The global telecom supply chain is strained. The impacts and implications are limiting what would otherwise be a period of growth, expansion, and investment.
This summer, the industry saw the widely reported views of Ciena President and CEO Gary Smith. In reporting on second quarter (Q2) revenue results, Smith pointed directly to component supply and availability. Despite posting 14% revenue growth, backlogs and shortages in semiconductors and integrated circuits are impacting business far beyond — upstream and down — the global networking systems, services, and software giant.
These same challenges are straining the ability for global subsea connectivity providers as well, and necessity is, once again, the mother of some inventive approaches to meeting customer needs in a drastically constrained supply market.
Who is affected?
The subsea industry is seeing impacts across the board. Wait times for all chip-based telecom components and equipment are stretching, in some cases, out to 52 weeks or longer. This means the hardware and service vendors, network capacity providers, carriers, and end users are all affected.
A constrained market and the resulting depressed revenues are crimping capital expense (capex) budgets. This creates an opportunity for those with available capital to pursue new opportunities. Delays in hardware upgrades and new builds are making some dramatic shifts in the queue and the consortiums funding planned projects. Request for service (RFS) dates don’t become real until the project is funded and the contract is in force.
Those with funding, and who know where they need to be, can even find smaller projects that may have stalled. They can step in and get them over the line. Providers need to look with fresh perspectives as the rules shift.
The list goes on.
The subsea industry is about finding the right deals. Scale helps, but it really comes down to the experience of the C-level management team and the ability to execute on some pretty creative deals. This means micromanaging, offsetting delivery risks, and talking transparently with customers along the way to be sure they understand the shifting rules in what, really, are unprecedented times.
These are not easy conversations. It is closer to triage decision-making in a mass casualty incident. Global scale means turnover with capacity shifting on a regular basis. Teams have to be much more meticulous about where and how they accept orders. Businesses have to give their best counsel, and sometimes the news is bad for the customer.
The industry needs to start looking creatively for new types of deals and ask questions, like, are there manageable risks we might not have considered in normal times? Where and when is capacity turnover happening? Does this create any flexibility or opportunity that would not even draw attention before? How many gigs can we cobble together that may fall out of other deals? That’s where the management team’s experience comes in — asking some new questions.
Customers are rethinking how they run their networks. In the past, they may have never gotten above 75% utilization before securing additional capacity. Now, they may be pushing 90%. Expected system hardware upgrades to add capacity are impacted., leading to some unique expansion and resilience strategies. Consider a customer looking for a specific route that would not only make sense for that particular organization but also its partners as well as the entire region — but, it requires an upgrade on a segment that is now on backorder.
Meanwhile, service providers may have, for example, a card in a cable landing station supporting a connection that's set to expire and not up for renewal. That can free up a card, but they have to weigh the incremental risk of removing a backup resource. Experience gives management teams a feel for performance, issues, and likelihood of failure. It comes down to redefining acceptable risk — ship a card and get the customer up and running in less than 48 hours.
Expect the supply chain issue to get worked out and create yet another new normal for global telecommunications, but it may not happen any time soon. In the meantime, teams should challenge themselves to think creatively while being transparent with their customers. Management teams will all weather the storm better when they work together to find less obvious ways to create value for their customers.