a shift to using AR collaboration tools. With these tools and technology in place we are seeing faster service capability with reduced need for travel for onsite support.
• As more technology has moved and is moving to the cloud, we have seen the need for tools to managed cloud and cloud spend sourced. 
• Effective and efficient use of cloud is becoming more focused with greater spend and usage.
• SDWAN design has become more important than ever to adapt with agility to changing demand.
• New technology and new players in the Supplier space are important to monitor to stay competitive.
• IT & Cloud Security are also in focus due to the change in architecture and remote work dynamics.
• Ransomware is a threat to all businesses large and small, and we are seeing an increasing number of publicized cases.
• Most category managers advocate multi-source strategy with technology that easily integrates into the architecture design environments.

Pricing Situation

• We expect suppliers to raise prices in near to longer term as demand is expected to remain strong for the foreseeable future due to change in Market Dynamics and their core costs increasing for Network and Servers.
• Long term pricing negotiation is best practice to lock in favorable discount structures.
• Demand planning becomes even more critical as the Market Dynamics are affecting lead times.
• Cloud pricing continues to provide opportunities for buyers as providers are offering discounts for commitments.
• Equipment available in non-factory order environments is seeking higher pricing and not supported by negotiated rates.

Lead Time Analysis

• We are continuing to see lead times of 4 to 6 months on most network hardware on factory orders and up to 12 months.
• Recently preferred customer status and ability to expedite have been removed by suppliers due to the continued excess demand.
• Availability of generic equipment within distribution channels are also seeing the effects of demand and this channel is also seeing long lead times.
• Emergency demand is driving the use of refurbished alternative equipment as a solution. Safety stock is a better alternative in strategic planning and can be combined with a spares & maintenance strategy.

Market Dynamics

• While the cloud has made it easier to procure IT, it’s also made it easier to overspend – particularly on SaaS. Enterprise SaaS usage and costs are ballooning. In 2020, spending on SaaS was roughly $103B. By 2022, it’s expected to surpass $145B – a 41 percent increase.
• The explosion in enterprise SaaS investment has revealed vulnerabilities in how enterprises manage these costs. At the root of the problem is toxic spend. Gartner estimates 30 percent of cloud fees paid by organizations are for licenses or subscriptions that are dormant or for features that are not being used.
• SaaS cost waste – toxic spend – is a pervasive problem impacting large users of solutions like Salesforce, SuccessFactors, O365, Workday and ServiceNow, to name just a few. Left unmitigated, SaaS toxic spend will consume funds that would otherwise fuel critical IT initiatives.
• New technology and new players in the supplier space are important to monitor to stay competitive.
• IT & Cloud Security are also in focus due to the change in architecture and remote work dynamics.
• Ransomware is a threat to all businesses large and small, and we are seeing an increasing number of publicized cases.
• Most category managers advocate multi-source strategy with technology that easily integrates into the architecture design environments.
• Consolidation and acquisition of leading point solutions/platforms by large suite publishers require forward thinking and planning to be opportunistic and negotiate forward contract terms under potential ownership changes.
• Growing concern about the security risks/threats of employees working remotely. Seeing an increase in cyber-attacks in the past 12 months.
• Need to make certain sensitive data in cloud is encrypted.
• Large enterprise software companies began stepping up compliance audits during COVID in an apparent way to increase revenue.
• Large SaaS estates such as Adobe Creative Cloud, Microsoft Office 365, Salesforce, ServiceNow, and Workday need to be very diligently managed
• Rapid movement from traditional servers to the cloud.
• Develop a SaaS License Optimization Assessment strategy.
• Monitor usage to right size license assignments.
• Liberate licenses by redeploying or terminating non-utilized licenses.

Pricing Situation

• We expect suppliers to raise prices in near to longer term as demand is expected to remain strong for the foreseeable future due to change in market dynamics.
• Long term pricing negotiation is best practice to lock in favorable discount structures.
• Demand planning becomes even more critical as the market dynamics are affecting lead times.
• Deals continue to be formed by supplier fiscal periods and sales pipeline management such as end of quarter/year sales for highest incentives.
• Deals continue to be driven by net new spend and new capability deployments as this is key for supplier market penetration.
• It is essential to right size initial purchases and use future scalability and feature use roadmaps to drive the best deal at the point of sale and over the lifecycle of ownership / deployment (avoid buy all today approaches).
• Consider proof of concept / proof of performance periods with supplier funded adoption, education services and complimentary licensing to validate the business case prior to purchasing.
• Software publishers are pushing price increases with all renewals.
• Need to remain diligent in negotiating pricing discounts.
• Utilization of third-party assessments on market pricing growing.

Lead Time Analysis

• No constraints visible in the market – cloud deployments even easier.

Market Dynamics

• Windows 11 and applicable release underway.
• October 2021 OS had limited availability.
• January through February 2022 OEM adoption with Windows 11 Home as default on ready to ship systems and Windows 10 Pro for business and Enterprise with Windows 11 license included; and
• Minimum CPU capability is required and drives refresh purchases on top of normal capacity needs.
• Pandemic rebound continues but delays still exist due to backlog, China weather related damage and physical delivery logistics and Chinese New Year shutdowns.
• Component shortages remain a constant and are anticipated through 2022 and early 2023.
• The secondary market for off-lease, remanufactured and indirect reseller product remains constrained and is now a less valuable option for enterprise with Windows 11 requiring recent CPU technology.
• Baseline specifications under limited SKU approval are still being reconsidered in favor of more flexible configurations while not introducing additional IT risk.
• Tablet and convertible options are now a secondary option to primary laptop configurations.
• Incremental improvements expected March through summer with new product releases.
• Expect enhanced camera hardware and software to optimize video conferencing environments.
• Emphasize SaaS / native application capabilities on mobile devices to reduce dependence on traditional laptop and desktop devices.

Pricing Situation

• Prices for OEM and direct fulfillment have been updating to 10%~ for FY2022 as compared to FY2021 and no guarantee for beyond.
• Off direct fulfillment models through resellers or integrators look to be price neutral through the end of 2022.
• Recommending to still leverage single bulk purchases for improved allotment and maximum discounts with direct or distribution relationships.
• Recommending to still consider OEM sponsored distribution and reseller delivery from distributed stock and assistance to mitigate off-contract pricing increases.
• Recommending to consider new low-end technology to control costs and increase availability. New low-end technology typically performs close to or at the mid-level technology level from the prior year; and
• Recommending to emphasize SaaS / native application capabilities at enterprise scale on mobile devices to reduce dependence on traditional laptop and desktop devices.

Lead Time Analysis

• Lead times of 4 to 5 months for direct build to order fulfillment.
• Component supply constraints and unprecedented demand for finished product continues to extend lead times. Direct purchasing and build to order relationships have highest risk due to OEM inability to stock.
• OEM direct fulfillment negotiations and pre-approvals can potentially reduce lead times through allocation (OEM sponsored escalation allocations) and protected business use cases such as regulated and medical applications.
• Recommend to still consider BYOD for temporary relief of new employees where work location, use case and data constraints allow.
• Recommend to still consider upgrading executive class / high end units as delivery should be better than mainstream product. Decommissioned executive units can then be reallocated or put into loaner pool.
• Demand planning and advance forecasting becomes even more critical as the market dynamics are affecting lead times; and
• Recommend to still consider reinforcing lifecycle approach with leasing and decommissioning services which can be planned in advance to reduce the delivery impact and reduce costs.