Japan’s troubles touch the IT economy

IDC’s Supply Chain Insights blog has taken its courage in both hands: a recent post from Robert Parker looks at the impact which the disruption in Japan will have on the global economy but also, specifically, on the technology supply chain.

This has been discussed in mainstream and specialist press, but rather less in the IT analyst community. Jack Santos, of Gartner’s Burton team, was possibly the first analyst to to cover it from this angle. Forrester’s Andy Bartels offered a note this week too, but he admits he is less expert and seems much more sanguine about a swift(ish) recovery.

Japan is critical for semiconductor supply. Transport, energy supply, and the upstream supply chain itself have all suffered a major impact. IDC note that Apple have already extended lead times for the iPad 2 “largely due to a lack of memory components”. The energy issue is crucial and, even if full-scale disaster is averted at Fukushima, it will clearly be some time before energy supply is back to normal.

As well as looking at the impact of the current crisis, IDC make some strategic comments. They believe that these events have shown lack of capability to respond to this level of disruption. They suggest that “More mature industries like automotive are taking much too long to evaluate the impact …”.

But, significantly, they believe that while electronics has responded more quickly their assessment has not reached far enough up their supply chain. The comments go to the heart of multi-outsourced business strategy. In global markets, Parker believes that “it is not enough to simply chase low-cost labor rates”; a more diverse supply chain offers better protection against disruption on this scale.

Gartner’s Santos, looking at the same issues, reaches what appears to be the opposite conclusion: that “the best corporate strategy may be limited and tightly managed externalization” – in other words, bringing things back in house.

It doesn’t stop there. With the Middle East also undergoing disruption, although of a different kind, and recent natural disasters in several other parts of the world, uncertainty is raised another few notches.

So both IDC’s Parker and Gartner’s Santos broaden the lessons about risk management too. In part this is because all companies depend, more or less critically, on the availability of technologies. But the lessons go beyond this to all areas of business.

More comprehensive contingency planning, say IDC, would be highly desirable. Jack Santos’s conclusions about the importance of a deep risk assessment are similar.

• Supply Chain Aftershocks, Robert Parker, IDC Supply Chain blog, 21 Mar 2011
• Quantum Supply Chains: IT Externalization, clouds, and outsourcing, Jack Santos, Gartner Blog network, 15 Mar 2011
• Japan’s Troubles Raise A Red Flag But Don’t (Yet) Alter Our Global Tech Market Outlook, Andy Bartels, Forrester blog, 21 Mar 2011
• Update: Quake prompts supply chain worries, EE Times, 11 Mar 2011

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