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PC vendors face difficult choices warns Gartner
PC vendors face a stark choice between
overhauling their business and getting
out of the ‘overpenetrated’ PC market
altogether, warns Gartner in a new
report,
Market Trends: PC Business
Leaders Need to Overhaul Their Business
or Exit the Market by 2020
.
The research organisation
predicts that a continuing
decline in the installed base
of PCs (desktops, notebooks,
ultramobiles), from 1,485
million devices worldwide in
2015 to 1,333 million devices
by 2019, will reduce profits and
force vendors to act.
Tracy Tsai, research vice
president at Gartner, said: “The
PC business model as we have
traditionally known it is broken.
The top five mobile PC vendors
have gained 11% market share over the
past five years — from 65% in 2011 to
76% in the first half of 2016; but this has
come at the expense of profitable revenue.
While this does not mean that the PC
market is finished, the installed base of
PCs will continue to decline over the next
five years, with a continuing erosion of PC
vendors’ revenue and profit.”
She argues that the traditional way
of gaining shipment market share by
competing on price to stimulate demand
won’t work due to changing market
dynamics: users are replacing PCs less
frequently; business applications and
storage are moving into the cloud and are
less reliant on PC performance; and price
and specification are no longer enough to
make a user upgrade their PC.
In the report Gartner identifies four
strategies that PC vendors could adopt in
light of these developments:
1
Current Products and Current
Business Model
The most conservative approach is to
continue with the current business model
and PC technology. This would require
high volumes to generate enough cash
flow to cover the cost of business, and, in
a declining market, vendor consolidation
would be inevitable.
Ms Tsai says that to succeed with this
approach vendors would still need to
make significant changes. “PC vendors
would need to streamline operations,
shift their focus away from gaining share
and increase the sales proportion of
mid-tier and high-end products to improve
operating profits for long-term business
sustainability.”
She adds: “Another key factor that
would need to change is the sales
compensation scheme. PC vendors need
incentives to drive their internal sales
teams and channel partners to move away
from a focus on volume and market share
to margins and profitability. PC vendors
will also need to shift focus away from the
wants of distributor and reseller customers
to the needs of users.”
2
Current Products and New Business
Model
The next option is to form a new team
to experiment with new business and
revenue models, such as PC-as-a-service.
For example, a vendor could partner with
a digital education content publisher,
bundling its two-in-one devices with digital
content on a subscription basis – the PC
is free to users and is subsidised by the
publisher. This approach would involve
greater business agility, risk taking and
acceptance of failure.
3
New Products With Current Business
Model
The third alternative is to develop new
product offerings and new market
opportunities in a more conservative way
using the existing model, for example by
making PCs smarter in terms of sensing,
speech, emotion and touch; developing
new products for the connected home;
or creating products for specific vertical
markets.
4
New Products With New Business
Model
The most radical strategy mooted by
Gartner is to establish a new business unit
to run operations in a completely different
way, with different resources, a different
revenue model and a new product line
based on new technology. An example
might be personal assistant robots where
a PC serves as an ‘information butler’ – a
combination of chatbot and voice-activated
virtual personal assistant – with revenue
coming from developers and third-party
content and service providers in retail,
healthcare, education, video or music.
Adapt or move on
Tracy Tsai,
Research Vice
President,
Gartner
OS of their choice, manufacturers have
been producing professional devices
pre-downgraded to Windows 7. That
option no longer exists. The requirement
for manufacturers to supply devices with
Windows 10 Professional will encourage
a lot of businesses to accelerate their
migration from Windows 7 to Windows 10.
TR
: What can resellers do to generate
additional business from PC
sales?
SH:
I will always push the ‘attach’ message
– what else can be attached to that
hardware? It’s a message we drive hard
internally with our sales teams, because
in a world of ever greater competition,
customers are always looking for the best
and strongest deal. Every reseller is trying
to maximise margin – margin’s our key
word – and margin really can be delivered
via attachment.
I only have to look at my desk: I have a
notebook computer and attached to that
I have a keyboard; I have a mouse; I have
a second monitor; I have Microsoft Office;
I have bags; I have USB sticks, dongles,
cables and adapters. My desk is covered in
bits and pieces that I plug into my laptop.
Do I buy all of these at the point I buy my
notebook? No. I have accumulated them
over time.
A reseller can maximise margin by
catching all these attachments when they
sell the notebook. The utopia is to offer
all possible options and attachments at
that point because, in my opinion, that is
when the customer is most likely to buy.
If I am spending £500 on a notebook, I
won’t think twice about spending £15 on a
bag to put it in. My big message is ‘attach,
attach, attach’.
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