Major de-booking proves that suppliers are in the driver’s seat: Analyst
And when it comes to the purchasing of equipment by CIOs or data center managers, he said, suppliers are currently in the driver’s seat: “When demand outstrips supply, it’s the customer who bears the brunt of the impact. HPE is in a position to prioritize certain market segments and product bundles as it allocates its limited supply of AI infrastructure.”
Annand added, “we’ve been given no indication this is what is happening, but it’s conceivable that higher margin and stickier customer deals, like those featuring HPE GreenLake, would take precedence over commodity sales of Gen11 HPE ProLiant Servers with Nvidia GPUs. We saw what COVID-19 did five years ago with exponential demand and a constrained supply chain. It’s not unreasonable, but we’ll see some of the same behaviors from suppliers and customers again.”
That said, he noted, “deals can be made. The dark horse hypothesis involves knowing when the inflection point of supply outstripping demand will occur. It takes a comparatively long time to stuff the supply chain with product; if the perception of genAI ROI remains soft amongst the CFOs of the Fortune 2000, we could see a significant swing in vendor/customer dynamics.”
Fast followers, he said, “will lose a first-mover market advantage to be sure, but in the long run, they might have lower TCO and thus higher ROI; they don’t call it the ‘bleeding edge’ of the technology adoption curve for nothing.”
According to Annand, “without a magic eight ball, it’s impossible to know how this will all unfold. Moore’s law used to predict that a pilot costing $1 million worth of CPU capacity could be scaled up 800% and be put into production four years later for that same $1 million.”
Smart CIOs, he said, “could plan product offerings around this. Transistor miniaturization is hitting the limits of thermodynamics and theoretical physics, and the smart CIO of today is going to have to plot the increasing performance of niche and increasingly refined AI models if they’re going to hit that sweet spot on the adoption curve.”
