Paul Wallbank – Brilliant Communications

Tag: PC

  • Milestones of the personal computer industry

    Milestones of the personal computer industry

    “There have only been two milestone products in our industry to date,” Steve Jobs told the Boston Computing Club in 1984. “The first was Apple II in 1977 and the second was the IBM PC in 1981.”

    Jobs at the time was announcing the third breakthrough – the Apple Mac – which turned 30 last week.

    Looking back over the four decades of the PC industry, Jobs’ claim that the Apple Mac was the sector’s third milestone stands up to scrutiny, however the greatest milestone of all for the PC was the launch of Window 3.0 in 1990.

    The rise of Windows

    Windows 3.0 changed the business model of the industry, it established software vendors – particularly Microsoft – as being dominant over hardware manufacturers, that shift nearly killed Apple and eventually sent most PC builders to the wall.

    Microsoft’s advantage over Apple, IBM, Atari and dozens of other systems, was that users weren’t locked into one vendor’s products. It was possible

    The Windows 3.0 milestone was even more important in that it forced a shakeout in the software industry as well, many of the incumbent vendors – most notably WordPerfect – though the Windows Graphic User Interface (GUI) was a flash in the pan and that most office workers would prefer to use keyboard instructions rather than mouse clicks.

    WordPerfect was horribly, horribly wrong in judging the market and by the time they released the Windows versions of their product Microsoft had captured key market share for Word and the bundled Office suite that dominates the business world today.

    Going mobile

    So things were good for Microsoft until the next milestone, which again was marked by Steve Jobs, the launch of the iPhone genuinely did change the smartphone industry and was the first inkling of mobile would eventually destabilise the PC sector.

    It’s interesting comparing Jobs’ iconic 2007 iPhone which sets the standard for product launches with the somewhat rough at the edges 1984 Boston presentation although both show how Steve Jobs was a master salesperson and a passionate believer in his products.

    The PC’s final milestone

    Three years later Steve Jobs delivered the milestone product that marked the beginning of the end for the PC industry, the iPad finally delivered a mobile computing device that businesses and consumers wanted.

    Apple’s iPad also marked a fundamental shift in the computer industry – no longer did the software companies control the market, power had shifted back to the manufacturers.

    From that moment on the PC, and Microsoft’s Windows business, started a terminal decline.

    The rise and fall of the personal computer is a great illustration of a transition technology. That Steve Jobs bookmarked the beginning and the end of the PC industry is an interesting note about a technology that changed the home and workplace.

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  • Microsoft edges towards the post PC era and the end of Windows

    Microsoft edges towards the post PC era and the end of Windows

    Microsoft’s evolution to the post PC era has been a fascination of this blog for several years now as the company’s once flagship Windows becomes irrelevant in a world dominated by smartphones and tablet computers.

    The launch of Windows 8 and the Surface tablet were the great hope for the company, but it appears the business model that built Microsoft into one of the world’s biggest companies is doomed. Microsoft is shifting to the post-PC era where Windows has little role.

    Yesterday’s financial results emphasised the shift as the consumer licensing business fell 6% year against last years revenues while the company’s overall revenues rose 14% – the old consumer Windows business is dying.

    This is illustrated in the company’s quarterly report, where the business units that delivered the growth were all in non-Windows areas.

    • SQL Server continued to gain market share with revenue growing double-digits
    • System Center showed continued strength with double-digit revenue growth
    • Commercial cloud services revenue more than doubled
    • Office 365 commercial seats and Azure customers both grew triple-digits.

    Drilling down into the numbers the trend against Windows is even more stark, here’s a chart of the performance of the division over the last ten years.

    Microsoft Windows division financial performance
    Microsoft Windows division financial performance

    As we see, life was good for Microsoft Windows until the iPad arrived.

    Following Apple’s proof that tablet computers could deliver what business and home customers wanted from a portable device, Windows’ revenue stagnated and now income and margins are falling.

    The devices and services strategy of outgoing CEO Steve Ballmer recognises is a reflection of how Windows is becoming irrelevant to the business.

    It’s hard to see where Microsoft now goes with Windows, the product still remains a key part of the business with 22% of revenues – although that’s down from 27% last year – and its hard to see a buyer parting with the hundreds of billions the division would be worth as a stand alone business.

    For Steve Ballmer’s successor as Microsoft CEO dealing with the Windows problem will be one of many big issues they’ll have to deal with, the future of the once iconic product though won’t define the future of the business.

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  • Does Bill Gates leaving Microsoft mark the end of the PC era?

    Does Bill Gates leaving Microsoft mark the end of the PC era?

    After Steve Ballmer’s announced retirement from Microsoft it was clear that the changing of guard was going to happen at Microsoft as Bill Gate’s last trusted lieutenant left a management position.

    Now Reuters reports that some of Microsoft’s shareholders are lobbying for Gates himself to leave the board.

    If that happens it would probably be the formal end of the PC era as Gates is the last of the pioneers of the desktop computer industry to still have a major role following Ballmer’s retirement and Steve Jobs’ passing.

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  • The PC industry’s search for new directions

    The PC industry’s search for new directions

    All Things D reported over the weekend that Microsoft executives are fretting over a major restructure being planned by CEO Steve Ballmer. This is part of the fundamental changes challenging the entire PC industry.

    Ballmer is dealing with massive changes in Microsoft’s core business as PC sales decline with customers moving to smartphones, tablet computers and cloud computing so finding new markets is a priority for the company’s board and senior management.

    The same problems are facing all the major players in the PC industry and it’s the main reason why Dell is in the throes of a battle to take their business private, what’s fascinating is the different ways these companies are responding to these changes.

    In Dell’s case the company’s looking at becoming “an Enterprise Solutions and Services (ESS) focused business” – essentially copying what IBM did a decade ago in moving from hardware and focusing on consulting and services to large corporations.

    Microsoft on the other hand sees the future in devices and cloud computing with Ballmer telling shareholders last year that becoming a “devices and services company” is the future.

    It’s important to recognize a fundamental shift underway in our business and the areas of technology that we believe will drive the greatest opportunity in the future.

    In Ballmer’s view those opportunities lie in cloud computing services and devices like the Windows Surface tablet computer and the smartphones, products which Dell struggled with during the 2000s.

    These are two very different directions and it illustrates just how the major players in the PC industry are searching for new business models as the old one collapses.

    How many of them successfully make the transition will be for history to examine; it’s easy to see Microsoft surviving given its massive financial reserves and market power, although nothing can be taken for granted as we could have said the same about Kodak twenty years ago.

    Dell on the other hand is far weaker being smaller with a narrower product base and currently has the management distraction of competing buyout offers. Dell’s survival is far from certain.

    Others, like HP, seem to be slipping into obscurity as management flip-flops from one scheme to another. The takeover of EDS as part of HP’s move into enterprise consulting does not seem to have gone well and the company is wallowing.

    What we’re seeing is the rapid disruption of an industry that itself was the disruptor not so long ago. It reminds us that even the corporated giants of today are as vulnerable as the stagecoach companies of yesteryear in the face of rapid change.

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  • Will going private save Dell?

    Will going private save Dell?

    Now Michael Dell and a team of private equity investors are going ahead with taking the company he founded private, the question is will this make any difference to the technology company.

    Turning around Dell is going to be a massive task as the company has lost the advantages that made it the world’s biggest PC manufacturer. At the same time, the industry itself is shrinking as corporate and consumer customers move from personal computers and servers to tablets and cloud services.

    The triumph of logistics

    Dell’s real success lay in logistics. In the early 1990s the company – along with its competitor Gateway – developed a global just-in-time assembly network which took advantage of cheap Asian suppliers, efficient air courier networks and call centres.

    Bringing these together meant Dell and Gateway could deliver a custom made computer to a customer in just over a week without the hassle of holding warehouses of stock, employing sales staff or renting stores.

    Price was the ultimate advantage and these companies could undercut competitors with their efficient networks, lack of inventory and no retail overheads.

    Losing an advantage

    Unfortunately for Dell, competitors caught up and by the early 2000s most PC manufacturers were using similar manufacturing methods and were able to match their price points.

    By 2006, HP overtook Dell as the world’s biggest PC manufacturer.

    Worse yet, Apple adapted Dell’s logistic systems to corner the high end of the PC market and then expand into consumer devices.

    Dell’s reaction was to compete solely on price and to do so they cut component costs and outsourced support to lowest cost providers.

    This backfired horribly and the poor quality products coupled with execrable after sales support deeply damaged Dell’s brand with the Dell Hell debacle being the public face of widespread customer unhappiness.

    Dell in the post PC world

    Making matters worse for Dell is that the market has shifted away from personal computers.

    Dell has a tragic track record of diversifying out of the PC markets, all of its attempts to move into consumer electronics with PDAs, smartphones, tablet computers and entertainment devices have been, at best, embarrassing.

    Enterprise computing has been more successful but even here Dell has shown little innovation and most of their entries into the corporate markets has been through acquiring specialist companies rather than doing anything different.

    Part of this to failure to diversify has been because of Dell’s relationship with Microsoft. The various versions of Windows intended to be used on PDAs and tablet computers turned out to be wholly unsatisfactory and left the market open to Apple with the iPhone and iPad.

    Going private

    That Microsoft is going to have a financial interest in the privatised Dell is not encouraging for the company’s prospects.

    Neither is the continued presence of Michael Dell. His return as the company’s CEO in 2007 has not solved the company’s problems.

    It’s difficult to see where the problem was being a public company, Dell’s woes were not because of troublesome board members or activist shareholders.

    Going private might allow Michael Dell and his team to experiment without the accountability of quarterly reporting, but that barely seems worth 26 billion dollars.

    Dell could surprise us all by reinventing its business and claiming a role in the post-PC world, but right now its hard to see how.

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