What Now for Hardware Vendors?

8 Jun, 2013 | BusinessComputersTechTdp

PC sales are down, way down, and falling. At least, typical PC sales (I tend to agree with the view that tablets can be classed as PCs) and, while I doubt we'll ever see the end of desktop computing, that market is going to continue to shrink. For now, tablets may fill the void, but they'll give way to smartphone all-in-one devices at some point.

This drop in sales isn't news to most people, but I was surprised to find that it's not just desktops and laptops, server sales are in decline as well. You'd think that with the rise of web and cloud services, along with the general return to client-server style architecture, they'd be on the up.

The problem is that, while everyone used to buy their own servers, one for each job/role, over-buying on the specs to ensure future-proofing, perhaps even buying a backup device, more and more people are opting for virtualisation (it's estimated that by 2014 as much as 70% of new servers could be virtual). That means fewer boxes as the resources of one machine can be used to serve multiple tasks.

Added to this is the fact that the big boys (Google, Amazon, Facebook, etc) are building their own hardware, and allow people to buy those services as and when they need it, rather than having hardware sitting idle for most of its life.

It's not just about better utilisation though, we've reached the point where we have more than enough computing power to do the majority of tasks. In fact, as far as desktop PCs are concerned, we probably reached that point several years ago. That's part of the reason for the growth in tablets: the relatively little processing power they possess is more than capable.

Many enterprises have long been locked in to a three year upgrade cycle, replacing hardware and software regardless of need. Microsoft are changing the way they release operating systems, so instead of a big shiny version every three years (on average) they'll be releasing more often. The machines used in most offices are already significantly over-powered for what they do, and with the rise in virtualised desktops, they'll require even less, meaning these companies will no longer look to upgrade as often.

One of the selling points of ARM chips is their lower power consumption. They've typically been found in phones, tablets, set-top boxes and other similar devices. More recently, they've started to make their way into servers, games consoles and they're also starting to make it into PCs aimed at desktop use.

There's a reason HP, currently the largest server manufacturer, is beginning to offer ARM-powered servers: market demands have changed. ARM chips are becoming more powerful, to the point where they're good enough, making power consumption and the heat generated by the servers (which makes it costly to cool them) a bigger issue than processing power.

There's undoubtedly still a market for servers, and for higher end workstations, but that market is shrinking. The desktop PC market is already well into decline. So the question is, what now for hardware manufacturers? Will Dell, HP, Lenovo and others the slowly die, shrinking to become shadows of their former selves? Maybe.

I certainly think that if you're not in the mobile market now, you better be soon, but will they ever be able to compete in the smartphone market? The titans who have long ruled the enterprise market still have a big hold on it, and that gives them an edge if they can find a way to pivot their businesses or expand their market sectors to make up for the loses they'll begin to see.

They've already begun to innovate on hardware, throwing out an array of tablet/desktop and tablet/laptop hybrids to see what the market will pick. Touchscreen devices are taking over and I think we'll see more hardware in the home, though possibly at lower costs (and therefore profit margins). Especially as more and more of our appliances become 'smart.'

With the increasing speed of ARM chips providing competition for Intel, and an alternative to the x86 platform (even Microsoft has taken strides in that direction), tablets and smartphones replacing computers in the home, virtualised servers--followed by desktops--replacing business machines, the future looks very different if you're in the hardware business, and some may not survive.