What does the lack of chips mean for cloud computing?

The complex problems behind the flow global lack of chips summarize two basic factors: The pandemic has limited the manufacture of chips, and demand now exceeds supply.

It will take time for the chip supply to normalize and the effects of the shortage to be corrected through the manufacture and distribution of technology products. Unfortunately, this will not happen at the rate that most experts predict or promise.

Most of the questions I get from technology reporters and analysts today relate to the lack of chips, specifically the impact of the lack of chips on the cloud computing market. Here are brief summaries of my observations.

First, the lack affects traditional enterprise data centers more than cloud providers. The good news for cloud providers, or those who use cloud providers, is that they are less sensitive to chip pricing and availability issues compared to owners of private data centers. Here’s why:

Cloud providers do a much better job of sharing chip-based resources because they take advantage of virtualized and multi-vendor systems. The typical data center will not be as efficient at sharing chip-based resources, whether they are virtualized or not.

Cloud providers can keep prices lower through a processing cycle because they look at prices and their effects for much longer. It is to their advantage to keep usage prices low because the number of customers they acquire translates directly into long-term return revenue. For the standard data center, these are just low-cost costs that will not be fully utilized for many years.

Second, cloud service providers are now driving more innovations of chips used in cloud computing systems. If you didn’t notice cloud providers invent, produce and exploit their own chipsets. Because many large cloud vendors now control all steps of the chip development process and the chips are optimized for their specific requirements, these vendors no longer rely on the chip makers for their innovations or their chip costs and powerful optimizations. This DIY approach means that the lack of chips will have a minimal impact on the products and services of the big cloud providers.

For these DIY vendors and their customers, the current shortage will most likely result in more innovation and more vendor control of other components that make up cloud services, such as networking equipment, power optimization, and even the power itself, which can be provided with renewable. sources such as wind or solar. Most owners of private data centers cannot profitably operate and innovate on the same levels as the larger cloud providers.

It’s not that I’m a shilling for the big cloud computing providers, but they have the upper hand if you consider the lackluster from all angles. Yes, they will feel some of the effects of the technological shortage, but the current crisis has much less impact on their operations or prices.

If anything, a shortage will continue to lead to independent innovation between cloud providers and others. Many businesses that are not strictly related to cloud computing are already taking more control of internal chip development and manufacturing in their market segments. If these manufacturer-driven DIY chips and innovations come true, today’s chip-related inventory shortage for everything from RVs and refrigerators to smartphones and portable Internet of Things items will become a thing of the past.

Copyright © 2021 IDG Communications, Inc.

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