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Devices

TelecomTV TRACKER

Sourced by TelecomTV's TRACKER platform
from Gartner Newsroom

Devices

The traditional PC business model is broken, leaders must overhaul their businesses or leave the market by 2020

Via Gartner Newsroom

Sep 16, 2016

STAMFORD, Conn., September 15, 2016

Analysts Outline Four Strategic Alternatives to Stay Competitive in the PC Market

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, Inc. If they decide to stay, they need to rapidly determine what changes to make or what alternatives to adapt in today's over-penetrated PC market.

"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 Tracy Tsai, research vice president at Gartner. "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)

Device Type 2015 2016 2017 2018 2019
PCs (Desk-based, Notebook and Ultramobile Premium) 1,485,276 1,442,329 1,400,050 1,362,622 1,333,450

Source: Gartner (September 2016)

"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 Ms. Tsai. "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."

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

This alternative is the most conservative approach, with the vendor running a current business operation and selling a current PC product. 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.

"PC vendors need to streamline operations, shift their focus away from gaining share, and increase the sales proportion of midtier and high-end products to improve operating profits for long-term business sustainability," said Ms. Tsai. "Another key factor that needs to change is the sales compensation scheme. PC vendors need incentives to drive their internal sales teams and channel partners to move away from a focus on volume and market share to margins and profitability. PC vendors also need to shift focus away from 'distributor and reseller customers' wants' to 'users' needs.'"

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 channel partners and independent software vendors (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.

"Business leaders of PC vendors need to think about business outcomes based on the four alternatives discussed here," said Ms. Tsai. "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."

Gartner clients can read more in the report: Market Trends: PC Business Leaders Need to Overhaul Their Business or Exit the Market by 2020

Technology trends will be further discussed during Gartner Symposium/ITxpo 2016, the world's most important gathering of CIOs and other senior IT executives. Follow news and updates on Twitter using#GartnerSYM.

Dates and locations for Gartner Symposium/ITxpo 2016 events include:

September 26-28, Cape Town, South Africa

October 5-7, Tokyo, Japan

October 16-20, Orlando, Florida

October 24-27, Sao Paulo, Brazil

October 24-27, Gold Coast, Australia

November 6-10, Barcelona, Spain

November 15-18, Goa, India

Related Topics
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  • Devices,
  • Gartner,
  • Mobile,
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  • North America,
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This content extract was originally sourced from an external website (Gartner Newsroom) and is the copyright of the external website owner. TelecomTV is not responsible for the content of external websites. Legal Notices

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