Only thirty years ago it would have been hard to conceive of an office without typewriters, and just as hard to imagine the famous Wintel entreaty of a computer on every desktop.
From ancient grudge break to new mutiny; these days the desks might not even have people assigned to them, let alone desktop computers.
Its all part of the huge innovation in how we work which has been wrought by smart mobile utility. And for companies who cut their cloth selling desktop computers and traditional notebooks, this is an age of uncomfortable disruption as consumers – business and individual – pivot on personal computing preferences.
The decline in the PC market is as vicious as any market disruption of the modern era and would give music and newspapers a run their money.
Beneath it all, the inevitable flourishing of innovation. Money hasn’t left the market, it’s just chasing new opportunities.
But first to the numbers.
The headlines couldn’t be worse. The core PC market in Australia is in sharp reverse. According to IDC analyst Amy Cheah, “In the second quarter this year the market declined by 21 per cent year on year.”
Worse still, Q2 is historically a very strong quarter for PC sales suggesting the overall result for the year is unlikely to be clawed back. “And there was also a sequential drop from Q1,” notes Cheah
She says several factors are at play and not simply cannibalisation of the PC market by tablets. “Consumer confidence is very soft and with the election coming up people are not buying due to the uncertainty that creates.”
The consumer market has been hit hardest, according to IDC’s figures and the SMB market is down 19 per cent year on year as the lower end of the market extends the time in between system replacements.
But even within a declining market there are nuggets of value. In the corporate market for instance, IDC says sales are flat – which is a creditable result. “It is a consistent run rate and it shows that they are still buying and there is a constant need to replace systems,” says Cheah.
For its part Gartner’s research confirms IDC’s view.
“It will take a few more years for the installed base to get to a point we will eventually reach a core number. But once we reach that point numbers will stabilize. For now though we are still at that point in the cycle where many PCs in the installed base are being replaced by tablets or even smart phones.” according to Gartner analyst Lillian Tay. “ That is the whole structural change of the PC market.”
Adios, standard operating environment
“Five years ago there were not many choices out there for buyers. PCs were basically the general purpose machine” says Tay, but all that has changed in recent years.
These days organisations are much more selective about the types of machines they give to their employees, based on their work needs.
A spokeswoman for Ingram Micro, Australia’s biggest distributor told CRN, “Mostly that choice is still being driven by the applications that end-users need and want to run.” Even though more and more applications are being “web-enabled” and adoption of cloud applications is increasing, for many that still means a desktop or laptop running Windows, she says.
Ingram’s view is that with the growth in Ultra books, power consumption, weight and “connectibility” are all important considerations influencing the choice of what to buy. And says the spokeswoman, for large corporates, total cost is obviously still important although, interestingly, less so that before. “With the drop in prices it’s perhaps less critical than it used to be.”
According to IDC’s Cheah, “It depends on the role of the user. If they are content creators then a desktop may be a better option. If they are always on the go and they need to be always connected then tablets would be more suitable.”
Gartner’s Tay says the PC has moved away from being a general purpose machine to having a specific usage. Gartner’s recommendation to vendors is that vendors have to take the time to understand the use cases across the client site. “Is it graphics for heavy editing, or storage,?”
“If the employees are desk bound and the productivity apps are based on sitting at a desk all the time the you want to be able to get the cheapest PC. If they are a heavy-duty user involved in serious content creation they may need workstation capabilities to do their job.”
But once productivity is based on their mobility that opens up a whole world of new choices for the buyers, says Tay.
“Will it be a traditional notebook or an Ultra mobile with high mobility but still with full windows based functionality. Or will a smartphone or tablet suffice.“
This is the kind of evaluation happening in companies all the time as they segment their users to figure out which device is best.
VR Rajkumar, national reseller channel manager, Intel Australia and New Zealand tells CRN , that when purchasing a new device, the biggest consideration for customers is how they’ll use it. “Do they need the full performance of a PC with multitasking capabilities? Is compatibility with existing PC applications a key factor? Will they be doing significant amounts of video or graphics processing? If so, a desktop or notebook will be most suitable.
Often, he says, the decision comes down to whether they want to be mobile, or simply what their preference is. “Do they hot desk? Telecommute? Do they visit client or customer offices on a regular basis? In that case it will be important for them to use a mobile device. If not, they may prefer a desktop PC.”
“There is definitely still a market for desktop PCs among users who prefer the experience of a large screen and detached keyboard although both of these things can be achieved by docking a notebook into a workstation. “
On the other hand tablets are more suitable for someone who wants a thin and lightweight touch device and for people who are more interested in consuming content than creating it.
Alternatively they may also choose a tablet simply because they want access to a particular application ecosystem or just want a simple user interface.
Dell’s Jeff Morris, director - end user computing APJ says that in many of the interactions Dell has with its clients they discovered that customers are not always 100 per cent sure what choices they should be making in terms of what devices their user should deploy.
The company recently put out a white paper addressing this very question. “Our recommendation is to understand your workforce and classify them into user categories. For example a worker who process orders would be a task worker versus a sales person visiting customer who would be a mobile warrior.”
Once users are classified you next have to determine the types of applications they use and the kinds of devices they interact with such as printers, web cameras and card readers. “Then you can look at how you deliver the content to the user and to what device.”
“By taking this approach instead of everyone getting the same device you can optimise how to deliver applications and provide the right device for the user to access that information from.”
Rajkumar says, “Go back five years and most large enterprises were predominantly filled with desktops, but now hot desking, telecommuting and the BYOD trend have changed that considerably.”
He argues that instead of trying to segment the market by size and prescribe suitable PCs based on that, resellers should look at the job function of the majority of people within the organisation. “With recent innovation in form factors – devices are now considerably lighter and thinner than a few years ago – as well as a huge increase in battery life, and this presents a strong argument for these businesses to upgrade. “
He also recommends that resellers aim to gain an insight into the organisational policies of their customers, and look at how these could impact purchasing decisions. “Do they hot desk? Do they have a great number of staff who work from home or a regional office? If not, they may be more inclined to purchase desktop PCs, with a focus on supporting legacy systems.”
It’s only once you’ve worked out how they are using their technology that you can offer a suitable solution Rajkumar says. “Resellers need to be prepared to be agile and offer a range of solutions to meet their needs – particularly since they may not initially know exactly what it is that they want. They should go in with strong knowledge of who they are dealing with, what interests them and what is (and is not) important to their business. “
There is a strong argument to make that many smaller organisations may not realise that old technology is in fact costing them money. “Old technology can make businesses less productive and the associated maintenance costs are often very high. You need to show them the ROI they will get from refreshing their PCs.”
Ingram’s spokeswoman adds, “The ability to manage and secure those devices is also critical for the enterprise of course.
Enterprise vs SMB
The industry leaders CRN spoke to are also seeing clear distinctions between the thinking at the high and low end of the market.
Enterprises tend to have fixed refresh cycles, says Rajkumar “Resellers need to make the most of that time and don’t have a lot of opportunity to sell outside those cycles.“
He contrasts that approach with small businesses where decisions are often more spontaneous. “There is a big opportunity for the channel with 1.6 million SMBs in Australia; with new technology constantly coming into market and with a great variety of devices available, the choice is huge.”
“The needs of small and large businesses vary considerably. Large enterprises generally have a clear brief of what they are looking to purchase – so it’s a matter of meeting that brief with a compelling, cost effective solution.”
“Resellers should be in touch with customers regularly, not just when the refresh cycle comes around. It’s important to make sure customers are aware of the technology available to them, as well as what’s coming, so they come to you when it is time to upgrade. Meanwhile, small businesses may not always know exactly what they’re looking for so be prepared to work with them to understand their needs.”
Large or small, Rajkumar says it is also important to keep on top of the refresh cycle. Older PCs are often less secure, reduce the productivity of a business and cost more to maintain.
Intel’s research indicates for instance that older laptops can cost businesses over $US1,700 more per PC in maintenance and lost productivity than new ones.
“BYOD is certainly a bigger factor in the SMB market,” according to the Ingram spokeswoman. “Large corporates seem more cautious about the variety of devices that they allow inside the corporate firewall – whereas SMB is more open.“
Of course this may also explain why security is increasingly a growth segment for SMBs. Research companies like IDC for instance predict that in the SMB space security software is likely to grow at double the rate of growth across the category as a whole.
“So we’re seeing a broader selection of devices in the SMB market that we see in the enterprise market,” the spokeswoman says.
Ingram also believes desktop virtualisation in the enterprise will provide opportunities. “Having seen ROI from server virtualisation, enterprises are looking to extend virtualisation onto the desktop too. This will be slower in the SMB segment we think. It’s a little early to say how that might affect enterprises with respect to their choice of end-user devices.”
Thank god for schoolies
One market everyone agrees is holding up strongly – and is indeed proving robust – is education.
Ahmmad Issa, national commercial manager for Synnex told CRN, “We are seeing a spike in education and government. ”Desktops are doing extremely well for us. We are doing a lot of projects in the education and government side.”
According to Kevin Yap, 4P product marketing manager at Lenovo, “We are rolling into an education buying cycle. This is when both public and private education are buying. A swag of those machines are mobile or notebook devices and there is a lot of consideration for tablet type products on that space as well.”
Indeed Yap says demand for tablets in the education market is running at two to three times that of the SME space.
“We are heavily betting that in the education space there is a greater uptake of Windows eight tablet devices relative to android and iOS. We have bolstered the range with the inclusion of out Helix product It’s a convertible where you can detach the screen as a tablet.”
Even though these are twice the price of the conventional slate tablet devices they are outselling them in education, he says.
According to Yap, only three years ago product preference in the education market was driven by the simple issue of what the IT manager or the department wanted to support – it was heavily geared towards Windows and standard devices and standard operating systems.
“The growth of BYOD has started to change that and we see that as a growing trend.”
Read on to learn about the opportunities with hybrid and ultra models
Hybrids
The popularity of Lenovo’s Helix is consistent with feedback CRN received from others in the market who pointed to strong interest and demand in hybrids and ultra mobile devices.
IDC’s Chead told CRN, “There are going to be more options available in the market shortly. Vendors are getting ready to release them at the end of Q3 to coincide with Intel’s new release which has more energy consumption technology. That will help with the battery life of all these new convertibles.”
And that is a big issue for a lot of buyers says Synnex’s Issa.” Battery life is one thing that people really are talking about and the heat of the battery is another aspect of it as well. We see that as a big driver.”
With Intel’s 4th generation of processors delivering an average of 50 per cent more battery life (up to 9 hours) - the largest battery life increase in Intel’s history - it’s easier than ever to stay mobile says Intel’s Rajkumar.
“These hybrids are also tablets as you can detach the screen from the key board. These innovations will help to drive innovation in the PC market and the tablet market. “
For its part Dell’s Morris says, “We are also seeing the further emergence of converged devices such as Hybrids.” And he gives the example of Dell’s XPS 12 and upcoming XPS 11, in the workplace. “As organisations budgets are reducing and the end user are demanding a touch device, hybrids allow IT to provide the user with the power of a laptop computer and the convenience of a tablet in one device.”
The outcome is a win/win. User needs are met and the number devices IT has to deploy and manage is reduced.
“More than ever before, resellers have a great opportunity to sell tablets,” says Intel’s Rajkumar. “Intel-based tablets are available with full versions of Windows and are often backwards compatible with any Windows applications used in the organisation.”
With Intel-based Windows and Android tablet devices on the market, users have choice. And they are still getting the power, performance and security they need he says. “They also have the ability to have the same operating system across a number of devices, which presents a great opportunity to offer a total solution to SMBs. “
But users no longer need to make this choice if they don’t want to, because the wave of 2 in 1 devices hitting the market gives them the best of both worlds. “These devices combine the responsiveness and performance of a notebook with the mobility of a tablet. Often they operate as a traditional clamshell notebook and then flip, swivel or slide to transform into a tablet.”
Users get the advantage of strong security, ‘instant on’ and a form factor that fits their style and needs according to Rajkumar.
“IT budgets are tight so the dollars to refresh the PC fleet and provide a tablet is not there,“ says Morris. “This means many IT professionals are looking for a platform that provides the customer with a tablet experience when they want to consume information but have the performance of a notebook when they need to be productive.“
Ultra market
The Ultra mobile market is also proving to be something of a boon, according to Ingram Micro. The company believes the Ultra book market is maturing, with a range of interesting and innovative multi-form-factor devices – like notebooks that convert to tablets, says the spokeswoman.
“This and the increasing number of touch-enabled notebooks will create more satisfying “multi-use” devices and we think will drive adoption. The introduction of Ultra books based on Intel’s Haswell chips together with new Ultra book features like WiDi (wireless display) will also drive increased adoption in the enterprise and SMB markets – as well as for power home users. “ she says.
Gartner told CRN that while the market will continue to see declines on desktops and notebooks small and emerging form factor for Ultra mobile is proving popular “It could be a full windows based machine but it could also be form factors that are evolving like the two in one. It could be convertibles, hybrids, or it could be chrome books. These are the innovations and there are a lot of excitement in this ultra mobile space.”
She says however that as it is coming from a small base the growth is not sufficient to lift the whole device market.
According to Tay there are a number of factors driving the ultra book market. “Number one is of course the traditional notebook replacement where and consumers and enterprises are considering going with ultra mobiles instead of traditional notebooks.
She says the new form factors provide flexibility, especially the two in ones where you can use it as a tablet with touch as well as or you can dock it can use it more as a fully fledged traditional PC when you want it.
“These are the uses cases which are driving consumption.”
And she credits the importance of Intel Haswell . “Intel is targeting a price $399 US and this will create some excitement for the consumers especially for the end of the year.”
“Ultra books represent s 10 and 20 percent of our range ,” says Lenono’s Yap. “The Ultra book brand will grow. The whole thin and light thing is the way of the future. It already represents 20 per cent of the total business.”
The XP impetus
The other big driver highlighted by the industry leaders is the fact that Windows XP is coming to the end of its shelf life – the point at which Microsoft will stop supporting the product. “XP support will end in Q1 or Q2 next year that will drive some of the refresh decisions,” says Gartner’s Tay.
“There are still a significant number of customers sitting on XP.’ Says Yap.“ That’s just par for the course With the function of time the commercial customers will move across.” He also noted that Haswell products will not support XP drivers “That will certainly force the hand of customers.”
“Historically in transition times like this we see an uptick in sales. It takes time to build applications from XP onto 7,” according to Yap.
“So this is a key juncture in the market.”
Dell’s Morris says, “more and more PC platforms become touch enabled its important consideration to factor when moving from XP. As touch technology increases in volume the cost declines and in some platforms becomes standard. So when considering your next desktop refresh it’s important to take these items into consideration.”
Ingram’s spokeswoman says, “Larger companies have always been slow to roll out new operating system platforms. It’s still early days. Resellers are starting to focus on educating their customers about the benefits of Windows 8.
“We are seeing interest in Windows 8, and with the Windows 8.1 update coming, and with support for Windows XP ending early in 2014, we expect this interest to continue to grow. The increasing availability and affordability of touch-enabled notebooks, and increasing familiarity with Windows 8 through use at home will also be a factor in driving growth in the enterprise.”
IDC does not believe that Windows 8 will ramp up very fast in the next 12 months in the corporate market. “They will take their time to test apps – most have just migrated to Win 7 so it will take at least two more years for everything to be tested. “
“The price of touch versus non touch still a significant issue. $50 per device is a lot across hundred machine. If the software is not touch enabled why would I want to migrate to Win8?”
An era of innovation
The numbers get all the headlines. So swift has been the decline in the desktop market that the numbers obfuscate a far more important story. We are living through an era of huge innovation in the PC category: from device form factors to how we interact with our devices.
According to V.R. Rajkumar, national reseller channel manager, Intel Australia and New Zealand, “In the next twelve months, we will see user demand for touch capabilities increase. Notebooks and all-in-one devices have already joined tablets in the touch category, but we expect touch to become the rule rather than the exception.”
Touch is just one example of the perceptual computing capabilities that we’ll see more of on Intel platforms, according to Rajkumar. He lists the others as speech, close ranges gestures, finger level tracking and other technologies. “These are all designed to make personal computing more natural and intuitive.”
He says security also continues to be a major concern for businesses big and small. “Hardware-assisted-security – where security features are embedded in the hardware of Intel processors – is today enhancing systems so they run more securely. “
All this technology will be available on a wide variety of devices according to Rajkumar. ”Today we see desktop, notebook, Ultra book, all-in-ones and tablet PCs on the market, as well as a new wave of 2 in 1 devices. These devices combine the benefits of a laptop and a tablet and come in many different form factors.”
The Next Unit of Computing, or NUC, is another example of how the PC category is evolving, he says. “The NUC is a customizable engine that can be used in a wide variety of ways: for example, to drive digital signage, power multiple displays or simply offer an intelligent computing solution for small spaces.
“With an Intel Core i5 vPro model available, it’s a great option for businesses.”
Rajkumar says the choice of devices on the market, and the ability to get the best of both worlds – the portability and interface of a tablet with the power and multitasking capabilities of a notebook – will be most appealing to consumers.
Read on to find out why PC sales are set for comeback in 2014
Analyst predicts five percent growth
Global PC sales have tanked for two years, but a new report suggests that the downturn has hit rock bottom, and desktop and notebook sales are ready to rebound. Financial analyst Gus Richard with Piper Jaffray is forecasting a boost in PC sales in 2014 by a modest 5 percent.
As part of a report on Intel’s outlook, Richard said desktop and notebook PC sales in 2014 will grow thanks to the sun-setting of Windows XP and the release of Windows 8.1. He also expects Intel’s upcoming Bay Trail microprocessor, used in hybrid notebooks and tablets, to drive sales.
Overall computer shipments had plunged roughly 11 percent in the second quarter of 2013, after dropping 14 percent the quarter before that, according to IDC. Piper Jaffray estimated that 30 percent (or 500 million PCs) of the 1.2 billion PCs in use today still run on Windows XP. With Windows XP support ending in April 2014 about a third to half of PCs will be refreshed, Richard said. That puts the number of XP upgrades between 150 million to 250 million PCs, Piper Jaffray estimates.
“This is more of a dead-cat bounce than a fundamental PC market change,” Richard said. He said sales in desktops and notebooks will continue to be cannibalized by a booming market for tablets and smartphones, and that PC sales will grow in 2014 and likely be flat for the next three to five years as older XP systems are put out to pasture.
Piper Jaffray raised its price target on Intel’s stock to $22 from $20 while upgrading its recommendation to “neutral” from “underweight.” Piper Jaffray forecasts Intel’s revenue in 2014 should rise to $54.2 billion from a projected $52.9 billion in 2013.
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