At a 1998 meeting of the Western Canada Computer Distributor Society, I asked some attendees how their sales were, compared to 1997. The general consensus was gloomy - sales were down about 10 per cent on average, reported more than one distributor.
Those inclined toward gloomy predictions began wondering whether this was the long-feared stall of the computer market dynamo that has gathered momentum nearly unabated over the last several years. However, 1999 provided signs to the contrary -- with the notable exception of the problems caused by RAM price increases and supply shortages attributed to the Taiwanese earthquakes. Indeed, sales of personal computers grew more than 10 per cent during 1998 and '99 as a result of the downward price pressure that now finds sales of inexpensive personal computers opening the market to more new users than ever before. As manufacturers pushed in 1998 toward the US$800 price-point for an entry-level system, the presumed price advantage of network computers was cast in considerable doubt. Now that full-fledged 366MHz PCs are available (sans monitor) for as low as C$450, resellers are struggling to put profits back into the picture with rebates, special SKUs and other incentives.
Statistics Canada recently found that Internet use doubled in Canada in the period from 1996 to 1997. At that point, said StatsCan, over 25 per cent of the population was on-line -- a number that has since climbed to nearly 40%. Most industry onlookers see this as an important factor that will determine the next period of economic growth.
In a compelling essay entitled "Feasting on the Giant Peach" (a metaphorical reference to James and the Giant Peach, a children's book by Roald Dahl), George Gilder states that: "In every industrial transformation, businesses prosper by using the defining abundance of their era to alleviate the defining scarcity." Gilder defines the modern consumers' free time as the irreducible scarcity.
For all this abusive waste of the most precious resource, says Gilder, the remedy is the 'Net. Businesses must use its defining abundance - MIPS, bits and gigahertz - to redress the residual scarcity of time. In practical terms, this is the promise of the Internet - a new global economy based on bandwidth abundance. For more details and an index of communications-related articles by George Gilder, visit http://www.seas.upenn.edu/~gaj1/ggindex.html.
Naturally, there is no simple cure-all that will jumpstart slow sales. However, there are a number of important developments that are poised to define how the next generation of technology buyers will purchase and use their products. Most obviously, the transition now underway to the Pentium II, and LX motherboard architecture (and its successors) will define the bulk of new system purchases in the near term. Because the software that drives the advantage isn't yet is place, only the early adopters are already on board, but the mass market is only about six months behind.
Indeed, the notion of "looking six months in the future" is a useful exercise for those who must maintain a practical sense of marketability for their products and services. It's no good to be too far ahead of the curve, nor too far behind.
Graeme Bennett is a former computer retailer. He can be reached at Gra...@PCBuyersGuide.com. He delivered several sessions at Comdex West in Jan. 2000.
Here are the trends that will be pivotal to defining sales over the next twelve months:
Q1
Early adopters will embrace Camino-class motherboards, PC133 RAM and UDMA/66 drives, in preparation for Windows 2000. Sales of Pentium IIIB (and probably, new Celerons based on a .18 micron core and 100 MHz bus) systems using the new motherboards and system components such as UltraDMA66 drives, PC133 RAM and AGP 4x graphics cards will improve as Q2 approaches.
Sales of modem products will slow, as cable modems and SDL services steal customers.
Q2
Optimists that we are, we expect a relatively rapid adoption of Windows 2000 as drivers and products emerge to take advantage of it. It will be interesting to see if the U.S. Department of Justice's Nov. '99 "Finding of Fact" and its subsequent ruling against Microsoft affects the shipping version of Windows 2000 in any way. We expect a ruling disallowing Microsoft from forcing manufacturers to bundle its Internet browser as part of their license of Windows 98 or its successors, and perhaps a punitive fine of a hundred million bucks or so. However, our interpretation of the wording of the Finding suggests that it is worded in such a way that Microsoft is almost certain to be able to win an appeal.
With or without Internet Explorer installed by default, Windows 2000's feature set is likely to make it a big seller. We've been testing the pre-release version (Beta 3 RC2) of Windows 2000 here at PC Buyer's Guide, and it's shaping up very nicely, with compelling features that range from automatic Windows updates via the Internet to its strong Plug and Play integration and integral support for many of the new devices that have hit the market in the past few years. Some features, such as multiprocessing, ACPI and USB, are certain to encourage new system purchases as NT 2000 emerges in final form. ACPI power management functions, for example, require systems based on ATX motherboards or their successors and, as many vendors are keenly aware, such motherboards require all-new cases and present a strong inducement for the user to invest in Synchronous Dynamic RAM, as well. Other features like DVD, Firewire and DirectX 7.0 graphics support, are likely to result in strong sales of the supporting multimedia hardware such as video cards offering hardware support of 3D acceleration via Direct3D. And then, of course, there's the network, where NT and Windows 2000 really shine. We expect to see many reports that find, as we did, that the benefits of moving to Windows 2000 in terms of overall usability -- specifically, its plug-and-play hardware and USB support and improvements in network and device configuration -- significantly outweigh the cost of the necessary RAM, hard drive space and training needed to ensure a successful upgrade.
Q3 and Q4
The market for DVD - especially the recordable and rewriteable varieties that hold so much promise in the computer industry - must settle down from the chaotic state it is currently in, if PC-based DVD sales are to take off. For the record, I'm betting on the second-generation Sony/Philips-endorsed DVD+RW standard (not the incompatible first-gen version currently offered by HP).
To help you make sense of current market conditions, I have a collection of info on such volatile technologies such as DVD and PCS posted at www.thetechnozone.com.
The lesson in all of this is to be aware of the technologies that will drive the decisions that your customers will be facing during the coming months.
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