Supply Chain Instability: Meeting Customer Demand

Faced with a shortage of people, equipment and materials, the supply chain is a notable and increasing concern for many industries - and the data center industry is no exception.

According to a report from the advisory organization, Uptime Institute, the pandemic, extreme weather and political instability have all contributed to disrupting global supply chains. Furthermore, a survey conducted for the report indicates that suppliers believe the problems within the supply chain will continue over the next two years for critical data center products and services.

With the data center industry experiencing significant demand and growth, the ambitions and opportunities within the sector remain high; however, the sector may be forced to alter schedules and plans if supply chain issues persist. The industry will need to demonstrate its resilience and creativity to meet the enormous demand, particularly regarding personnel, equipment and construction.

In episode five we are delighted to introduce Andy Isaacs, Vice President, Procurement, at CyrusOne and Dan Ayley, Director, Global Head of Industrial, Science & Technology at Turner & Townsend to the podcast.

Guided by our Host, Matthew Pullen, EVP & MD Europe at CyrusOne we present an honest and realistic view on the impact the supply chain challenges are having on the data center industry and offer practical guidance on how to navigate them.

We hope you enjoy this thought-provoking discussion with actionable advice, and thank you for listening. We’d love to hear your thoughts, so please don’t forget to like, share, comment and subscribe.  

Visit CyrusOne website.

Guests:
Andy Isaacs, Vice President, Procurement, CyrusOne
Dan Ayley, Director, Global Head of Industrial, Science & Technology, Turner & Townsend

Further Reading:
Turner & Townsend 2022 Data Center Cost Index

Transcript

Andy Isaac (00:02):

It's really about transparency. Again, many of our customers are in the same supply chains we are. They see the challenges, and I think they really appreciate that transparency from CyrusOne and the fact that we can share the proactive things that we're doing to try and eliminate some of the challenges that we see and really sort of get their space stood up as soon as we can.

Matt Pullen (00:26):

Hi everyone and welcome back. Thanks so much for joining us. As ever, I'm your host, Matt Pullen, EVP, Managing Director Europe at CyrusOne. And today, we're going to be discussing the supply chain and how events across the globe have impacted logistics and operations both across our industry and beyond. Joining me today is my esteemed colleague, Andy Isaac, Vice President Procurement at CyrusOne, and Dan Ayley, Director at Turner and Townsend.

(00:54):

We'll just dive straight in, Andy. What are the challenges then within the data center supply chain?

Andy Isaac (01:03):

I mean, whether it's a personal, professional life experience, we're all seeing delays and constraints and challenges within supply chain, and data center industry is no different really. So I think at a macro level, it's really sort of three things that you kind of touched on there. Material and equipment and labor availability, that's a real challenge that we're seeing right now. Things that we could obtain in the marketplace very easily have become very challenging to secure. I think secondly, when we do find them, we're challenged with incredible long lead times. We were looking at a lot of our data center equipment. We could get it in 10 to 20 weeks. It's now 40, 50 plus weeks. So that's really challenging. So when we actually find it, when we understand the lead time challenge, we're then paying more for it. Things have gone up anywhere between 30 to 200% increases that we're seeing in our supply chains at the moment.

Matt Pullen (01:57):

Well, I mean, this is such a pacey industry, and we are dealing with some very, very large clients who have serious expectations. So when you're talking to them, what do you say has caused these challenges? What's going on behind the scenes?

Andy Isaac (02:12):

Well, a lot of our customers, particularly the hyperscalers, they're in the same supply chains as we are, so they're seeing firsthand some of these challenges. Really, I think there's a general recognition now that the focus for supply chains within data centers really has become assurance of supply. It's about getting the components, the goods, the labor that we need. It's about standing up that capacity. It's about leasing that capacity. But unfortunately, things are taking a long time now, and our time to market is just incredible now. We are looking at things into 2024 now. And managing expectations of our customers around those supply chain challenges is something that we're focused on.

Matt Pullen (02:52):

So just delving in a little further, because you hear about issues that have occurred in China affecting the manufacture of chips, for example, and you had pandemic issues in northern Italy in and around manufacturing facilities for critical components within data centers. Is there anything that you can really point to for the listeners and say, "Well, just giving you a few examples, these things have happened that have had such a fundamental impact."?

Andy Isaac (03:21):

I kind of describe it as the perfect storm. There are so many different elements once you get under the hood of this thing and kind of understand it. I think, firstly, we're looking at incredible demand in our industry. We're seeing deals the size of we've never seen before. Everyone wants to buy as much capacity as they can. I think you couple that with the disruption that we're seeing as well. Again, the perfect storm. We're seeing challenges getting labor, people on production lines to turn up to assemble things, to manufacture things. We're seeing challenges with sub-components. Breakers, for instance, going into PDUs. Refrigerant valves going into chillers. We've got partially finished goods sitting all over our supply chain waiting on critical components. They just can't ship.

(04:04):

We're seeing challenges with freight and with shipping. Initially, it was just the prices going up, but we're actually seeing constraints around labor availability to drive wagons and pick things up and deliver things. That's a real challenge. And then you couple that with the whole geopolitical background that we're seeing in many parts of the world right now. It's just a number of different elements coming together that's really challenging the way that we're having to look at our supply chains.

Matt Pullen (04:31):

Then expanding this, how is CyrusOne working with suppliers to navigate these challenges then?

Andy Isaac (04:38):

We take our supply base very seriously. We have a philosophy where we look to leverage fewer, bigger, more strategic relationships for volume and value, and we've definitely had the ability to leverage significant volumes over the last couple of years in Europe and in the Americas as well. One of the things that we really focus on is making sure that CyrusOne is the customer of choice. We want our purchase orders at the top of the stack. We want our deliveries out the door first. Anything we can do to work with our supply base to make that happen, we put a lot of effort into that. We also look at building resiliency, both in our direct supply chain where we might have to bring in additional suppliers to help us manage the constraints, but we're also getting into our supplier's supply chains and helping them understand their constraints, building their resiliency, making sure that their supply chain can actually deliver the things that we're looking for.

(05:30):

The other thing we work on is innovation. At times like this, we found working again with our supply base to look at how we can redesign something, how we can eliminate something, how we can then build that into our design and our data centers moving forward, that's a focus for us as well wherever we can work to drive that innovation. It's really just really working with our supply base and making sure that we're driving the value that we're trying to get out of it, but we're leveraging the volumes and the relationship that we've worked so hard to build over the years.

Matt Pullen (06:02):

Fascinating. It's interesting. Does that mean that for CyrusOne it's easier to help suppliers and it's easier to leverage the supply chain in these extraordinary conditions because of CyrusOne's scale and experience? In other words, does it make it more difficult for smaller players to be able to bring the leverage and to pivot the way that CyrusOne has done?

Andy Isaac (06:31):

It really does challenge some of the smaller players, and we hear this from our supply base. When we have such volumes that we are committing one to two years out even, that takes priority over a lot of the smaller players that are trying to buy really smaller quantities of what we're buying in bulk. So I think definitely it gives us an advantage. We see the leverage that we have in our supply chains, we see the lead times, we see how we can improve them versus some of our competitors. And yeah, I think it definitely is supply chain for us as a source of competitive advantage over many of these smaller players.

Matt Pullen (07:07):

These conditions have not just impacted delivery timelines for equipment and therefore delivery timelines for CyrusOne building data halls, building capacity, and delivering it to customers. It must also have had an impact on pricing. Pricing as far as CyrusOne is concerned from the supply chain and then inevitably pricing towards the end customer.

Andy Isaac (07:31):

We started to see price movement probably about a year ago. And every time we've gone to market subsequently over the last year, prices have increased. The most important thing as a procurement person, we think about cost savings. Really at the moment, we're focused on cost containment and should cost analysis, so we need to understand exactly what we're buying and how much we're paying. In many cases, we're using our volume to lock in preferential pricing for the next 12 months. In other cases where there's so much movement within a commodity, within a piece of equipment, we're having to tie certain elements of that price to some index that we can actually then track over time. So obviously, the index goes up, we end up paying a little bit more, but when it goes down, hopefully it will go down, we're looking at paying less for what we're buying, but it definitely is a focus on cost containment and understanding your cost and your price that you're paying.

Matt Pullen (08:25):

Now, we go back to one of the big questions therefore, which is do you believe in the face of these challenges that the industry can meet demand?

Andy Isaac (08:33):

It's very challenging. So as I sit here now in the first half of 2022, basically for a lot of the things that we buy was sold out through the end of 2023. So try and get an economizer chiller in North America, for instance. It's near impossible. So I think we're seeing demand just backing up and up and up, and obviously then delivery to our customers beyond that is challenging. I talk to many of our suppliers on an almost daily basis, and they're telling me that it's just becoming apparent that orders now are moving into 2024, and they're filling up the 2024 order book, and it's a very healthy order book. The biggest challenge they have is thinking about what pricing is going to look like in 2024. Sitting here in the first half of 2022, that's a real problem for them. So locking in that capacity and trying to determine pricing so far out is really challenging, but I think, again, many of the people we talk to, they see no relief at least going through the end of 2024. It's certainly a challenging landscape that we face.

Matt Pullen (09:39):

And when you have the discussions with our big customers, do you think they're aware of all of the issues? Would you say there's a collaborative environment where we're working with our big customers to solve common issues and to try and as you say contain and control, certainly cost escalation so that budgets can be met within some kind of target?

Andy Isaac (10:09):

Yeah. One of the learnings for me again over the last year is it's really about transparency. I'm personally dealing with a number of our customers and being very transparent about what's happening in our supply chain and their specific builds and the contracts that we have with them and sharing all of the information that we see and making sure that they're aware of exactly what's happening, they value this. And I think, again, many of our customers are in the same supply chains we are. They see the challenges, and I think they really appreciate that transparency from CyrusOne and the fact that we can share the proactive things that we're doing to try and eliminate some of the challenges that we see and really sort of get their space stood up as soon as we can.

Matt Pullen (10:52):

Interesting. So standing back then, what does the next two to three years look like from a demand perspective given the current landscape?

Andy Isaac (11:01):

Well, again, I just see an incredible amount of volume. And here at CyrusOne, I mean we've been seeing six to seven years worth of orders that we would typically do in just one year, so incredible challenges. And our competitors and the hyperscalers are seeing similar kind of volumes as well. I think it really is about doubling down on our relationships with our supply chain and, again, looking at the positioning CyrusOne as customer of choice. It's about leveraging the volume that we have. It's about building that resiliency. It's about getting innovative. It's about doing all of the things that we talked about really just to manage through those next couple of years that hopefully puts CyrusOne in a really good position and enables us, as I say, to leverage supply chain as a source of competitive advantage.

Matt Pullen (11:49):

Andy, that was a fantastic recap. But looking from a global point of view because CyrusOne's aspirations are to continue to expand globally, is this a consistent issue across all the regions of the world, or do you see this issue being tougher to navigate in North America versus say Asia? What's your global perspective?

Andy Isaac (12:11):

So directionally, it's the same sorts of challenges. We're seeing different impacts in Europe than we're seeing in Asia Pacific, for instance. And we're very close to a lot of our suppliers. They work globally. That's by design that we can leverage that book of business across the world. Definitely, we're seeing different challenges in Europe than we see in North America, so different strategies for those different markets, but ultimately, again, it's about leveraging the volume across the globe that we can have those conversations with suppliers and those suppliers hear us, and they work with us.

Matt Pullen (12:46):

Fantastic. So I think at the end of the day what you're saying is that there's challenges ahead. The demand isn't going away, so everybody's trying to find a way of meeting the demand through the supply chain, that the challenges are global, but we are in probably a new era of collaboration and transparency where we're working more tightly with our supply chain and our customers than we have ever done in the past. And through doing that, hopefully we'll solve this issue.

Andy Isaac (13:17):

If nothing else, it's made us and our customers rethink how we buy. We've had to approach our supply chain differently. We've had to approach our customers differently, and we've had to manage a lot of issues that we never ever thought would exist in our industry. So I think adapting to that, again, working with our customers, it's putting us in a good position.

Matt Pullen (13:39):

Great. Well Andy, this has just been fascinating. In this episode, we are going to hear from a supplier. We're going to hear their perspective and how they're dealing with the pressures that they're feeling. But Andy, to get your perspective sitting as the meat in the sandwich has been fantastic, and I really, really appreciate your time. Thank you.

Andy Isaac (14:01):

It's been great to be here. Thank you, Matt.

Dan Ayley (14:16):

I am a big fan of collaboration. I'm a big fan of working with the right partners to achieve shared outcomes and the need to explore alternative delivery models, procurement and contracting strategies that are fair where we're all playing together to win.

Matt Pullen (14:43):

So welcome back listeners. I'm delighted to welcome Dan Ayley to the podcast as our guest. Dan is director and industrial science and tech lead at Turner and Townsend. And importantly, the author of the company's recently published Global Data Center Cost Index. So welcome Dan.

Dan Ayley (15:01):

Thank you.

Matt Pullen (15:02):

So I think it's fair to say that faced with a shortage of people, equipment, and materials, the supply chain is a notable and increasing concern for many industries, and the data center industry is no exception. We're seeing significant demand. However, we may be forced to alter construction timelines if supply chain issues persist. So Dan, from your perspective and from your work directly with suppliers and data centers over the years, what are the most important components to building trust between suppliers and developers?

Dan Ayley (15:33):

Well, it's interesting, Matt, that you open up straight away with the word trust. I think that is an increasingly important word to be used as I think this year on reflection now. And looking into the market for next year, more than ever for some of the reasons that you've already outlined, it's been a very difficult market, a very busy market, and organizations are looking for repeat business and trust in partnership with the supply chain both up and down.

Matt Pullen (16:08):

Interesting. And maybe we'll come back to that point of trust because I completely agree with you. But interestingly from your conversations, what are the supplier's biggest pain points currently?

Dan Ayley (16:20):

Well, lead times for equipment certainly, but the requirement of our industry for data centers to go fast. Generally, a requirement for fixed price contracts is increasingly difficult in today's market because of the uncertainty over these lead times, and the increases in raw material prices, everything thereafter in the supply chain. As suppliers, we're looking for some certainty. Further down the supply chain, the confidence in orders so that they can commit to the orders that they need to place to meet schedules.

Matt Pullen (17:02):

Interesting because you said another key word there, confidence. So we've got trust and confidence thus far. You also referenced increase in raw material prices. And in fact, we need to talk about inflation. And really importantly, you recently published your Annual Data Center Cost Index for 2022. So what were the most interesting findings, particularly as it relates to challenges presented from the current economic climate, both in terms of inflation, but also picking up on the point you made earlier about lead times?

Dan Ayley (17:36):

I think the fact that it's an annual publication, I think, has given us more challenges this year than it has in previous years. This is the sixth year. But the pressures that the supply chain are feeling, and presumably your business also, all the way up through the supply chain, the cost increases in the 12-month period are significant, and it led us to consider whether we should be publishing a data set on a more regular basis than annually. There's also the consideration of as a global publication, the impact that we're seeing on the foreign exchange market. It's published in US dollars, but the US dollar buys you a considerably different amount of construction on a straight exchange to a pound or a euro today than it did 12 months ago. So it's a really difficult global index to keep as an annual publication at the moment.

Matt Pullen (18:38):

So do you think you might produce it six monthly or quarterly? What's your thinking?

Dan Ayley (18:42):

Well, there was lots of debate actually within the business around having regionalized indices. Clearly, we've got the data to be able to perform that, and we do that within our business, and we share that with our clients in certain regions, but it is a recognized, as you say, publication for the industry globally. We've got to keep it as a global publication with the ability now to share data with our customers regionally on a more frequent basis.

Matt Pullen (19:12):

Your point about exchange rates is fascinating. Because certainly from my seat, I see this issue in that I think the sort of the medium benchmark. At One, we saw London and North Virginia, which is really only fueled by the exchange rate situation because I'm often enviable about the way in which because of the scale of the market et cetera, that the construction costs can be optimized in the US. But I think what was fascinating is at the end of the day what you were saying is that costs have gone up by roughly 20% during 2022. And I'd be curious to see whether you're calling the top of the market from a construction cost point of view and where you see things going over the next couple of years? Because there's a lot of talk about significant inflation in 2023 and '24, but also there's a lot of talk about a lot of that's been baked into price increase this year. So actually, we might not see significant increase over the next couple of years. But I'd just love your view.

Dan Ayley (20:20):

If we'd recorded this last year, there was inflation, it was a busy market, but I think the supply chain was still looking to buy work in a relatively safe environment. Two years since the start of the pandemic, get my dates, but coming out of the pandemic people were buying work. The data center industry was, it was a magnet. Other industries have recovered, all other industries. Generally, in construction, in most markets around the world, it's not just [inaudible 00:20:53], everything's been busy, which has put all that pressure on supply chains, availability of labor. The price point now, the pressures that are on, it's very difficult for the supply chain to buy the work. The supply chain aren't as prepared to buy the risk. The risk of failure in today's market is much higher, and so we're also expecting to see increased amounts of litigation through failures to meet contractual obligations.

Matt Pullen (21:24):

That's really interesting because then that's sort of counter to my view that we might see a leveling off of costs because you might see some cost increases for risk absorption if the current approach is by buyer versus vendor don't adapt. Is that right? Is that the correct interpretation of what you just said?

Dan Ayley (21:46):

The point I'm trying to make is that we need to be very careful what orders are placed and with who and the importance of a contract. And so whilst we talk about partnering, trust, people do fall out. Even marriages go through difficult times, and construction is no different. It's important that we do our due diligence, that we are placing the right orders with the right companies in a safe way, hopefully with trust and considered partnering. We need to make sure we're taking the right precautions in entering into contract because of the pressures that the supply chain are under for access to materials and labor with the increases that we're seeing.

Matt Pullen (22:28):

And all of that, I feel like comes to life when I look at some of the other findings in the report. And I guess I was quite suppose surprised to see that 78% of people polled report in the increase of more than eight weeks in lead times, which, I mean, my view is the lead times have increased much more significantly than eight weeks. And I think that goes entirely to your point where we're looking at contracts that are effectively relatively rigid in terms of penalties relating to delivery on time. And the supply chain is no longer entirely in control, particularly when it's dealing with utility's performance to ensure delivery against contractual requirements. So I was surprised because I thought the report would show that there was a view that those delivery timelines have extended much further. But I guess to your point because it was an annual report, that at the beginning of the year-

Dan Ayley (23:36):

Yeah. It's annual. It's global. And within that 78% that said it's a minimum of eight weeks, 50% would've said it's at least 12, and there'll be another percentage of people that are seeing lead times that are 20 weeks plus. And it is a nice open question which talks to construction lead times as a whole, where clearly we've got MB switch gear, transformers, and the likes still very long, but we're still seeing eight week lead times for standard materials.

Matt Pullen (24:12):

I hope you're feeling pretty optimistic. Certainly from my point of view, I think the industry is working in a more collaborative way. Maybe we are not seeing necessary a seismic shift in terms of contract structure, but I think there's a recognition, particularly if you use the force majeure word that there is far more collaboration in terms of understanding the reasons for delays and coming together to be accommodating of delays, particularly when they're through no fault of the supply chain, and, as I say, are often down to national infrastructure issues, particularly around utilities

Dan Ayley (24:53):

Collaboration, yes. I think the other thing to consider is there are still only a certain number of A teams out there. And Matt, you will want the A teams on your programs at work delivering your projects, as will your industry peer group. And as our industry gets busier, there's more pressure on that same supply chain to have access to those same top teams. And then we have outside pressure from other competing industries, semiconductor, the amount of money that the likes of intel are spending across the US and moving into Europe. Mega scale projects planned in Germany now in semiconductor, putting the pressure that's already on through the electric vehicle and the associated value chain for batteries and the like. They're all competing for the same talent that we want in data centers.

Matt Pullen (25:41):

You've highlighted really important issue, which is the ESG agenda, which is this drive towards data centers being climate neutral by 2030 through the desired eyes of certainly the European Commission. So I mean, to what degree do you see a conflict, in a positive way, but a conflict nonetheless that the industry needs to deliver against this demand? I'm reticent to use exponential, but it has been and arguably could continue to be. But the industry is facing a lot of challenges, whether it be geopolitical or whether it be exactly what we've been talking about in terms of the availability of equipment, the lead times on equipment, how would you see those stresses having a negative impact on the speed at which we can get to climate neutral? There are simple things like stress on utility, the need therefore to maintain diesel generators for resilience, putting off the innovation and the time scales to non-carbon fuels, move to hydrogen, move to fusion, et cetera. What's your view about the conflict that we are in at the moment with our ESG agenda?

Dan Ayley (27:00):

There's a great opportunity for data center businesses to be innovative and do something different. The best option that I can see would be onsite nuclear power, and so like the Rolls-Royce small modular reactor concept, which is probably a good 10 years away from being commercially available, the option for government states to partner with private businesses and enterprise. The likes of data center is what's required to get facilities like that regulated and available. Wouldn't it be great for you to have clean power uninterrupted and available 365, 24/7, no concerns, 30, 40 years? No worries. That power is there. No standby required. 10 years away from any technology like that. And realistically, onsite generation of anything big enough to service a data center, you're looking at regions like the Nordics, places where there's lots of renewable energy capability. But again, it's not going to be onsite, it's going to be near.

Matt Pullen (28:12):

Yeah, with all the legislative issues around providing support to private wire agreements, et cetera. But I got to say, Dan, I'm, excuse the pun, positively glowing at the thought of all of this technology, particularly localized nuclear. Interestingly though, your survey did highlight that 56% don't think the data center sector has a clear and measurable plan to achieve net zero carbon, and I guess it's just because of the pressures we've just been talking about.

Dan Ayley (28:43):

It's not alone as an industry that faces that same challenge. There's a lot more that all industries need to do.

Matt Pullen (28:50):

As an industry veteran, and you started at Turner and Townsend, a extremely high regarded global organization, you started there in 2002. You've been in this industry or associated with the industry for 20 something years. So what do you think the data center industry needs to do to adapt or change their approach for the coming year?

Dan Ayley (29:14):

I'm a big fan of collaboration. I'm a big fan of working with the right partners to achieve shared outcomes and the need to explore alternative delivery models, procurement, and contracting strategies that are fair where we're all playing together to win.

Matt Pullen (29:36):

That theme started with trust, was built on with the addition of confidence, and what you've just said I think is absolute. I think the industry can come together to beat back these headwinds though. I completely agree. So on that theme then, the mood within the industry, top to bottom, I guess, what's the mood in the broader data center industry right now given the challenges that we've discussed that we've tried to see if we can see what the addressing factors are?

Dan Ayley (30:11):

Extremely upbeat. Despite the negative media for around geopolitical environment that we are living in, despite the pressures that are on stock markets, big tech and the like, still absolute confidence in our data center industry growing in all of the primary markets. The secondary markets have had a fantastic year in each of the bigger regions. I think a CBRE publication recently suggested that there'll be 2.5 gigawatts of data center capacity available in the secondary markets of Europe by the end of 2023, the amount that's been scaled out there. We need to work together to weather the storm of the unpredictable market conditions around price and lead times.

Matt Pullen (30:56):

For sure. And it was interesting, your survey returned the result that 71% consider the data center industry to be recession proof, and I think it showed itself to be really resilient. I think your point is that it's a shifting sands. There's still a small community, but as long as they can shift their focus from primary to secondary, back to primary, that the industry is going to really, really stay very, very strong. On that basis, what does the pipeline of work look like within the industry? You talked about the secondary markets. I mean, the scale is much smaller, but I think the point you were making is the aggregate scale though, and at 2.6 gigawatts is pretty much bigger than the FLAP-D markets put together, so there's an organization that operates across 46 countries with 112 offices. I guess it's all about being agile for you guys as you see this industry morph across the world.

Dan Ayley (31:53):

We've had phenomenal growth in all regions. I think clearly one to watch, I'm not sure where it is on your agenda, Matt, but huge amount of growth in places like Africa. So what started in South Africa, growth in East Africa. We've now got lots of data center opportunities and some projects in West Africa. In Asia, the amount of work that we've seen in Indonesia and Jakarta, but that's now moving across into Malaysia, Philippines. It's not just Europe that's going through that kind of primary down into secondary market growth. It really is a global strategy.

Matt Pullen (32:31):

Oh, for sure. And we've talked about it a lot, the fact that deployment of infrastructure in places like Africa skip some of the archaic infrastructure deployments, copper, et cetera. It's got a modern infrastructure which enables a move to the public cloud and use of social media, et cetera, that much easier, so it's no wonder that growth is accelerated. In the core European territory, enterprise outsourcing to the cloud is still hovering at around 20%. There's a huge amount of growth to go, as there is in Asia. I do feel we've seen a bit of a resurgence in activity in the US probably because of just cyclical, forward buying habits by the main companies that drive demand. And we're just going through an interesting uptick in forward buying. Also, some shift in technology. If there's one thing that the data center industry needs to keep top of mind for the coming year, what is it in your opinion?

Dan Ayley (33:36):

Well, I think it's the common things that we've been through. It's having some confidence in your supply chain, in your pipeline. Having having confidence in your pipeline, locking in your teams, hopefully in a collaborative, trusting environment to secure your teams to deliver against your objectives for the year because there's a lot of competition out there.

Matt Pullen (33:57):

So Dan, I'm just going to go slightly off script here because in a number of the other episodes we've talked about the skills gap. I think that mental health issues also are coming to bear because of the stress of COVID. And even though we're on the other side of it, arguably there's still some pent up issues. So your organization, bearing in mind how global you are, how are you addressing the skills gap in terms of what you will offer your employees in terms of how they work? And also, what are your thoughts on the mental health issue and how you address that?

Dan Ayley (34:36):

Now more than ever, when we're looking to attract the right people into our business, from graduate level all the way through to senior professionals and project leaders, people are more aware of their mental health and their wellbeing, and it's important that we're offering them the right choices and availability and supporting them in their work. Some people are happy and enjoying the ability to be back out traveling. Some people are enjoying being back in their office and collaborating with industry peers in the office. But I think there's also the reality that there are people in our industry that have chosen otherwise. Some people are choosing that they don't want to be traveling anymore, which is putting further pressure on the availability of industry professionals. The strain of working on fast paced projects, up against tight deadlines, projects with commercial pressures, and the risk of burnout, I think we are certainly seeing instances of people choosing to take time out from our data center industry and do something else.

Matt Pullen (35:41):

It's interesting, isn't it, but I'm so glad you're alive to it. You've also got a majority owner who knows a thing or two about the workplace. And the mere fact that you're alive to it means that I'm sure you're finding opportunities to effectively accommodate people's issues and to provide them with remote working, provide them with the ability to be in a team where the load is shared, as you say. So some members in the team may travel, others don't. I think what you're demonstrating is that as an employer, just alive to it. If you're alive to it, then solutions will emerge.

Dan Ayley (36:20):

Well, I think we all learn through a pandemic of how we use technology to be able to continue to meet requirements working from home, collaborating. The technology we use today to make this recording, it's brilliant. When you get into construction, when you've got a tight schedule, we do need people on site. So it's finding the right balance, working with our teams, aligning people to the right tasks at the right time.

Matt Pullen (36:48):

Dan, thank you because I couldn't agree more. During the pandemic, I think both you and I saw the stresses and strains of, for example, putting three or 400 construction workers together on a single site. The stress that put on the individuals, the worry it caused the families, and I think we mustn't come out of the pandemic forgetting the stresses and strains we put on people and the issues that may have caused, but also thinking about the future and how we can provide better environments for people, construction, through operations, through corporate. So I really appreciate you responding to the questions because it's clear they're front of mind for you. Thank you. So Dan Ayley, thank you so much. Thank you for bringing all of your experience. Thank you for talking about your Global Data Center Cost Index, which was published just in the middle of last month. I think it's great that you're supplying the industry with that kind of data, and I really appreciate having had the opportunity to talk to you about the supply chain. Thank you so much.

Dan Ayley (37:58):

Thank you.

Matt Pullen (38:04):

Thanks again to Andy and Dan for joining me. A really important and insightful discussion and lots to think about. We'd love to hear your thoughts. Remember to like, share, and comment, and tag us at CyrusOne with the hashtag CyrusOneConnects. I've been your host, Matt Pullen. Thanks again and take care.