Concerns and Predictions for the Tech Industry and Market in 2016

For the last 25+ years, I have written an annual predictions column and have tried to look forward to what might happen in tech in the New Year. Actually, they were less predictions and more like researched observations about what I expected to happen and, in a lot of cases, I drew my observations from products I saw that would be released in that new year or from being inside tech labs and seeing things companies were working on that I believe would have impact in the upcoming year.

But, this year, I am deviating a bit from this tradition. I want to share a few researched thoughts on potential products that could impact us in 2016 but also share some real of concerns I have for the overall tech market in the coming year.

Let me start with four tech products I believe will be interesting in 2016.

Windows 10: Although Windows 10 did not give the PC market a boost in 2015, it should cause a bit of growth in PC sales, especially in IT, next year. This year, PC sales will be off around -10% but most of the researchers and PC vendors we talk to say Windows 10 is the best OS Microsoft has introduced in 10 years and they are seeing serious interest from IT to start upgrading in larger numbers in 2016. If so, that would mean we most likely will only be off -2% next year. PC vendors have finally concluded PC demand will never grow and they see yearly demand for at least the next three years hovering between 285-300 million sold world wide annually. However, I have talked to some vendors who think that, within three to five years, we may see only about 225 to 250 million sold each year. If that happens, there will be even more industry consolidation and we should prepare for a PC world where only HP, Dell and Lenovo survive.

2-in-1s and convertibles start to catch on: By the end of this year, 2-in-1s and convertibles will account for less then 10% of all PCs sold in 2015. Despite heavy advertising from Microsoft and the PC vendors, products like Microsoft’s Surface Pro and others in this category have been slow to take off. Even Apple getting into 2-in-1s last fall has not helped this segment of the market grow. But that may change in 2016. Both 2-in-1s and convertibles are beginning to make more sense for a lot of laptop buyers since they do add a level of flexibility to the computing experience. Interestingly, if the industry pushed them as “future-proofed laptops”, they would get a lot more attention as people now hold their laptops and PC’s well over four to five years. But vendors would never do a future-proofing campaign as they really want people to buy new laptops every 3-4 years. Although they will still be slow to gain any serious market share, PC vendors have a goal of making 2-in-1s and convertibles account for as much as 40% of all laptops sold by 2018-2019.

Android 2-in-1s and laptops hit the market: Although Google is still trying to push Chrome as their OS for laptops, the tide is turning and, by the end of 2016, we should see many Android-based laptops and perhaps even Android desktops on the market. We know that at least one or two Android 2-in-1s will be launched at CES in January but we are hearing that, by next year at this time, Android fans could have many more to choose from. Android on laptops and perhaps desktops face serious technical challenges that Google must address but we hear that is in the works too. These types of products would especially be attractive to a younger audience who cut their computing teeth on iOS and Android and have little interest in Windows or even the Mac OS as they start entering the workforce.

VR and AR gain ground in 2016: I bought myself the $99 Samsung VR Goggles for Christmas. Samsung’s Goggles work only with a Samsung phone and need special Occulus apps to really work. But I found the experience, even with its limited apps, fascinating. The idea of delivering 360 degree 3D images and 3D videos, even at what I would call an entry level, gives users a sense of how immersive VR can be and how both VR and AR represent the future of personal computing at all levels.

It is very clear to me VR and AR is many years away from delivering a great consumer experience that will have any impact on the way people see and interact with the technology. But, if you do try out the Samsung Goggles, you will get a glimpse of our future. On a personal level, I think VR and AR delivering a more immersive computing experience will be a game changer for the overall PC, CE and communications industries. Once they work well, are easy to use and the software development community embraces these products and creates great apps for them, they could rewrite what the computing experience will be in the next 2-4 years. But in 2016, they will have a minimal impact on the tech scene and VR and AR in 2016 will be one in which more building blocks will be laid for an eventual VR and AR experience that could be very cool for everyone.

Concerns

Increased hacking of IT and sensitive infrastructure: For years, I have been predicting hackers would go after our power grid and other parts of the US energy, banking and communications infrastructure. News last week that hackers in Iran stole plans from a power plant in the US underscores this threat. If you have ever had the power go out for any length of time, you know how serious something like this is to businesses and homes. With hackers stealing personal identities and going after banks and even trying to take down the internet, the need for increased security measures to protect these institutions has never been higher. I talked with a major IT director recently and he told me as much as 20% of his IT budget is now allocated to security and protecting his company from outside attacks.

The US government, local utilities, banks and communications companies need to increase their effort in this area and become much more diligent in their protection of US citizens. This threat will not go away and will only get worse. These folks need up their game in this area.

IoT will remain confusing and stifle market acceptance: I am really concerned that the industry as a whole has no real plan to harmonize IoT in a way that really makes it work for consumer audiences. Today, most IoT companies and products act like islands unto themselves and some treat their products as one-offs or standalone models that only have value by themselves. While that may be true in some cases, most need to talk to each other and work together harmoniously in ways that bring them together to deliver a richer ecosystem of features, functions and services. IoT, as it is designed and marketed today, is just too confusing to a mass consumer audience and, if it is to live up to its trillion dollar potential, industry leaders like Apple, Microsoft, Google, Intel and others need to make nice with each other on IoT and start working together to make their devices, products, and even services talk to each other and deliver to the consumer a much cleaner and easier to understand implementation of IoT across the board.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

645 thoughts on “Concerns and Predictions for the Tech Industry and Market in 2016”

  1. Interesting, thanks.

    I’m not that hot about Win10:
    – Apart from the UI and the potential for Universal apps, I didn’t notice anything new, and since Win8’s UI was so bad I started using Classic Shell anyway, and I’m sticking with it, so visually I’m still in Win7 or whatever (there’s a list of looks/layouts to choose from)
    – I keep getting crashes. Not full BSODs, but graphics driver crashes (at least once a week, on a dual-card Intel IGP+ATI 7870 setup), and app crashes (the Clover Explorer replacement, Firefox displaying a blank rectangle, VLC when used alongside Civilization 5). Not a major issue (10s freeze for driver auto-restart, close/reopen for app issues) but I hadn’t had that level of flakiness since Win95, everything had been rock-solid since XP.
    – They keep changing OS tools that don’t need changing (just got a notice that my mail client is being deprecated in favor of a Universal App that doesn’t even seem to support backups ?) and not changing OS tools that need changing (multi-tab Explorer w/ favorites and sessions, puh-lease ?). Also, we’re playing beta-testers for Edge ? I haven’t launched the thing even once, wake me up when it becomes full-featured and reliable.

    I guess I’ll have to tell people what to do before the “free upgrade before aug. 2016” is up, but right now I’m telling everyone to wait.

    Until MS have a real Mobile ecosystem (apps !), 2-in-1 is kludgy. Plus 2-in-1s are competing against 2x one-in-one, those being cheaper, individually lighter and smaller, and generally more handy (I’ll take more screens+batteries over a funkier design anytime). I think they should do 3-in-1 and agree once and for all on a cross-vendor docking bus, or Intel should include Lightning as a baseline, so that 1 single device does it all. and that expensive dock outlives the one laptop/tablet.

    Hey, Android is already on (confidential) laptops and desktops. A handful of tweaks to mouse support (wheel to zoom !) and a PlayStore section, and Google’s job is done. the 50% of tech ignoramuses around me will be delighted to get rid of Windows. The other 50% need custom Windows apps. Ars had a not-idiotic preview of desktop Android: http://arstechnica.com/gadgets/2015/12/android-on-the-desktop-not-really-good-but-better-than-youd-think/
    Right now, Android works better for me as a desktop than Windows does as a tablet.

    I’d bet VR is the new 3D: Wow ! with no uses.

    And AR needs to start small, I’d love glasses that just flash notifications and read texts into my ear. I keep thinking it needs to be paired with a smart ring or bracelet for input, I don’t want to twiddle my temples or speak to myself all the time. Thinking of it, I don’t really want to wear glasses, a ring, or a bracelet either, so this better be good. I still think smart glasses have more potential than smart watches, but then again people don’t even seem to realize than smartwatches take up more hands and attention than smartphones.

    What I really want is a smart monocle with cane input. Opens up a great market for custom canes, too, and we’ll all get to look like my childhood hero Arsène Lupin ! https://www.google.fr/search?q=arsene+lupin&source=lnms&tbm=isch&sa=X&ved=0ahUKEwib7M2G44bKAhXFiRoKHbbwCWQQ_AUICCgC&biw=1480&bih=918
    What could they put in a smart top hat ? Lotsa batteries ?

    Agree on the IoT, I’d extend that to the IoH (Internet of Health).

    Reply

  2. You’ve talked about PC market consolidation before, and if my memory serves me right, last time you carefully refrained from mentioning any company names. This time, you’ve let out the three companies that you expect to be left standing, and they are intriguing. There might also be lessons that could be applied to the future of smartphone OEMs.

    Apart from Apple, you mention Lenovo and Dell. Both these companies have a legacy that is strongly rooted in the Western corporate markets, and I assume that most of the profits that they earn are from corporate customers and not consumers. If this is the case, then it seems that their PC business is not really a standalone one, but instead an accessory for their corporate clients. I would appreciate your insights into this.

    In relation to smartphone markets, I am interested in how OEMs will earn profits as prices plunge lower and lower. It is likely that it will soon become impossible to earn profits in the consumer smartphone market (excluding Apple of course). It will be interesting to see if the only smartphone OEMs left standing in say 10 years, will be the ones that have a profitable adjacent business.

    Reply

    1. How will OEM’s manage shrinking margins:

      I think more and more of the development costs will be shared, shifted to open-source, etc. For example sony recently invested in changes that enables open-source developers , and there’s talk about more companies using the open cyanogenmod OS. BTW cyanogenmod os have a theme engine, so if an OEM’s could easily have unique visual layer.

      Also , we might probably see a lot of strength from the chinese OEM’s , for example xiaomi , which have plans to profit in various ways: Selling various devices tightly integrated with the phone and via brand strength, Sharing revenue with per-installed apps and services offered through them , collecting data for regular commercial purposes(xiaomi mentions that with regards to their low-cost band) , and since they are chinese i assume the government is encouraging them too, in some ways.

      So like you say , profit from adjacent businesses will be key.

      Reply

      1. Agree very much on the Xiaomi angle, with the caveat that we don’t really know if it’s working even inside Xiaomi. Leaked financials suggested that Xiaomi actually makes profits from handset sales, and service revenue is small.

        Even though the company sells smartphone applications, other software and services, 94% of its revenue came from handset sales last year, according to the document. Sales of services such as mobile games accounted for only 1% of its revenue.

        http://www.wsj.com/articles/smartphone-maker-xiaomis-2013-profit-nearly-doubled-1415195999

        Assuming the leak is accurate and that competitors will copy their lean marketing strategy, even Xiaomi will have to find new ways to earn money.

        I’m wondering what these adjacent businesses will be. Will they be tied to corporate IT consultation hardware and consolation services (like Lenovo and DELL)? Will they be tied to carriers (like i-mode in Japan in the 2000s)? Will they be tied to e-commerce (like the Amazon Kindle)? Will they be tied to payments? Will they be tied to entertainment distribution (like cable TV set-top boxes)? Or will they be tied to semiconductor production (like Samsung)?

        There are so many profitable businesses enabled by or dependent on mobile, which means that there are so many feasible combinations.

        Reply

        1. Wasn’t there the same issue in the POTS area with fixed phones ? Lots of revenue got transacted over the phone, plus usage itself was expensive. But actual telephone/fax machines makers (Siemens, Alcatel, probably Motorola) only ever saw bare handset revenues.

          Why is everyone now fixating on phone makers needing to be something else than phone makers ? Wheelbarrow makers aren’t being constantly hassled about getting into the building / contracting / architecture / building management / … business. Nor printers about the publishing business. Nor video equipment makers about content (Sony did try though, to iffy results). Nor electricity generators about distribution / electric equipment. I could go on and on and on…

          Reply

          1. I don’t know much about the wheelbarrow industry, but I expect it to be more profitable than the smartphone one, excluding Apple and Samsung.

            We are wrong to assume that every commoditised market has to operate at razor thin margins or even worse, at a loss. Smartphone margins, and PC margins before that, are even worse than what you would expect of normal commodity products.

            That’s why wheelbarrows and other construction tools can be independent, self sustaining businesses, while smartphones may not.

          2. I think the main issue is “irrational expectations” (not even exuberance ^^) that because Mobile is such a huge economic opportunity, mobile phones makers are on the verge of flipping a “rent” switch and get a slice of the that. Those dreams lead to companies and investors willing to stick it out in the face of low/null/negative returns a lot longer than they would otherwise.

            Plus small phone-only OEMs can’t do anything else, and larger OEMs figure they’ll wait out the inevitable PC-style consolidation.

            Apart from my old and tired argument that OEMs don’t have the skills to be anything but OEMs, there’s the added obvious strategic issue that competitors compete: if Samsung finds a profitable/lock-inable “service/cloud” angle, LG won’t sign up to it, they’ll copy it. No possible network effects = guaranteed failure, except maybe in the nichiest niches. Everybody around me knows not the buy off Samsung’s appstore, but on the Real PlayStore, so their apps/content carries over to whichever device from whichever OEM they choose next. Only Google or independent cloud/IoT/… players can be successful, same as MS, Valve, Oracle, and consultancies are hoovering all the PCs’ profits.

          3. Totally agree.

            One thing though is that I think the ecosystem “lock-in” angle is hugely over-hyped in both necessity and effectiveness.

            As you mention, Ecosystem “lock-in” is very hard and not many companies succeed. Additionally branding and customer satisfaction often have the same effect. This means that even if companies cannot find an effective lock-in strategy, they will still cling to what you describe as “irrational expectations”.

            For example, Sony still clings on to the TV business despite it being a huge money loser. TV tends to be viewed as the centrepiece of consumer electronics; it is the device on which most time was spend and was the most visible interface. Exiting the TV business is perceived to signal an exit from consumer electronics altogether, at least from a branding perspective. This is a topic that is discussed time and time again whenever Sony reports its disappointing financials.

            Today, smartphones have replaced TVs as the centrepiece of consumer electronics. That is why Sony is again reluctant to exit, despite losing 200 mil USD per quarter (Sony smartphones are the most popular Androids in Japan).

            Sony has no significant lock-in in neither TVs nor smartphones but they still have “irrational expectations” mostly due to branding and market signals. This means that the potential for smartphones OEMs to be merged with adjacent industries is actually larger that it would be for other products. (And you can expect investment bankers would come up with many imaginative synergy claims to convince their clients to do M&A)

          4. The craziest thing re: Sony is it seems they did away with the IR remote in their latest smartphones, letting go of the little bit of synergy they had with their home AV presence. They never built any synergy with their cameras. They do have a Playstation app at least.

            I think I’m ready to launch the OEM’s motto: the 3 most important things for an Android OEM are the device, the device and the device.
            Not the user experience because Android’s default UX is very nice and customization is more often than not crappification.
            Not updates because it seems people don’t care.
            Not “bonus apps” because the only apps people care about are free and available to all (FB, twitter, Pinterest, Google and MS apps…)
            Plus I’m sneakily piggybacking on “location, location, location”: Instant credibility ! And Apple said it first, so nobody can disagree, even from the dark side…

          5. It may seem crazy that Sony stopped including their IR remote, but I’m sure that it was a rational decision based on customer usage data. Most likely, very few people used it. Gimmicks aimed at creating some sort of artificial synergy rarely work.

            I’m not exactly sure what you mean by “location …” but if you mean making sure that the brand is omnipresent, then yes, I’m sure that it is very important. Hence the strategic value of selling a product (even at a loss) that people stare at all day and which has your logo on the front.

          6. I sometimes forget not everyone studied business. It’s a meme about the 3 most important things for shops in particular, and for real estate in general.

          7. I initally thought that might be what you were referring to, but it didn’t seem to make sense in the context. That’s why I thought you might mean something different. Either way, I fail to understand what you meant. Especially the part about Apple mentioning it first.

          8. Same as only one thing matters in retail (location), only one thing matters in mobile: the actual device. OEM-specific OS customization, apps, cloud, tangential attempts at monetizing… are just distractions. And Apple famously insisted for a long while that their business was making devices (subtext: not cloud, not apps, not OS). It’s still their official motto.

          9. As for the remote, I think sometimes you’ve got to stick to your guns and fight for features. I suspect setup was not sexy. Did their app have an extensive database of preconfigured devices ? Did they use Amazon’s Mechanical Turk to let users snap a picture of their devices’ make+model to automatically receive the right profiles ?

          10. And I would say, corollary to your OEM’s motto, the 3 most important things for an Android device is the price, the price, and the price.

            The Android device market has devised from the very beginning to be an OEM race to the bottom. Certainly, the OEMs had ambitions that they might somehow transcend this race and develop a specific demand for their brand of phone rather than the Android brand of phone but so far, and billions of dollars have been poured into this effort, there has been no escape. It’s like Hotel California! You can check out any time you want . . .

      2. Regarding the theme engine on Cyanogen mod, I’m wondering who will use it and for what purposes. I think it’s a bit too simple for a future Xiaomi-like company, which should have a sufficient number of good software engineers, but it could work well if for example, Ferrari, Gucci, Prada, Muji, Pepsi, Mc Donalds, etc wanted to create their own smartphone.

        Reply

    2. “I am interested in how OEMs will earn profits as prices plunge lower and lower.”

      The same way manufacturers make money on DVD players or portable stereos or microwave ovens or any other item of mature consumer electronics: the few companies that continue to make them (mostly off brand, “white box” makers) will eke out razor thin margins selling dirt cheap devices. Brand name companies will buy those pre-built devices and slap their logo on them, then offer them at a markup, making customers pay extra for the brand name. A few companies (ie, apple, maybe a couple others) will continue to make high end, deluxe devices that sell in comparatively tiny numbers Outside of the deluxe market, innovation will mostly grind to a halt as none of the OEMs involved will be able to afford to spend a lot on R&D. The stupid, myopic eye of wall street and of the tech press will turn elsewhere, deeming the smart phone industry “dead” because it will have become boring to them.

      Reply

      1. I don’t have data on DVDs or stereo’s, but washing machines seem to be quite profitable for LG. Apparently, 80% of their profits come from their boring, “dead”, mature home appliance division.

        http://www.wsj.com/articles/lg-electronics-looks-to-washing-machines-to-keep-spinning-profits-1441770518

        The PC and smartphone industry is in worse shape profit-wise than most boring markets. The consequences are also likely to be different.

        One way to look at it is the BCG matrix. While I do not agree with the strategic suggestions of the BCG matrix, I like its way of looking at relative attractiveness of markets.

        https://en.m.wikipedia.org/wiki/Growth–share_matrix#

        PCs and smartphones were/are in the problem child quadrant due to the growth of the market and hyper competitiveness. Other boring products are often in Cash Cows. They should be looked at differently.

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  3. I am very skeptical about IoT ever catching on, at least in the scale and level of penetration that industry proponents seem to envision. The roadblock I see is its utility relative to the cost and inconvenience of setting up and maintaining an IoT device network. (Let’s not even talk about the security risk of hooking up all those devices, appliances, security sensors, etc. to the grid.)

    What benefit is there really to getting your refrigerator to talk to your car? Or a light switch to your calendar app? Or monitoring your energy consumption down to the last watt-hour? Few people are that anal retentive. Especially, and we all know this, when keeping your personal IoT network humming means constant tinkering, tweaking, fine-tuning, and fire-fighting. And then imagine the uproar when people find out three years after initial installation, an OS or protocol upgrade renders their connected devices and appliances incommunicado without a major hardware upgrade (or worse, full replacement).

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