PC majors need to overhaul their businesses to avoid extinction by 2020

|September 15, 2016 0

MUMBAI, INDIA: Business leaders of PC vendors face a stark choice and must decide between overhauling their businesses or leaving the PC market by 2020, according to Gartner.

“The traditional way of gaining shipment market share by competing on price to stimulate demand simply won’t work for the PC market over the next five years,” said Tracy Tsai, research vice president at Gartner. “Today’s PC vendors need to adjust to the new realities that are shaping consumption, including the fact that PC users are extending PC lifetimes until end of life, business PC applications and storage are moving into the cloud, and are less reliant on PC performance and, crucially, that price and specification are not enough for a user to upgrade a PC — a new and better customer experience is the only true differentiation.”

“The PC business model as we have traditionally known it, is broken. The top five mobile PC vendors have gained 11 percent market share over the past five years — from 65 percent in 2011 to 76 percent in the first half of 2016; but this has come at the expense of profitable revenue,” said Tsai. “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.”

Worldwide PC Installed Base, 2015-2019 (Actual Units)

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Gartner has identified four alternative strategies that PC vendors can use to adapt to the PC market of the future. These are based on corporate culture and assets, business operation and technology innovation, and completely revamping the business.

Alternative 1 — Current Products and Current Business Model

It requires high volumes to generate enough cash flow to cover the cost of business, so, in a declining market, consolidation of vendors is inevitable. The purpose here is to protect and keep the PC business running, but the risks are high, especially given Intel’s and Microsoft’s alternative focus moving forward.

Alternative 2 — Current Products and New Business Model

This alternative suggests that PC vendors form a new team that can experiment with new business and revenue models for PC products, such as PC as a service. In this scenario, the business model is agile, allows risk taking and accepts failure. Vendors could, for example, partner with a digital education content publisher. The vendor’s two-in-one devices are bundled with digital content on a subscription basis; the PC is free to users but is subsidized by the publisher.

Alternative 3 — New Products With Current Business Model

The third alternative is a more conservative way to explore new product offerings and new market opportunities, such as making PCs smarter in terms of sensing, speech, emotion and touch; expanding new products for the connected home; or developing products targeted to vertical markets. It’s a gradual way for PC vendors to expand into new products based on their current business model.

Alternative 4 — New Products With New Business Model

Alternative 4 is the most aggressive way to transform in terms of business operations and product innovations. In this scenario, PC vendors could establish a new business unit to run business in a different mode and explore new technology solutions to create a completely new product line. This would include working with new ISVs and partnering with startups. The resources and revenue model might be completely different from a vendor’s existing structure.

An example could be personal assistant robots. A PC can serve as an “information butler” at home, a combination of a chat bot and voice-activated virtual personal assistant, with revenue from developers and third-party content and service providers, such as those in retail, healthcare, education, video or music.

“Some vendors may need a whole new business and product strategy to turn their situation around. PC vendors need to identify their core competencies, evaluate their internal resources, and adopt one or more alternative business and product innovation models to stay in or leave the PC business,” said Tsai.

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