From a pc to a server market

There is no doubt that the PC was the dominant product of the nineties. Now we hear that things are not going so well, which frankly isn't so surprising. Progress is inevitable and in all walks of life advances take place and the established concepts become obsolete. The PC is nothing unusual in this respect.

The gloomy predictions for the PC market do not mean however that the PC will go away. Far from it. Sales are still enormous, but they are clearly falling. The big problem for the PC industry lies in the future because as the total volume of sales falls, then vendors must cut margins in order to maintain market share, and since there is little to choose between one PC and another, there is little brand loyalty so that dominance in the past will not count for too much.
There is little suppliers can do about brand loyalty with a product like a standard PC; domestic users buy on price and the corporate users are showing signs that they will make do with the machines they have got for a lot longer than in the past. There is only one outcome of this and that is that new markets have to be opened up. Time scales are alright at the moment, but no one can afford to wait too long before moving on. There are many options open to those who can adopt. However one of the really big problems is bound to be fitting into a new business model. There has been huge profits made in the PC heyday, and it will take a lot of reorganisation to come to terms with the much lower profits that are the likely outcome of the post-PC products. It is worth noting that the telephone giant Nokia is currently predicting a fall in profits because the mobile market, on which many hopes will lie, is not growing as fast as hoped.
The component manufacturers will need to keep abreast of new requirements, particularly lower powered and smaller devices, but the total market should continue to grow. Perhaps they will even learn how to control manufacture! The Integrated Circuit market is notorious for swinging wildly between oversupply and shortage! However Intel, together with Microsoft the biggest beneficiaries of the PC boom, has been hurting of late. They have fought off the challenge of Motorola and have to a large extent kept ahead of the clones such as AMD. But they have fallen behind in low-power technology. This can prove serious because that other giant component manufacturer is already established in that market with the telephone manufacturers. Without too much fuss IBM have expanded their considerable production facilities to be a supplier of OEM components on a grand scale. It will not be surprising to see IBM take over from Intel as the major IC manufacturer!
The PC itself can also progress in more specialised guises. The laptop is a case in point. I believe that in the future, when we have "Star Trek" communications capability the concept of a "personal" computer will be something to laugh about, but that won't happen for a long time yet. Admittedly intelligent phones will take over from some laptop applications, but there are a lot of fanatical users who don't want to lose the control they feel that they have with their laptops. Since there is a continuing market for these higher end products, there is scope for ongoing development, particularly in reducing size, power consumption and weight. These will not become cheap commodity products, so that they should retain good margins to attract manufacturers who favour the corporate world.
Probably the biggest market to come is not strictly a PC and that is the server products. These are based on similar technology to the PC, running the same basic software, particularly Windows XP and Linux, but they feature detailed attention to the characteristics of a server not a personal system. A server is used by many users, therefore it must be more reliable, scalable and higher powered. Servers will feature redundancy, multi-processors, clustering and high performance storage and networking. There is no doubt that the Intel-based servers will continue to grow in power and value for money so that they will dominate the small to medium system market, a worrying thought for the dedicated Unix vendors. Compaq and Dell are seeing this as an opportunity to replace their falling PC revenues while it plays into IBM's hands, since they have never done very well in the domestic market place.


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article 2001-07-27T00:00:00.000Z Martin Healey
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