Euronext’s relocation from Basildon to its new datacenter in Bergamo, Italy, was met with supply chain disruption that affected hardware delivery and lengthened lead times from manufacturers, sources tell WatersTechnology.

The global shortage of semiconductors used to power everything from computers and cars to datacenters means that in the run-up to the move, Euronext and its client firms ordering hardware for the new site have been waiting for three, six, or sometimes up to 12 months for equipment to be delivered, as opposed to a more normal three- to six-week turnaround.

“That was probably the biggest risk and the scariest moment in this project,” says Jeff Mezger, head of product management at Transaction Network Services (TNS), a provider of data communication networks and one of the third parties assisting firms with the move.

The chip shortages have been driven by the growing demand for materials across different sectors, coupled with shipping disruptions and staff shortages induced by the Covid-19 pandemic. Deloitte predicts the chip shortages will continue well into 2022 and cause rollover disruption to lead times and global product development in 2023.

As part of the datacenter move, client firms and third-party vendors connecting to Euronext must have new hardware components ordered, delivered, and installed at the new site, the Aruba Global Cloud Data Center IT3 in Bergamo, on time for the June 6 go-live date. The required IT parts include servers, switches, routers, and—most importantly—the semiconductor chips used to build the hardware components.

“It always came down to the chip in the hardware, which was either difficult to acquire, or in the process of being built on the back of high demand,” says Georges Lauchard, group COO and chief information officer at Euronext.

Mezger says the supply-chain backlog for semiconductors has worsened significantly over time and that lead times are getting longer. “Last autumn, it was on a three- to six-month timeframe, and just this month, some of these vendors are now saying a year-plus, so it’s getting worse, not better, in terms of the times,” he adds.

The heart of the problem, Mezger says, is that network suppliers—including Cisco, Arista Networks, and Juniper Networks—were having difficulty sourcing the components, such as chips, needed to build the hardware for the datacenter move. This was further exacerbated by pandemic-related shipping disruptions and factories struggling to maintain production lines due to worker absences. Making matters worse, Lauchard says, is the fact that chips have complex production lines.

“It’s not like one country creates the chips. You have to have the silicon wafer, which then goes to another country [where the chip is assembled], then in another country you might add another component and when you send it to the final location, they perform the final test and checks. So, there’s a fairly complex set of steps that suppliers have to manage,” Lauchard says.

Chips can be sourced from different parts of the world, but the vast majority come from Asia, where countries like China and Taiwan have adopted strict “zero Covid” policies, making it harder to move materials in and out of the regions. In January, US President Joe Biden told Congress that 75% of computer chip production takes place in East Asia and 90% of the most advanced chips are made in Taiwan. A mere 10% are produced in the US.

Mezger says to be ready for the June 6 go-live date, clients will need to have connectivity to Euronext’s matching engines and its market data, and ensure that their order routing access is operating. Additionally, all market data from other third-party trading firms needs to be available from the Bergamo site.

One head of product management at a broker-dealer that has procured its own hardware for the Euronext migration, says they have not experienced significant issues obtaining tech for the move. They say they have ordered four circuits and the hardware it needs. The broker-dealer will also need about two racks within the Bergamo datacenter. The product management head says the tech hasn’t arrived, but they believe it will come before the datacenter goes live.

“We want everything live, running, and tested with at least a four-week margin; that would be my sort of minimum. And everything will arrive several months before it goes live,” they say.

The source adds that if they do run into issues when it comes to chip shortages, they will have to tap into their existing stock.

“We always have a couple of switches, for example, in our in our lab in London, so we’d be able to ship from there,” they say. “It’s not the preference, but that’s what we would do if there were any supply chain issues.”

Raising the alarm early

Euronext’s Lauchard says the exchange alerted client firms and vendors about the long lead times and supply-chain issues early in the migration project. The exchange first published its intentions to migrate its primary datacenter, which includes all of Euronext’s historical market infrastructure, in October 2020, in a note to shareholders. The migration so far does not include Borsa Italiana, which it acquired in April 2021. Lauchard, who joined the exchange group over two years ago, headed up the decision and the implementation of the datacenter move.

“When we started the project, the first communication we gave to clients was, ‘We all know there is a supply-chain challenge; please make sure you take that into consideration and we recommend that you order your key components as quickly as possible.’ And we did the same thing,” says Lauchard.

In cases where certain materials weren’t available, Lauchard says Euronext and client firms had to negotiate with suppliers which components to prioritize, or alternatively, had to opt for different suppliers and rework their configurations. To meet the June deadline, the exchange also had to tap into its stockpile of backup materials, which are usually kept as replacements for when tech issues or hardware failures occur.

“Is it a normal way of managing a supply chain? This has been the new normal for the past 18 months,” he says.

Mezger says he and TNS are also monitoring the situation in Ukraine, as the Russian invasion unfolds, to see if the war could impact tech supply chains by disrupting the movement of equipment, or people building or shipping the technology.

“That risk is on our radar going forward. We’ll put a contingency in place and plan around it if needed, but hopefully there will be no impact,” he says.

Despite challenges in obtaining the hardware, he says Euronext and the vast majority of its clients are on track to meet the June 6 go-live date. He says this is because TNS kick-started the project soon after the decision was made, which allowed enough time to cope with delays or procurement issues.

As part of the datacenter move, Euronext had to design its datacenter requirements for its clients and procure the necessary equipment. And at the end of last year, it completed the implementation of its infrastructure locally, including setting up networks, co-location, servers, racks, and microwave capabilities. The exchange group is now implementing its software and testing it on the different Euronext platforms.

Lauchard says clients are at the same stage of readiness in terms of tech procurement, installation and testing.

The end-to-end dress rehearsal with clients for the new datacenter will take place on April 23. Lauchard says he expects 99.9% of clients to be ready by the April deadline, noting that one “small” client has indicated they may not be ready.

Mezger says that the official migration will occur as a “big bang” switchover, meaning the old sites will be shut down at the end of business on the Friday, June 4, in Basildon and will go live in Bergamo the following Monday, June 6.