Has the PC Become Antiquated?

In a recent interview with BetaNews, the chief researcher for IDC's Quarterly PC Tracker report -- which rates the relative market share of PC manufacturers in both the US and worldwide markets -- raised a serious question pertaining to the market growth figure around which much of IDC's reporting is based.

As last week's report noted, worldwide PC shipment growth stands at an annual rate of 10.9% by IDC's account, 2.4% higher than the firm expected it to be at the end of last year. That bump is on account of a number of factors, IDC's David Daoud believes, the onset of Windows Vista being among them, but perhaps more prominently, vendors like HP adopting a more direct approach to how to address their customers.

That new approach is giving HP some vital market differentiation against Dell. But Daoud thinks it may only be a short-term solution.

"How are you going to have HP...begin to address the needs of the female buyer, the teenager, the mobile professional, the ones that actually don't need that much computing power, etc., when you have mature, emerging, very much stratified markets going forward?" Daoud asked. "That's a challenge for the industry as a whole, not just Dell."

Diverse, stratified, smaller market segments, but lots of them - that's what the PC industry faces in the coming months, Daoud believes. If any manufacturer is to adopt a long-term market strategy for PCs, it may have to re-examine the entire question of why people would want PCs in the first place, and whether it's really the PC that vendors make today (flat monitor, keyboard, optical disc, hard disk, Windows) that people really want.

"We're still using the keyboards to enter data, to write out letters, to send an e-mail," he remarked. "It's pretty old, isn't it, if you start looking at the technology that we have? Think about that, for a moment. We have had for a long time this concept of the tablet PC, and no one has been able to crack that market. Why is that? Because no one has been willing to do the same thing that Apple has done for the iPod: own that market, take it to the next level. Think of it. We've had the speech recognition as an input interface for a long time, and yet no one has really taken that into consideration.

"So what we have here is, we have technology driven by Microsoft and Intel, when the PC industry has turned into a manufacturing base," Daoud continued. "Rather than think, 'How do we actually go to our customer and help them improve the user experience?' It's wonderful to have input through a keyboard, but what about creating new ways to input data? I know that's pushing it a little, but clearly we're still, the PCs that we have today are still the same PCs that we had when the industry created the PC in the late '70s."

Vendors today appear to be focused on defending and maintaining their intellectual property, Daoud argued, when that IP is centered around this concept of technology in a box. Moving away from this model and distinguishing oneself in the market may mean that a manufacturer must move literally outside this box.

"Apple didn't create the MP3 player," he reminded us. "But it has been able to create an ecosystem which brought the hardware, the software, the content, content delivery, marketing, ownership of the entire ecosystem. And on the PC side, the PC manufacturers have not yet done that in a way that would have them differentiate themselves."

In the very small computer space, Daoud pointed to the examples of Flipstart and OQO as companies that have successfully distinguished themselves in their respective spaces by changing the game, so that it plays by their rules. The broader PC market, he believes, is becoming just a broader multiple of little markets about the same size as theirs.

"I think the challenge for these companies going forward," IDC's David Daoud told BetaNews, "is how you move from being the best supply chain player in the space, the one that knows how to lower prices, lower costs, maximize the challenge, to actually innovate a little more, by looking at usage models a lot more than just looking at product design. I think usage model should determine product design."

So it sounds like David's saying that for companies like Dell, Lenovo, Acer, and Toshiba to move forward (the #2 through #4 players, by IDC's figures) they may have to start identifying and addressing niche markets, because the broader PC market has matured to the point of stagnation.

"Yea, to the extent that [it's] a consumer market," Daoud responded. "The business sector is a good example of where you could create a lot of innovation. I certainly don't mean that these companies are entirely lacking in innovation; in fact, if you look at what HP has been doing, it certainly has the blade PCs, it has a thin client business...But again, it's limited, to a certain extent, to a quarter of HP's large enterprise business.

"There's a lot more to be done in analyzing really what end users are looking for and looking at," Daoud concluded, though step one may be to examine "the models of these smaller companies that are looking at ways to branch out to enter the PC market through the back door."