This article discusses the demise of the PC and the rise of hosted solutions not previously readily available to the small to medium enterprise (SME) market. The reference to Henry Ford’s quote is that mass production comes at a price – freedom of choice.
Desktops are dead
Two things happened to place the future of desktops (mini-towers, desktops etc), and by inference the demise of the corner PC store, under a cloud.
First Intel abandoning the manufacture of desktop motherboards (See iTWire article ) – please note this does not include CPU’s, chipsets or servers. In late news (11/2/13) Asustek (22 million) and Gigabyte (19 million) had over 51.3% of own-brand DIY motherboard market (of a total of 80 million) in 2012. ASRock (lower cost ODM formed by Asustek) and Micro-Star International (MSI) shipped 7.7 million and five million motherboards respectively. Intel sales of five million will impact on Elitegroup Computer Systems (ECS) which had been Intel's ODM manufacturer.
Second the increasing centralisation of manufacture of computing devices in the hands of a few faceless Asian contract managers (See iTwire article). These apparently unrelated factors have contributed to the premature death of the PC as we know it.
Analysts say that major motherboard manufacturers like Asus, Gigabyte et all are more worried about why Intel left this market so suddenly – “What do Intel know that we don’t?” According to one source Asus are strongly considering quietly exiting the “desktop market”. Their product range has been broadening to touch based all-in-ones, tablets, notebooks and Eee (all made on the massive Asian contract manufacture lines, not at Asus factories). They say “You don’t need to own the asset (manufacturing) to get the benefit” and they may be right.
Once majors like Asus leave the market innovation stops dead as R&D is always a percentage of sales.
As an exercise I shopped a few remaining PC stores to get a typical Intel based desktop – i5, Windows 8 Pro, case and power supply, integrated graphics, 1TB HDD, 8GB memory, 22” monitor, corded keyboard and mouse and speakers.
Typical assembled price was around $1000 with lower speed processors i.e. AMD or i3 taking about $100 off the price and i7 adding about $200 to the price. A top of the range Gamers unit with all the bells and whistles – around $2500+.
By comparison AMD based notebooks start at $300, i3 at $500, i5 at $600 and i7 at $800. Top end gamers notebooks were around $2300 (apart from the Toshiba Qosmio at considerably more). Yes you may have to add a larger screen and external keyboard/mouse for business use – add about $100.
The retailer said that its profit margin on PC’s was now under 5% and could only be competitive if it parallel imported parts. “If I buy locally [from the Aussie distributors] I have to charge $300 more for the same thing”. He said that his 15 year old business can’t survive much longer on PC sales. There is no money in hardware was the recurrent theme.
Look out of the Window – it is very cloudy
Another recurrent theme was that typical users don’t need the power they had in desktops especially with the burgeoning use of the cloud and server side, virtualisation and thin computing.
A network installation and support company said its profit margin had been shredded by the move to thin clients. “Thin clients start at $300 – all you need is a monitor and keyboard. No moving parts, no maintenance, fully virtualised for remote management, lowest TCO and very green”. Its business model has had to change because there is no longer any hardware margin to help offset labour costs. It is also concerned that the proliferation of consumer $300 15” notebooks replacing PC’s in SME installs and that price includes Windows 8 Pro – just add a router for cloud access.
SME’s have been slow to embrace software as a service. According to Brent Paddon of OvertheWire and sister Telco company Netsip “Once NBN takes hold the move to hosted everything will be dramatic”. Brent was saying that typically SME’s are hesitant to invest in sufficient bandwidth to use hosted voice and data opting to connect to the internet with consumer grade ADSL/Cable which has no minimum service level standard and no quality of service (QOS) ability. But NBN will allow SME’s to have hosted servers, VoIP, software, storage and more all for a few dollars a week.
He mentioned Netsip's hosted VoIP phone system where for about $10 per month per user an SME could get hosted PABX services – just add a SIP handset connected to your router. The cost savings on hardware were significant but the call savings were even bigger with 9c untimed local calls anywhere in Australia (using local gateways). Brent added that the service had Direct in Dial and Direct fax as well using fax to email services.
Microsoft’s re-entrance to hosted software came recently with Office 365. MS obviously intends to own this space and SkyDrive is an important part of the equation allowing for collaboration (like a central networked hard disk) and hosted Exchange, SharePoint and Lync – all at a few dollars a week.
However some wrongly use the MS Office 365 Home and Business (5 PC’s are for home use) but at least they are [sort of] licenced. It is leading to some revenue for network support companies to set up SkyDrive and using other on-line software like hosted Exchange and SharePoint "from as little as $6 per user per month”.
Accountants are happy to with the move to rent rather than buy “100% tax deductible, scalable and few onerous lock in terms make it ideal for SME’s to get access to the tools from the top end of town”.
SUMMARY: Yes the world is becoming coffee coloured – choice for business at least is coming down to finding capital to be individual or rent and write off immediately. I would be buying shares in datacentres at present…