In your results commentary, you talked about the impact of memory shortages being “uncertain”. Can you give us any insight into your calculations there?
The manufacturer of this kind of memory is carried out by three or four big players globally, and they are operating at capacity. They’ve got a choice of where they put that production, and you’ve got lots of competition for it, particularly with the hyperscalers hoovering up a lot of it – and that’s a lucrative channel for them to feed it into. How they then allocate it into other corporate channels and into the consumer space is dynamic. It depends on how lots of different things play through. So it’s impossible to predict.
What we do know is that, to some degree, both prices and lead times will continue to go up across most elements of hardware.
This gives us a number of opportunities.
We’ve got the broadest reach in terms of vendor and depth of relationships. We’re the biggest player in the UK, so we’re going to get priority from the disties and the vendors. We can get good outcomes for our customers however it plays out, and that will give us an advantage.
And if customers can’t do certain things because they’re waiting for hardware, or because they have to repurpose budget because what they thought of becomes too expensive, we can help them wherever they go – and most of our competition can’t. So again, good outcomes for customers, good market share opportunity for us, but impossible to predict exactly how that will play through the figures over the next six months.
Cisco and HPE – two the three largest hardware vendors – have updated their partner Ts and Cs to allow for potential post-PO price hikes, which is unprecedented for the industry. Will partners like Softcat need to reflect this in their Ts and Cs? And is it even possible to do this in scenarios like public sector frameworks?
The contractual situation now has to be bottomed out on the back of that.
We’re working very hard with all our customers, whether in the public sector or elsewhere, to explain, ‘look, here’s what the vendors are doing and why they’re doing it’.
People like [HPE CEO] Antonio Neri have explained that because they’re not in total control of their supply chain, they’re having to deal with a very dynamic situation themselves. So they’ve said to customers they’re therefore going to have to keep prices dynamic.
We are passing that message onto customers. Because what we can’t do – Softcat or anybody else in the middle – is to absorb those differences. We can’t give the customer certainty if the vendor is not giving us certainty on price.
We have to get ourselves in a position where customers’ understanding of that, and the contractual situation, reflects that.
With some of the frameworks, we’re going to have to create workarounds and carve-out situations, whatever it will be. There are some contractual issues to resolve there.
Have recent geopolitical events led any of your UK customers to rethink their exposure to US tech?
I think people were beginning to think about data sovereignty very carefully anyway. And it’s not just about sovereignty. It’s about where you want the data for speed of processing and other factors too. You’ve seen data centres get virtualised, then hyper converged, then moved to the public cloud.
And now people have started to get very thoughtful about which workload where, which storage where. And that’s not just about speed and cost efficiency of processing; now it’s around data security, latency of environment and all sorts of other factors.
I’m sure the geopolitics and how that plays into it has crossed some of our customers’ minds, but I think it’s just one issue within many.
I don’t see it as being a huge catalyst right now in terms of what customers are doing with their infrastructure or architecture. Maybe it will build somewhat, but I think there are bigger factors at play for them.
Interview continues on final page…
