Future forming

The desktop PC market moves in two directions: dedicated business machines and home entertainment devices.

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By  Andy Tillett Published  April 25, 2005

Present form|~|futurefuturisticpic200.gif|~|Part of LG's vision for the home of the future|~|The PC market is evolving. Desktops are facing a tough time in the marketplace, but are they up against outright extinction? Sales of laptops are soaring and the desktop PC needs to adapt in order to survive. Home entertainment is the buzz word for desktop PC vendors focused on the consumer sector. Channel Middle East takes a look at the factors determining the future of the desktop and the implications for the current Middle East channel landscape. Today desktop vendors work on razor thin margins. The role and functionality of the PC has changed dramatically in the past ten years, and the market has clearly split into two camps: corporate and consumer. Vendors have in many cases split their computing divisions to achieve clearer focus on each of these separate markets. Fujitsu Siemens is one such vendor. It established two separate arms, creating a consumer PC group last year to go alongside its traditional desktop operation. Computing giant FIC established a home entertainment division nearly two years ago. The result of these consumer concentrated divisions is the development of a new type of PC, targeted specifically at the home entertainment market. This further defines two separate paths for the PC, and leads vendors to establish a new channel, targeting end-users from an entertainment perspective. The top subject for desktop vendors is form. Size and shape are the two issues on everybody’s lips when it comes to the corporate and consumer market areas. In the business sector users want better and faster computing, they want access to IT any place and at any time. They want to be mobile and wireless, yet networked and on the internet. The most common and popular solution to this is a laptop. A notebook PC offers users more freedom and takes up far less space. This market has grown considerably, sparked by a drop in unit price. “Since notebooks dropped below the US$1,000 price point, people are far more likely to go for a mobile device. Work patterns are changing; people are more mobile in terms of working at home or on the road,” says Susanne Lewitzki, product marketing manager at Fujitsu Siemens Computers, Middle East. The business PC market is predicted to continue evolving along a familiar path. The trend will follow monitors and mobile phones in becoming thinner, smaller and more portable. Solutions, cross-selling and services are the areas resellers must concentrate on to make profit. “Resellers have to focus on adding value to serviceability; how easily a PC can be upgraded in terms of manageability. Selling to a corporate IT administrator the benefits of manageability features, or very importantly, security, which is a must have these days, is the most important thing,” says Lewitzki. ||**||Mobility issues |~|futuremin200.gif|~|Stephen Min, general manager of the notebooks and laptops division at LG MEA |~|Consumer users are increasingly opting for the accessibility and portability of notebooks over traditional PCs. Consumer computing tends to be more demanding on PCs and this had been a factor holding consumers back from embracing the laptop form factor. The introduction of Intel Centrino technology on the laptop has greatly increased its scope and ability, and the gap in power between notebooks and desktops has decreased. This makes a notebook a viable alternative to the desktop. “The launch of Centrino mobile technologies has enabled the introduction of sleeker, lighter notebooks with substantial performance and longer battery life… Mobility is set to grow through the development of infrastructure, with breakthrough wireless technology, such as WIMAX,” explains Nass Nauthoa, reseller channel manager at Intel GCC. One of the major benefits driving the popularity of laptops is undoubtedly wireless internet access. Communicating without wires makes a laptop truly ubiquitous and even more attractive to end-users. Although this may be very popular with consumers, wireless technology in its present state it is by no means foolproof, and can present a security risk, something businesses can ill afford. At present this stops many businesses from establishing wireless networks. The market for virus prevention and security is presently huge, and as a more comprehensive solution for wireless systems is developed, this will see a surge in demand in the channel, as well as potential notebook sales, as more wireless systems are implemented. Speculation over the desktop’s future has been increasingly negative since the introduction of the laptop. Views vary, but concerns reach to the very top. Stephen Min, general manager of the notebooks and laptops division at LG MEA claims: “Everybody wants the functionality of a notebook over a desktop. Eventually there will only be a market for notebooks. It will be the end of the desktop.” This is a very contentious opinion, and there is still a very strong argument for the role of the desktop in the home or office. Smaller units, called small form factor (SFF) designs, are growing in popularity. Thin clients in particular are easily adapted to smaller form factors, and more and more companies are using them in their offices. “I don’t think that companies trust their employees enough to give them all laptops. They don’t want employees taking their computers home with them every night, they don’t want their property being messed around with and possibly misused outside of work,” says Samer Atassi, sales manager at DTK Computers Dubai. ||**||The future is small |~|futuremilko200.gif|~|Milko Van Duijl, vice president of IBM’s PC division|~|The desktop is fighting back, and its solution for the future is small. To keep ahead of laptops they have to become smaller as well as beating them in specification: speed, power and capability in order to remain an attractive option. However, the technology market works on a push-pull basis. Deciding when and how much to develop technology in relation to the consumer is a very difficult move to make, as Milko Van Duijl, vice president of IBM’s personal computing division points out. “Vendors will always develop [technology] a couple of years ahead. If you become out of synch — if you become a technology push company and you’re not listening to what the market is pulling — then you risk disconnecting and wasting your money,” he says. The desktop form factor is on the brink of a make-or-break situation. It needs to evolve to survive. Intel has developed and launched new components based on BTX technology, which it is now bringing to the mass market in the hope of making the SFF more accessible. “BTX enables platforms to run quieter, have unique scalable system form factors and meet lower price points that market segments such as the digital home and office demand. BTX’s key benefits address these requirements and are able to achieve those using standard components at reduced cost structure compared to custom solutions or its predecessor platform, ATX,” explains Nauthoa at Intel. This technology is still in its fledgling stages in the marketplace; it has been launched and distributed, but is by no means commonly available yet. Many people, even those in the industry, are simply not aware of it. Intel predicts BTX to be widely available by the fourth quarter of 2005. Although Intel’s is likely to be the most common configuration of this new form factor, it is by no means the only option available. White box manufacturers and some vendors, such as Fujitsu Siemens, already have their own methods of reconfiguring PCs to meet SFF dimensions. The largest sector in the PC market, and the one seeing the strongest growth at present, is the home environment. “We are traditionally a corporate vendor. It is only in the last year that have we started to look at the home market. Coming from a corporate background to this sector is not an easy step; it takes a lot of effort. We are entering it because it is a booming area. The sales figures are phenomenal,” comments Atassi of DTK. The present cutting edge of PC technology is the home network. Already commonplace in other areas of the world, namely America, home networking is linking PCs and electronic devices across the household to one central network server. The present market for such items exists in the Middle East, albeit as high-end luxury goods, though as prices reduce and these home networks become more accessible, they will become far more widespread. The home network is the first step in the evolution of the PC into many aspects of home life. It is not just a step forward in form factor, but a massive change in functionality. We are now getting closer to the reality of a digital home. The first generation of products aimed at bringing the digital home together into one network are the latest home PCs, which take on a range of functions that would traditionally be covered by separate appliances, such as music, television and radio. By bringing such functions together, we see the convergence of the home appliance and PC markets. Effectively, PC vendors are opening a new channel, which is in competition with the large consumer electronic manufacturers. This is a different market to the one that PC vendors are used to, and will require a different marketing strategy. They have to tailor their products to appeal to consumers in looks, simplify functionality as far as possible and build up brand equity. As the PC starts to incorporate applications to replace devices, large consumer manufacturers will also compete by adopting PC technology into their products to keep them on the cutting edge. But what will the outcome be: a television with PC functionality or a PC with television capability inside? ||**||TV versus PC|~|futuresameh200.gif|~|Sameh El Deeb, Category manager commercial desktops and displays at HP |~|The companies who will be most effective at dealing with this convergence are the larger consumer manufacturers who already have capability for mass production, such as LG, Sony, Samsung and Toshiba. Manufacturers such as these also have the economies of scale and capital to invest. “We have an research and development centre looking at audio, video, PC and television. As we provide all these things we are in a better position to bring all of these products together as one,” claims Min at LG To compete against this, the vendors who only operate on one of these sides — consumer electronics or consumer computing — look likely to team up. The larger consumer electronics distributors have already seen similar happenings in other areas such as digital photography. Ashish Panjabi, chief operating officer at Jacky’s Electronics, a large UAE based retailer and distributor, foresees such changes in the marketplace. “It’s going to be very difficult for anybody to penetrate the market on their own. An IT manufacturer has had 20 to 30 years in his field, and a consumer electronics manufacturer could have up to 50 or 60 years in that industry, and I see a lot of partnerships forming between them.” All vendors appear to be very optimistic in putting out products aimed at the new digital home. For example, computer manufacturer Dell took a bold stance last month as it released its first 26” LCD television/PC in the UAE, marketed as a television rather than a computer. With the convergence of the home computing market, vendors will have to focus on branding and creating products geared at end users in terms of looks and easy functionality. IT vendors and consumer electronics companies will have to learn to work together. IT distributors and resellers will also find themselves dealing with consumer-focused products. Effectively this will be a new channel, requiring new strategies from all levels of the supply chain, in order to reach out to the largest number of end-users. This could spell bad news for smaller distributors and resellers, as larger electronics manufacturers typically have close relationships with power retailers. The market environment will not be what resellers and distributors are used to, and they will have to prepare for increased competition. It will be survival of the fittest and casualties look inevitable as the convergence dream becomes a reality and two channels are forced to become one. This is the stark reality facing vendors and their existing channel partners as the humble desktop PC continues its journey towards the centre of the home network and becomes a entertainment hub. ||**||

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