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XP: A case of peripheral vision?

XP: A case of peripheral vision?

If you've used Windows 2000 you will be familiar with the functionality and design of the Windows XP operating system, as well as the kind of hardware it needs to run. Yes, XP likes powerful processors, lots of memory and, like all recent Windows releases, uses its fair share of hard drive space.

In years gone by, that combination signalled a boost in sales of new PCs as users sought the latest hardware to ensure acceptable performance from the new operating system and the applications software designed to exploit its features.

Windows XP is a little different. Most high-end machines purchased in the last 24 months are more than equipped with the processing power and hard disk space for XP. And educated consumers, whether they're sitting in an office or the spare bedroom, know it.

Add to this the fact that in the current economic climate, cautious spending is the order of the day, so predicting what the market will require in the wake of the XP release is a little trickier.

PC sales worldwide are expected to tumble 10 per cent compared to the previous year, and with consumer spending locked by fear of war and further economic pain, it's hard to see how Microsoft's new OS could do anything more than echo the glorious times when Win 95 was new kid on the block. Nevertheless, Microsoft's new baby is in it for the long haul, according to Alan Bowman, director of home and retail at Microsoft Australia.

"We never expected to set the world on fire with Windows Me, but with XP we expect the sales to be equal or greater than Windows 98," he says.

"Given the current landscape, we've committed ourselves to timing, training and marketing to get the channel engaged from day one. It probably won't be a big bang, but it will kick-start sales."

So where is XP likely to increase levels of trade enthusiasm?

Thanks for the memory

Memory sales are certainly going to be a big winner from the release of Windows XP. Like Windows 2000, XP needs a good chunk of memory to run smoothly. And whether it's DDR, SD or RD RAM, the rule is, the more the better.

"If the customer is upgrading, the component that needs to be most reviewed is the RAM," says Mark Linton, product marketing manager for home and small business at Microsoft Australia.

Microsoft states that 128MB is required for basic users of XP, but Linton concedes that for Windows XP, the more RAM the better.

"256MB is the sweet spot for power users," he claims. "And as soon as you get into video editing, or even multiple users at the same time, then 256MB is going to give you better performance."

It's now fairly common to have machines with 256MB of RAM, although 64MB and 128MB have been the norm in many systems over the last few years. Consequently, while many machines sold over the last few years have more than adequate processing power and disk space, users looking to upgrade to XP will need to boost system RAM to 256MB or 512MB to ensure higher performance.

Memory producer Kingston Technology, best known in Australia for after-market memory upgrades but also an OEM of memory for companies such as Hitachi and Toshiba, is preparing for an increase in demand for memory from buyers of Windows XP.

"The economic downturn has caused corporations to reassess their purchases," says Keith Hamilton, Australian country manager for Kingston Technology. "The hot button is the return on asset that really makes sense to them. They're saying, 'This is the hardware we have, what can we do to squeeze the most out of it?'"Through distributors, Hamilton is preparing bundles with Windows XP in order to capture users looking to upgrade to XP whose systems need performance-boosting memory, while at the same time boosting margins for resellers.

Harvey Norman's general manager of computers and communications, John Slack-Smith, agrees with Hamilton's assessment. "Our memory sales are now as good as they've ever been and we expect an acceleration of that with XP."

XP will also have the impact of making 256MB standard on new systems, with many buyers likely to be ready to consider upgrading to 512MB. And unlike previous releases of Windows, Microsoft will target the hardware-heavy XP operating system across both consumer and business markets.

Linton suggests that retailers considering selling XP to the home market with existing hardware should offer a service to add memory and upgrade the operating system for the user.

Old PCs for new

The fact that many machines already in the market are more than capable of running XP is good news for many PC owners and less good news for PC sales.

However, upgrade PC sales may be spurred on as "Ready for Windows XP" applications enter the market.

Users with computers that were top-of-the-line more than two years ago may be moved to consider a new PC in order to take advantage of the stability and functionality XP has to offer, its multimedia capabilities, or by new applications and devices being released for XP. Even the sizzle of the extensive marketing campaign planned by Microsoft may drive earlier-than-anticipated system upgrades, particularly for home users.

"We've found the upgrade cycle, which was every three years, was starting to push out. It was moving slightly to a 3.5 year cycle," says David Hepworth, Compaq Computer Australia's manager for desktop access solutions.

Hepworth expects that this cycle time will go back down due to factors such as Compaq's own product development, the Windows XP release, and changes to Intel pricing, which all result in greater value from upgrades.

"This is a real opportunity for resellers," he says.

Certainly, prompting this lifecycle market to move ahead of time is a strategy Microsoft has used in the past, most recently with the targeting of Office XP at users who bought Office 97 but skipped Office 2000.

The PC purchasing strategies of corporate IT buyers may be little changed, however. Many corporations are already moving to Windows 2000, and have been specifying hardware that meets the requirements for 2000, and hence XP. Nevertheless, while IT managers may have plenty of processing power on users' desks, it's unlikely that they will disrupt the momentum of a Windows 2000 rollout to add Windows XP to the standard operating environment, even if they see advantages in the technology.

Sales of application software are likely to be increased as IT departments look to protect their software purchase by requiring Windows XP support.

"I think most corporate clients are keen to ensure applications are XP-compatible and certified even if they're not rolling out XP now," claims John Donovan, Symantec's managing director, Australia/New Zealand.

Of course, users with computers that were at the value end of the market at the time of purchase may also consider upgrading. This is a price-sensitive group not generally as interested in the bells and whistles a new operating system has to offer.

Indeed, they may not necessarily need Windows XP at all, even though XP's improved stability and much of the new interface will certainly enhance their computing experience. Simply put, the hardware requirements of Windows XP will most likely result in these users buying a higher-specification machine than they probably would have previously.

A bit on the side

While memory is a clear necessity, and the sales of peripheral devices and system components across the board are likely to benefit, sales of multimedia products are likely to be the big winner.

"The growth is going to be with digital devices. Still cameras and digital video cameras are the hot areas," claims Microsoft's Linton.

This presents an opportunity for resellers looking at supplying these devices, connectivity solutions for these devices, and software that offers greater multimedia functionality than the base operating system offers.

Digital audio and video already have a groundswell of support. XP will make working with these formats, and connecting to the devices that produce them, easier than ever. USB and FireWire are both supported so customers will need connectivity solutions such as FireWire cards and USB hubs in order to capitalise on this functionality.

Naturally, if the user doesn't already own any digital audio or video input devices they may be prompted to buy them. This bodes well for the digital video camera market, as well as for sales of standard digital cameras.

Harvey Norman's Slack-Smith sees the potential of peripheral product sales in conjunction with the release of XP. The retailer is targeting four areas: digital music and video, digital photography, gaming, and mobile computing.

"Positioned the right way, and if we get the message right to customers, we have the opportunity [with XP] to have as fundamental an impact as Windows 95," he says.

Nick Angelucci, Creative Labs' Australian marketing manager, is confident the new operating system will boost demand for his company's products.

"It's going to go ballistic," he says. "People will be buying up extra hardware such as sound cards to complement the XP purchase.

"I think we're at the stage where the peripheral market will be the big thing for the coming six to nine months."

Creative recently released the SoundBlaster Audigy, a 24-bit 100dB sound card, and has Windows XP drivers ready for installation.

Multimedia could also drive sales of other system components and peripherals. Digital audio and video require significant hard drive space, and preferably high-speed hard drives. While communications technology is now more than adequate for transferring business documents, the large file sizes of multimedia content will necessitate the use of CD burners to store and transfer files, particularly for machines not connected to corporate networks. Importantly, Windows XP includes the functionality to record CDs in the base operating system.

Graphics cards may also be purchased to enhance video performance or make use of Windows XP's multiple monitors feature. The multiple monitors feature permits the XP desktop to cover more than one monitor, perfect for use in applications such as video editing where many windows are often open at the same time.

Ready-for-XP software sales overall may take some time to follow the XP release, although antivirus software is one category that should take off straight away. Symantec, which has been working solidly to ensure its range of software meets the Ready for Windows XP requirements, expects XP-compatible antivirus applications at the time of purchase of the OS to be hot property.

"We're going to have very good attach rates with antivirus products and XP," claims Symantec's Donovan.

Increased activity

There is no doubt that Windows XP will result in an increase in activity in the PC market. However, if PC owners looking to use Windows XP choose to add low-priced RAM to an existing system rather than buy a new PC, the impact may be less than expected.

Corporate PC purchasing plans are likely to face little alteration, and IT departments in the middle of Windows 2000 rollouts are unlikely to change plans to include Windows XP.

XP-related sales to consumers will be more complex than sales related to the release of past Windows operating systems. Buyers will require greater education on the advantages of the operating system and the memory and processing power needed. Resellers looking to capitalise on the Windows XP opportunity should consider concentrating on sales of new PCs to customers with machines over two years old and those previously in the 'value' category. Owners of newer machines will need RAM upgrades and potentially additional items such as FireWire cards.


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