Market Dynamics

• Most Network and Infrastructure companies remain at pre-pandemic or higher demand.     ​
• We do not forecast a change in demand unless economic or political influence drives the change.  
• Fed policy or political impact with China trade with current administration could impact demand within next 12 months. Reference to Federal Reserve of interest rate hikes planned and news release of Biden Administration statements.   ​
• The 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 do not see this demand for infrastructure change. Although there is a movement to get back to the office, remote work appears to be an ongoing reality in hybrid work environments.    ​
• We currently expect component shortages will start to subside due to demand erosion mid 2023 as a result of continued interest rate increases and inflation pressure. Reference: the U.S. economy will be plagued by stagflation—meaning high inflation and slow economic growth—according to Bank of America's latest Global Fund Manager (Mar 15, 2022).​
• We continue to see more applications move to cloud-based architecture also creating demand and capacity needs in infrastructure.    ​
• As more technology has moved and is moving to cloud, we have seen the need for tools to managed cloud and cloud spend sourced.      
• We continue to see expansion and development of AR collaboration applications & tools. With these tools and technology in place we are seeing faster service capability with reduced need for travel for onsite support.       
• With cloud being an alternative to traditional server and storage of data which is growing exponentially, we are seeing demand for servers and storage as moderate.  
   

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 Firewall components. (hardware, software, and support). ​
• With the supply constraints remaining and continued demand, we see suppliers increasing pricing without immediate impact on demand. We expect this to continue until demand erosion starts to impact revenue.   ​
• 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.    ​
• Server and Storage pricing appears to remain stable at the moment, but very well could start to see pricing impacts due to component and labor price pressure.    ​
   

Supply Analysis 

• We continue to see supply constrained in the Infrastructure technology and expect this to remain for the forseeable future.  (Next 12 Months)    
• Cloud Supply continues to remain available and capacity appears to be available as needed.     
• We are continuing to see lead times of 4 to 6 months on most network hardware on factory orders and over 12 months on some. Primarily Cisco Equipment within the Jabil network.    
• With the persistant supply constraints, we have seen availability of generic equipment within distribution channels also tighten.  Availablitlity within this channel are also seeing long lead times where they used to be available at a higher price point.   
• Emergency demand is driving the use of refurbished and alternative equipment as a solution.  Safety stock is a better alternative in strategic planning and can be combined with a spares & maintenance strategy.   
• In addition to utilization of spares and reburbished equipment alternatives, we have asked primary OEM suppliers to extend support on end of support product until new product is available.    
• We are engaging in advanced bulk ordering based on new refresh needed due to 14 month lead times on new product orders.    

Market Dynamics

• While the cloud has made it easier to procure software, it’s also made it easier to overspend – particularly on SaaS.     
• Gartner predicts that by the end of 2022, annual end-user spending on SaaS products will reach $649 billion.      
• We do not forecast a change in demand unless economic or political influence drives the change. Fed policy or political impact with China trade with current administration could impact demand within next 12 months. Reference to Federal Reserve of interest rate hikes planned and news release of Biden Administration statements.   
• 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.      
• The 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.    
• We see increased demand for new security and cloud-based software as a result to this change.

Supply Commentary 

• Software supply is generally readily available once developed and ready for market.  Licenses are subsequently sold with maintenance and support.     
    
• New technology and new players in the Supplier space are important to monitor to stay competitive.         
   
• We continue to see the development of cloud management applications and cloud security tools as utilization of cloud technology has grown at exponential rates.
   
• IT & Cloud Security software will remain in focus for the foreseeable future due to the change in architecture and remote work dynamics. 
   
• We continue to see a consolidation within the software industry which affects supply. 
    
• KKR acquires Barracuda Networks - Investment giant KKR has agreed to acquire email, web, and network security solutions provider Barracuda Networks from private equity firm Thoma Bravo in a deal reportedly valued at nearly $4 billion. Thoma Bravo took Barracuda private in a $1.6 billion deal completed in February 2018.    
   
• KPMG acquires Fortica - Professional services giant KPMG has announced the acquisition of Canada-based cloud security company Fortica. The deal will help KPMG reinforce its cloud security presence in the Quebec region.    
   
• Meriplex acquires Cyberian Technologies - Meriplex has bought the assets of Cyberian Technologies. Both companies provide managed IT and cybersecurity services. Meriplex is strategically acquiring managed services providers in an effort to become the leading MSP/MSSP in the United States. 
   
• In May 2022, Broadcom announced a $61 billion deal to purchase VMware. This is the Broadcom announced a $61 billion deal to purchase VMware.Broadcom announced a $61 billion deal to purchase VMware. This is the Broadcom announced a $61 billion deal to purchase VMware. This is the latest in a string of acquisitions to push the microchip powerhouse further into enterprise software territory.
   

Pricing Situation

• We are seeing software suppliers raising prices or attempting to raise price across all categories.
• Long term pricing negotiation is best practice to lock in favorable discount structures.   
• Utilizing alternative suppliers and POCs to express interest is a best practice to introduce competition and to offset supplier price increases.    
• New technology and new players in the supplier space are important to monitor to stay competitive.   
• Over the past two years, we have all witnessed unprecedented changes to supplier businesses, especially regarding eCommerce, supply chain relationships, and the technology platforms that support them. Suppliers have adopted new processes, seen increased cost to their organizations, and had to optimize their respective resources. As a result, suppliers are increasing prices to offset costs.
• As a result of increase pricing, managing utilization of software license has become more critical to maintain total cost of publishers.
• To ensure optimize pricing is obtained, utilization of third-party assessments of software pricing is gaining traction and considered best practice.  
  ​​​​​​​   

Supply Analysis Commentary

• We continue to see plenty of supply within software technology and expect this to remain for the forseeable future.  (Next 12 Months)    
• We continue to see new software publications and applications being presented in the marketplace and expect this to continue in the foreseeable future.  Driven by demand. 
• We are continuing to see more publications available in cloud applications and expect that to continue into the forseeable future.    
• Advances in low code / no-code software are creating opportunities in application development at a faster pace and with fewer resources.   
• New entrants in cloud optimization and cloud security have created more supply options with good ROI.  
• New technology and new Suppliers are impacting supply and important to monitor to stay competitive.   

Market Dynamics

• Most hardware companies remain at pre-pandemic or higher demand.    
• We do not forecast a change in demand unless economic or political influence drives the change. Fed policy or political impact with China trade with current administration could impact demand within next 12 months. Reference to Federal Reserve of interest rate hikes planned and news release of Biden Administration statements.   
• The 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. Computers are an integral part of this capability.    
• We currently expect component shortages will start to subside due to demand erosion mid 2023 as a result of continued interest rate increases and inflation pressure. Reference: the U.S. economy will be plagued by stagflation—meaning high inflation and slow economic growth—according to Bank of America's latest Global Fund Manager (Mar 15, 2022). 
• Innovation and software upgrades should affect demand for new equipment.     
• Windows 11 and applicable release underway:
  • 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.
• With Metaverse and business application development, we expect further demand for hardware and components to support these applications.     
• Jabil introduced Tablet and convertible options are now a secondary option to primary laptop configurations to adjust demand.   
• Jabil developed and implemented various Raspberry Pi solutions to offset demand need for thin client, which also reduced need for purchased software licenses.    
• Emphasize SaaS/native application capabilities on mobile devices to reduce dependence on traditional laptop and desktop devices.   

Supply Commentary

• Component shortages are affecting availability and lead times for orders.   
• Component shortages remain a constant and are anticipated through 2022 and early 2023.   
• Recent announcement of Taiwan's second largest semiconductor manufacturer to expand operations in Japan should improve supply of some semiconductors within a few years.    
• With the supply constraints remaining and continued demand we see suppliers increasing pricing without immediate impact on demand.    
• HP Inc. and Dell Technologies Inc., said last week that demand for computers outpaced their ability to satisfy customer orders. Shortages of semiconductors and a range of supply chain problems related to the Covid-19 pandemic, port backlogs and the weather all have held back sales.      
• New technology and new players in the Supplier space are important to monitor to stay competitive.
• Jabil is implementing several business process changes to address supply challenges:
  • Advanced ordering based on forecast
  • Implemented supplier leasing with a 3-month buffer for deployment and lease start date.
  • Building safety stock based on forecasted demand.
  • Looking at suppliers' DAAS model which allows for regional safety stock  
• Traditional distribution channels used to be available for supply at higher prices, but as demand has persisted, these channels are now challenged with supply availability and specifications.   
• Lead times of 4 to 6 months for direct build to order fulfillment.    
• OEM direct fulfillment negotiations and preapprovals can potentially reduce lead times through allocation (OEM sponsored escalation allocations) and protected business use cases such as regulated and medical applications.  

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 Firewall components. (hardware, software, and support).   
• With the supply constraints remaining and continued demand, we see suppliers increasing pricing without immediate impact on demand. We expect this to continue until demand erosion starts to impact revenue for suppliers.   
• 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.  
• Prices for OEM and direct fulfillment have been updating to 10%~ for FY2022 as compared to FY2021 and no guarantee for beyond.    
• Equipment available in non-factory order environments is seeking higher pricing and not supported by negotiated rates.    
• 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.     

Supply Analysis

• We continue to see supply constrained in the Laptop & Desktop Hardware and expect this to remain for the forseeable future.  (Next 12 Months)   
• Currently with new product releases a limited supply will be built in with production planning, but we expect demand will rapidly consume the availability.  
• We are continuing to see lead times of 4 to 6 months on most network hardware on factory orders. Tablets currently appear to be readily available as an alternative for some use cases.  
• With the persistent supply constraints, we have seen the availability of generic equipment within distribution channels also tighten.  Availability within this channel is also seeing long lead times where they used to be available at a higher price point.   
• Emergency demand is driving the use of refurbished and alternative equipment as a solution.  Safety stock is a better alternative in strategic planning and can be combined with a spare.   
• We have had success in some regions affecting supply and lead time with bulk ordering based on forecast utilizing new leasing models based on placement into service.