Changing places

Changing places

There is a clear line of division in the desktop/laptop debate. In the red corner sits the channel community, claiming that although laptops are becoming more popular, they are still a long way from replacing desktops in the office environment. "Not so . . ." call laptop vendors from the blue corner, claiming their portable offerings are increasingly becoming the standard replacement for desktop models in the corporate environment.

Industry analysts are having a bet each way, with some supporting the laptop takeover and others pointing out that, although the notebook market has grown, market share has decreased with respect to sedentary desktop models.

Analyst Inform's figures are telling. Over the first six months of this year, desktop market share has increased from 76.2 to 79.7 per cent, while notebooks fell from 17.2 to 15.1 per cent.

While these figures fail to show that both markets have grown substantially, they do tend to indicate that the notebook is growing in its own right, rather than at the expense of desktop sales.

Andy Woo, computer and peripherals analyst with IT industry research group Gartner, points out that the notebook market has seen 36 per cent growth over the last 12 months.

"Growth has been particularly strong in the last quarter, where we saw a 26 per cent growth in quarter-on-quarter sales," Woo said.

Phil Burnham, senior research analyst of PC sales at Inform, believes there is no evidence that notebook sales are cutting into the desktop market.

"Notebooks are definitely not having an effect on desktop sales at the moment," Burnham said. "Notebook sales are increasing, but there is nothing to indicate they are replacing desktops to any degree."

According to Burnham, a history of unreliable supply, both for local OEMs and the ready built sector, has led to channel players remaining wary of laptop vendors. Although he concedes the situation has improved significantly over the last six months, he believes vendors still have a lot of catching up to do.

This idea is borne out by Phillip Tran, sales and marketing director of systems integrator and PC manufacturer Compucon.

"For a long time, there was not enough price stability to make notebooks a viable offering for the channel. Whether you were manufacturing laptops here or importing them ready made, there was always the concern that supply would not come through," Tran said.

Tran believes this instability in the supply chain was a major inhibitor to investments in the laptop market.

"For a long time we were involved in the notebook market in order to maintain goodwill. It really wasn't making us any money because we would have to order ahead and suddenly prices would fall and our margins would disappear," he explained.

These improvements in supply can be attributed to a number of factors. On the one hand, the manufacture of all-important LCD screens has been significantly scaled up, and on the other the CPU market has stabilised.

According to Tran, much of this improvement can be laid at the feet of Intel and their renewed focus on fulfilling the requirements of the local OEM market.

Despite this, Inform's Burnham is yet to see this supply driven improvement in laptop sales morale spread throughout the channel.

"The feedback we have been getting is that the channel is still having problems sourcing some of the products," Burnham said.

Closing the gap

While Avery Hilditch, joint proprietor of Adelaide-based reseller and systems integrator Secrett Systems, has seen some improvement in notebook sales over the last 12 months, he is convinced there are two main factors which deter end users from making the investment in portable PCs instead of desktops.

"My customers are not prepared to pay an extra thousand dollars or more for a machine that is not as powerful as the desktop offering," Hitditch said.

Price and power are widely recognised as the two principal stumbling blocks in the mobile market. However, the narrowing of the gap in both these areas appears to be driving much of the notebook sales growth.

In a comment which echoed throughout the vendor community, Antonio Leone, technical product manager for notebook PCs at Acer, said there had been significant changes to the time lag between improvements in desktop and notebook performance.

"There is still a bit of a technology gap, but it is definitely narrowing. It used to take months for more powerful processors to be included in a mobile offering," Leone said. "These days improvements made to desktop CPUs come through to the notebook space a lot quicker."

Arno Lenior, marketing manager for NEC computers, believes the price changes and power improvements have made possible significant improvements to the total cost of ownership equation.

"The affordability factor is significant - a lot of people who are interested in mobile computers are able to make the change to a paperless portable office. For the first time, end users are reaping the rewards of the total cost of ownership," Lenior commented.

"Employers are seeing that when staff have the freedom to take the PC home they get increases in productivity that quickly make up the price differential," he said.

Mark Whittard, Toshiba's national marketing manager, Australia/New Zealand, believes these changes to the price and power will drive the laptop wedge further into the desktop market.

"Slowly but gradually we have seen the market grow from 10 to close to 20 per cent of total PC sales. It is being fuelled by cheaper notebook prices and more concurrent releases of technology," Whittard said.

Great expectations

There is a sliding scale that represents vendor ideas about the desktop replacement debate. Some vendors are convinced that notebooks are well positioned to cannibalise the laptop market, while others are seeing growth in some very specific verticals.

NEC's Lenior is firmly in the replacement camp and believes a growth in the proportion of laptops used in the corporate environment is the inevitable result of changing work practices.

"We are seeing massive growth in desktop replacement. Notebooks are significantly more flexible, they allow for hot desking, telecommuting and they make a paperless office a realistic option," Lenior said.

Graham Orford, national marketing manager of Australian PC manufacturer and systems integrator ASI Solutions, believes that, whilst mobile offerings are gaining ground in certain sectors, the growth is not as healthy as was originally forecast.

"We are selling more notebooks now than we have ever sold, however we have not seen the 20/80 80/20 switch that was being forecast by industry commentators a year ago," Orford said.

Acer's Leone agrees and also points out that while notebooks are set to grow into some particular verticals, a complete takeover is still a long way off.

"Notebooks are not going to replace desktops entirely. In time, they will account for a greater portion of PC sales, but it is a gradual process and depends on the success of a couple of variables."

One of these is, as several analysts have pointed out, that the PC market generally has been quite flat thanks to big spending in preparation for Y2K and deferred spending thanks to expected post-GST price cuts.

However, there are some more practical market variables that vendors, with a tendency to focus on sex appeal rather than practicality, have failed to notice.

It seems resellers may be missing a comprehensive market assessment capable of identifying appropriate markets. For starters, not everyone needs a portable PC. Since not everyone is on the road, the majority of the positions out there are still best done behind a desk at an office where people and paper resources are centralised.

Secrett Systems' Hilditch points out that notebook resellers haven't discovered the bountiful market they once expected because portable computing simply does not offer the revolution in computing that vendors are promoting.

"Who wants a notebook in an office?" Hilditch asks. "They are fine on the road, but most office workers just don't need to drag their computer around with them - most people sit still all day."

Technological innovation is still a jump ahead of human capacity for change and work practices often linger behind available resources. This point has not been lost on IBM, which is focussing its marketing and development resources on verticals.

Darren Gosling, marketing manager of mobile computing at IBM, described a marketing and R&D strategy which targeted appropriate uses before technology was developed. "Our products are really addressing a mobile market. We use industry analysts such as Gartner to identify the mobile user, and then develop products to suit their needs," Gosling said.

A failure to properly identify target markets and develop products appropriately could leave resellers attempting to sell square pins into round holes.

While faster, lighter, smaller is often the catch-cry of vendor marketing and speed is important, weight and size are not issues when it comes to desktop replacement.

Hilditch believes that affordability has been the greatest influence on laptop uptake, however wider usage throws up other questions. According to Hilditch, ergonomically, desktops are still ahead of their portable counterparts.

"They are still a glamour item - more people are buying them because more people can afford them. However, unless it is really necessary to carry your computer with you, the glamour wears off really quickly," Hilditch said. "When people put laptops on their desks they end up hunched over for eight hours a day."

Although some laptop vendors are beginning to respond to ergonomic issues, most are more interested in focussing on "flexibility", as their major contribution to ergonomics in portable PC design.

Toshiba's Whittard responded to questions on ergonomics with a comment regarding reductions in the weight, thickness and footprint of the latest offering.

"We have solved many of the problems associated with ergonomics because our offerings are significantly lighter and thinner than our previous offerings. Our devices have evolved from five kilos to a little over one, and have dropped in thickness by about a half," Whittard said.

Hilditch, however is adamant that laptop sales might be on the rise but they have a long way to go before they are as comfortable to use as desktop offerings.

"The main thing you do to a computer is enter information through the keyboard and read information via the monitor. If you can't do that comfortably on a laptop for eight hours a day you may as well stay with a desktop," he said.

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