PCs Gone Wild

on November 16, 2012

One of the most exciting things happening in the industry right now is the diverse innovation coming from Windows PC OEMs, who are making every type of form factor imaginable. Looking specifically at the traditional PC industry and traditional PC OEMs, I have never seen such a wide array of innovative products flood the market place and more are coming.

All of this is being driven by Windows 8 and Microsoft’s bold approach to build an OS that can support such a diverse range of hardware. I have been using many of these devices and I have some observations.

The first thing that strikes me is how different of an experience one can have with the same Windows 8 OS but with different hardware. Back in the old days, you could select a Windows laptop and expect basically the same experience across the board. Those days are gone, for now at least.

Some form factors perform better as a traditional notebook. Others perform better as a tablet. The touch and trackpad experience varies from device to device. The performance of certain devices is drastically different. Some have drastically better battery life than others. The key point I am making, and the observation that really struck me, is that the device landscape for Windows 8 has become one of trade-offs. To maintain the level of form factor innovation we are seeing around Windows 8, OEM and ODMs will be making key decisions of which trade-offs to make in order to bring certain devices to market with certain features at certain price points.

There has never been an environment like this before and my fear is that it is extremely confusing for interested buyers. Just as the OEMs and ODMs will need to make specific trade-offs, so will certain consumers need to be aware and comfortable with those trade-offs. Although trade-offs and compromises have always been apart of the PC shopping experience, it is severely exasperated to an entirely new level.

Consumers shopping for PCs will be forced to examine the features and functions they value (and at what price) more than ever before. I am intrigued by the kind of impact this internal reflection could cause in the marketplace. The reality is that there are a massive amount of PCs in the market that are 4 years old or older. I’ve come across a range of data on this and from all what I have seen, it appears a conservative number is in the 100 to 120 million range. If we are starting with that number as a base then we would initially think that many consumers are in the market for an upgrade, and in fact they are. However, the hardware diversity and bold transition of Windows 8 may have adverse effects as consumers truly begin shopping with a more refined set of needs, wants, and desires, than ever before.

Interestingly, I came across a story at USA Today which highlighted a survey from a Windows security software company called Avast. In this survey Avast gauged the awareness and likelihood of those in the market to upgrade to Windows 8. Of the 135,329 Windows users who responded to the survey, 33% indicated that they were probably not going to upgrade to Windows 8 in the immediate future and 41% said they were definitely not going to upgrade to Windows 8 in the immediate future. Now the nugget of data that came out of this quantitative survey that got a lot of press yesterday was this: Of those 135,329 Windows users who indicated they were in the market for a new PC, 42% said they were going to switch to an Apple product.

Now many may say, that is one survey and often we have to take data like this with a grain of salt as Ed Bott did in his breakdown of that poll. But I have seen data from a number of other research companies and vendors that all back up this concern and relative uncertainty. However, a key point remains. A large section of the market is hesitant, and a large section of the market is looking at all their options, even if it means switching platforms. Doesn’t necessarily mean they will switch, but they are considering all their options–that is a key point.

The personal computing landscape has changed drastically in the last 3-4 years in that those who bought PCs in that time frame, who are now in the market for a new one, have a much more complex landscape than ever before. The competition for those in the market for upgrades will be fierce and more importantly consumers will be more savvy to their own personal preferences with these devices.

There are a number of scenarios I can see playing out from optimistic to catastrophic for the PC industry and I will look at each briefly.

Tablets and Premium PCs

If you read my column where I shared some high level thoughts on the Surface then you understand my view that the product is not the best tablet nor is it the best notebook. Because I feel the pure tablet form factor perfectly serves the mass market needs, my gut is that consumers will shop for a no compromise tablet. However, we know that the traditional PC still plays a role. So I can see a scenario where consumers buy the best tablet and the best notebook, thus truly giving them the best of both worlds. This doesn’t necessarily mean they buy them in the same year but the point remains that I see a scenario where it could play out this way.

If this happens, and consumers take this road in large numbers, it is very good for many players in the PC ecosystem. An interesting thought on this scenario, is that generally speaking a well made premium PC will have a longer life cycle, thus extending the refresh rate perhaps even longer than it is today for traditional PCs.

Tablets and Low Cost PCs

The other scenario I can see happening and one that may be a bit more troubling for certain companies, is one where consumers buy a no compromise tablet and a very low cost PC. If you buy my logic that the traditional PC form factor over serves the needs for a large section of the mass market, then a key question remains. If consumers, as they reflect and become in line with their true PC usage, realize that the tablet can do upwards of 80% of what they primarily do on a daily basis, then why would they spend lots of money on a product that will not get used every day, week, etc. If the tablet becomes the personal computer and the traditional PC just sits in the other room and is only used for some tasks, then in my opinion the traditional PC loses its perceived value in the eyes of consumers.

In either scenario, the life cycle of the PC is extended and the refresh rate the industry used to enjoy with PCs will most likely shift to tablets. Lower cost PCs may need to be refreshed more often but in this scenario the profit opportunities are not in PCs they are in tablets.

This scenario is one that not every OEM today is poised to compete in and could be challenging for some. The reality is the industry has changed dramatically. Consumers have become way more in tune with what they want and why they want it. That shift will have profound impacts on the types of products we see and who the winners and losers in the market may be in the future.

The PCs gone wild trend of form factor innovation is not just necessary it is a necessity if companies are going to stay in the game, compete, and have sustainable business going forward. I’m excited about the innovation in PC hardware we are seeing today and I am even more excited for what is around the corner.