Does anyone think that prices of IT equipment are likely to drop to similar pre covid levels once everything thats going on blows over?
It's getting very hard to justify the cost of some equipment now, constant increases on top of FXR mean that it's proving hard to stick with some vendors. I am seeing this with many of the products we use, I have always purchased based on suitability AND quality but it's getting hard.
With everything going up in price and business trying to cut costs to survive I am guessing there are many businesses out there that are simply forgoing established brands for cheaper alternatives.
On the plus side SAAS products seem to be fairly good i.e. most seem to have an increase in 5-10% which is an easier pill to swallow.
I don't think we will likely see a price recovery for 5 years.
China is in financial strife. Two banks in China filed for bankruptcy in the last couple of weeks. No one wants to extend anyone credit in China - so it can be hard to get a Chinese manufacturer to accept orders now without cash up front - and no one wants to pay cash up front in case the Chinese manufacturer goes out of business and doesn't deliver. I could see China taking 7 years to recover. It's not just the recession - its going to take a lot of time for the people of China to regain confidence in using the banks - and its hard to grow an economy without trusing and using a bank. China is going to go back to being a cash based economy for quite a while now.
Last month, half of the provinces in China shut down all large manufacturers for 5 days because there was not enough electricity.
Major chunks of China are getting shut down because of COVID.
So anything coming out of China is going to face considerable delays for years to come. I'm guessing 7 years.
The US has biffed a *lot* of money at Intel to bring back chip manuafcturing to the US. Globally, everyone is having trouble completing building projects on time. So despite what Intel says, I could see it being 5 years before Intel can commence *volume* chip manufacturing.
If China and the US have a war over Taiwan - it's going to get bad in ways we can't even start to imagine.
Lots of products get made from oil - like plastics. The R*ssian/*kraine (to avoid bots) w*r is creating serious issues around the supply of oil and rare gases (like krypton, xenon, and neon) used in manufacturing. I think this "event" is going to be going on for many years to come.
All the reserve banks gloablly are pumping up their reserve asset ratios (lots of terms used for that one), causing interest rate rises. They *must* do this to combat the stupid amounts of money printed during COVID. You have to pull all that money back out of circulation.
So lets say a government pumped money into the economy over 2 years. To pull that back out in 4 years you are going to have to pull out 25% per year. People would scream if 25% of their money was taken away from them over a 4 year period (it's called inflation). Even 8 years would be 12.5% per annum. I think that is about the max people would take.
So lets say it is going to take 8 years for the world to recover from the money printing caused by 2 years of COVID.
So yeah - I don't think we will likely see a price recovery for 5 years - and 5 years is being pretty optimistic when you consider the above.
Well said @PhilipDAth really nice in depth analysis. @cmr This thought came about when preparing my 2023 budget, I am lucky that where I work has a pretty good IT budget but I would imagine some places are struggling and we will see people holding onto equipment for much longer than they normally would.
Just like cars the second hand market for IT equipment is going to do well I suspect.
@BlakeRichardson we needed to get a Cisco SG550X PoE switch and ended up paying 50% over RRP as there were none available through usual channels, or even refurb...
I have seen certain models of equipment prices increase over 50% since I purchased the same model a year ago. One thing that is disappointing is hardware licensing has increased a lot as well which is unexpected, I've seen licensing go up 65% in some cases.
We have seen similar woes with our budget plan and equipment we planned to purchase next year. Equipment purchased at the beginning of 2022 is now 2x what it cost the first time! Not to mention crazy lead times on that equipment too. I can tell @PhilipDAth has put some thought into this 😀. Like he and the rest have been saying, the cat is out of the bag and once it is out, it is hard to put back in. If anything, I think we will see more people pushed to the Cloud or SaaS because of those "cost savings" you can put in your budget.
I understand that Cisco themselves haven't probably increased the price over 50% in some cases but distributors and resellers all clip the ticket and add in their own increases which inflate the price so in no way am I having a go at Cisco or singling them out. This is something I have noticed and wondered how others around the world were finding it.