It’s the time of year when we all try to look ahead and plan for what we believe will happen, but this year the proverbial crystal ball seems particularly cloudy – there’s so much happening as we all start to emerge, blinking in the bright light, into the post-pandemic “new world”.
By Guy Whitcroft
But surely, we know what’s going to happen, many cry – we see people not going back to offices, a boom in consumer spending and travel due to pent-up demand, and all is looking cheerful …
But is it really?
Let’s think for a moment of some of the challenges:
Chip Shortages
We’re all well aware of the chip shortages that emerged last year and which continue to make things tough, with no less than 169 industries affected. It takes time to build new chip factories and ramp up production, so this will be with us for a while yet.
Of course, just this week (mid-February) we saw Western Digital, with its partner Kioxia, disclose that they’ve had serious contamination at two factories which has ruined the materials used to create flash memory (16-billion GB of material in all), so SSDs, USB sticks and other commonly-used flash devices will be impacted.
And, to add to this, China seems to be increasingly confident that it can do as it pleases and has made it clear that it intends to have Taiwan under its control in the next few years. This will have a massive impact on the chip industry.
Shipping
We’re also a long way from the world’s shipping systems returning to any form of normality. Ports all around the globe are facing delays in offloading cargo with China’s zero-Covid policies causing complete closures at very short notice. Closer to home, Cape Town, South Africa’s “best” port is looking at ships lying offshore for as long as 30 days now, according to reports.
This, together with a shortage of available containers, continues to significantly push up shipping costs and times, too, meaning importers have to hold higher levels of stock to counter the delays, adding further to costs.
Labour Issues
The Great Resignation is strongly under way, particularly in developed economies. For example, in the US, although the unemployment rate has dropped to 4%, the number of vacancies has continued to rise strongly and there are now twice the number of vacancies than there are unemployed people.
This not only impacts business from a staff shortage perspective, but adds pressure to salaries too. Granted, we don’t directly have this problem in South Africa, but the vacancy rate in the developed countries, coupled with higher salaries is making the prospects of emigration from South Africa look even brighter now, which will affect the availability of the most skilled levels of staff.
Energy Prices
Gas and coal prices have risen dramatically during the past six months or so due to a rapid increase in overall demand for energy as economies start to recover and the effects of climate change on the northern hemisphere winter which has pushed demand even higher and resulted in very low coal stocks in China and India, in particular. This, in turn, has pushed coal prices to new highs, and put even more pressure on gas prices.
Gas is further affected by the current instability in Europe as the continent relies on Russia for about a third of its gas – used for electricity generation and heating homes. Also affecting electricity prices is the increased cost of carbon offsets and taxes, pushing prices still higher.
Oil prices, too, are on a sustained upward trend, reaching levels not seen for many years.
These increased energy prices significantly affect all areas of the economy, from agriculture to manufacturing and shipping, and so to the end user.
Inflation
The exceptional levels of government spending during the past two years, whether on vaccinations and protective equipment or on propping up various segments of their economies, will have to be paid for. Government borrowings have increased dramatically and so we will see increased taxation to cover paying this down and the higher interest charges associated with greater borrowings, while interest rates will have to start rising, too, adding further pressure to government balance sheets as well as our own pockets.
Add to this the pressures of increased prices due to the energy, shipping, labour and chip shortages and we’re looking at a period of much higher levels of inflation over the next few years than we’ve been accustomed to this century.
Opportunities
So, what about opportunities?
You might fear that the above all means a dark road ahead but, of course, all challenges lead to opportunities and many of the world’s most successful organisations today were started in difficult periods where the founders saw great opportunity.
The fact is that corporate balance sheets are, in most segments, looking extremely healthy and investors still want to see growth rates that outstrip inflation (read: higher than we’ve seen).
Cost pressures will cause businesses to look hard at their own structures and we can expect the pace of digital transformation to increase, not just to contain more traditional costs but also to remain competitive.
We’ve seen, from people being forced to work from home almost continuously for long periods, that although this sounded like a great idea it’s having an adverse effect on many. Mental health issues are increasing, productivity is declining (after an initial upward trend) and creativity is also waning – people need to be able to gather in groups and discuss things, and virtual meetings are just not the same. Yes, they work well for some routine stuff, but for anything needing proper discussion, face-to-face meetings yield much better results.
Companies will therefore need to find ways and tools to accommodate this hybrid working if they are to retain market share and increase growth rates, not to mention staff retention. And staff will expect more training and career development opportunities too. These areas dropped off during the pandemic, but will need to be addressed strongly now.
What does all this mean for you, the reseller?
Although PC and printer sales showed strong upward movement over the past couple of years, this is likely to tail off for a period now.
However, XaaS sales will certainly continue to grow strongly as companies move further into the cloud and step up their digital transformation. Of course, the hardware and software components behind this will also have to increase.
Cybersecurity will need continual tightening. Ransomware attacks are growing in number and complexity and companies will need to be shown how to protect themselves against these and all other forms of cyber breach (industrial espionage is also increasing).
Another area of great opportunity is AI. This will be a significant tool going forward, helping in areas from manufacturing and logistics to customer experience and overall business management, and, of course, managing company energy costs, too, linked to smart sensors and the like.
And then there is networking – the complexity of corporate networks will continue to increase with the “Work from Anywhere” approach as will speeds, as people will expect to have the same level of connectivity wherever they are at a particular time. Resiliency will be taken for granted, so companies will need to pay close attention to this, as they will to the issue of “desktop support” – ensuring users, wherever situated, have easy access to support services to help them over their periodic hiccups: everything from drivers to logging on via VPN over strange networks, to apps crashing, and so on.
All of this adds up to interesting opportunities for the market – perhaps with an over-arching one of corporates increasingly outsourcing their IT departments while keeping a core high-level team to define the systems that can give them strategic advantage, although outsourcing development and implementation.
May the year ahead be a highly successful one for you.