At Online, we are deploying thousands of servers per month.
To optimize cost and improve our time to market, we use a lean manufacturing strategy. This strategy allows us to move fast and upgrade our Dedibox servers on average every 18 months.
Manufacturing our own servers requires to be in contact with our suppliers daily to track, negotiate and order all components we need as an hosting provider including CPUs, RAM, RAID controller cards, SSDs and hard drives.
Six months ago, we started receiving some signals announcing strange things coming to the DRAM & NAND market.
Everything started in June during a chat with one of our SSDs supplier while we were ordering SSD disks as usual. Our supplier started to warn that lead-time were nearly twice longer than standard lead-time. He also predicted that lead-time would continue to grow. We later found out that it indeed took months instead of weeks to deliver our SSDs.
In October, we started to get higher pricing compared to the previous quarter. We started to receive astonishing informations: pricing for ordered supplies could change between the ordering and the invoicing. In short, the market was volatile.
When you are buying such large amount of disk, you are always looking to buy at the right time, not too early to avoid excessive stock, not too late to avoid being out of stock. But at that time, red lights were everywhere.
In fact, according to the September, 6 market view of DRAMeXchange, DRAM contract prices were predicted to rise over 10% in Q4 2016 as memory demand stayed hot, and NAND pricing was also going to rise.
This prediction was confirmed in our day to day negotiation. On average, the price for RAM and SSD raises week after week. According to the latest market view of DRAMeXchange, NAND and RAM pricing will continue to skyrocket this year as industry’s wafer capacity will grow enough to satisfy demand.
This effect is mainly due to the demand increasing of both the smartphone and the server shipments while the 3D-NAND fabs ramp-up of leading actors is not as fast as needed.
The snowball effect: due to the DRAM and NAND market crisis, HDDs might join the shortage acting as an alternative product while the market will calm down.
For now, we kept our pricing unchanged as we will absorb the market effect transparently for our customers. Dedibox servers are extremely affordable and we expect the market to stabilize in the coming months to maintain our highly competitive pricing.
However, this market crisis totally disrupts our supply chain. SSDs and RAMs components delivery time is now uncertain and we don't get any guarantees regarding the volume ordered. That led to temporary out of stock on some of our servers in 2016 and we are ramping up our stocks to avoid the scenario to repeat in the coming months.
The good news is that despite the market volatility, we do not plan to change our pricing and there is a lot to come! We are currently working on the next generations of Dedibox servers and on providing new services.