Power, pricing and production in '98

Power, pricing and production in '98

The funny thing about the PC industry is that no matter how turbulent today seems, you'll look back a year from now and think these were the sane times. The craziness just doesn't end.

The coming months will bring faster, cheaper PCs with new options and vendors grasping for the best way to sell, just like 1997. Some of the turmoil stems from causes information technology managers have come to accept. Faster chips give you more bang for the same buck you spent the year before, and new technologies - such as Universal Serial Bus and Accelerated Graphics Port (AGP) cards in 1998 - will boost overall system performance.

Where things get really confusing for IT managers is in the purchase process. Prices tumbled in 1997, and the buying model was recast as buyers re-examined the direct vs indirect argument and more vendors embarked on build-to-order manufacturing. Price cuts and build-to-order strategies will continue to be hot in 1998, according to analysts.

The average price of a corporate PC will continue to slide in the coming year, according to analyst Chris Goodhue of the GartnerGroup.

"Intel and the OEMs are being really aggressive on Pentium II roll-outs, and those Pentium IIs are falling right into the pricing sweet spots," Goodhue says. Bargains still can be found in traditional Pentium machines. "Maybe buyers can save money by not rushing out to buy the latest. I think Pentiums will be viable through most of 1998, or at least the middle of '98."

For many types of users, a Pentium may be fine at this point, as long as it has enough memory, although the Pentium IIs may be a good investment based on their attractive pricing and the fact that the architecture will be around for a while.

Both Goodhue and Rob Enderle, senior analyst at Giga Information Group, raise red flags for buyers looking at the sub-$US1000 PCs that caught so much public attention in 1997.

Goodhue says although the sub-$US1000 PC is worth considering, buyers must keep in mind that the system seldom includes a monitor, and the published price might only buy older technology, such as a 133MHz Pentium or a nonstandard design.

Yes there's a catch

One reason prices are falling is because vendors are changing how they do business. With build-to-order strategies, vendors assemble PCs only after a customer books an order. Vendors aren't stuck with large inventories of preconfigured PCs, and buyers can better customise their systems.

In the US, build-to-order strategies and the ongoing price cuts are largely a result of IBM, Hewlett-Packard and Compaq reacting to the success of lower cost, direct vendor Dell. And those companies will put still more competitive pressure on Dell in the future, according to Goodhue.

"To be honest, I don't see the number one driver in the choice of a vendor to be direct or indirect. Very simply, it's price. At the end of the day, Dell is on the short list because it is putting price pressure on other vendors," Goodhue notes.

Goodhue says IT managers must be aware of how changes in the industry will impact them and how they will change their relationships with their PC manufacturers.

Enderle offers two pieces of advice for IT managers. First, when dealing with build-to-order strategies, be aware that your system - particularly less common components - may not have been tested as thoroughly as a standard configuration. Second, he says, "Buy big. Be important to your vendor, and then if you have a support problem, they will treat you a lot better."

One of the most important technology developments Enderle sees coming involves system management.

"We're looking for a set of equipment that is much more easily managed from a central site," he says. The person doing the central management might be part of an IT organisation running preventive maintenance after office hours or a vendor downloading a software fix.

Another technology that analysts agree will be hot in '98 is AGP, which off-loads graphics processing from the CPU to a special bus, resulting in faster overall system throughput.

Users can expect a flood of peripherals based on the Universal Serial Bus architecture, with digital cameras for still images and videoconferencing being particularly hot in 1998.

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