Gartner
Strategic Planning Assumptions
The compound annual unit growth rate for the worldwide desktop PC market for 2003-2006 is forecast to be 7 percent (0.6 probability).
The average configuration of a professional mainstream desktop PC system in 2005 will be 5.5GHz CPU speed, 1,000GB hard disk drive, 512MB system memory and 17-inch flat-panel monitor (0.7 probability).
By 2007, 25 percent of desktop PCs shipped will not use the current desktop form factor (0.7 probability).
By 2007, sufficient network and digital-rights management standards will have emerged to accelerate the adoption of home networks and the proliferation of home network connected devices (0.8 probability).
By 2005, one in three PCs will be sold in developing regions (Asia/Pacific, Latin America, Eastern Europe, and Middle East and Africa), up from one in four in 2002, and more than 65 percent of worldwide new-seat shipment opportunities will be in those regions (0.7 probability).
By 2005, flat-panel displays will account for greater than 50 percent of monitors shipped (0.8 probability).
Introduction
The following document provides Gartner’s key predictions for the PC market, followed by its expected impact in 2003 and recommendations as to how to react.
Gartner Dataquest Perspective
Prediction No. 1
Extending PC Life Cycles Will Dampen Shipment Volumes in 2003
In the current economic downturn, the need to minimize spending together with the still adequate performance of many PCs purchased more than three years ago will allow PC purchase decision makers to extend the life of their installed base of desktop PCs rather than replace them. Increasing dependence on replacements rather than new seats in nearly saturated developed markets will exacerbate the impact of extending life cycles on growth levels. Market growth will be pushed out into later years, and compound absolute shipments in the next three years will decrease compared with previous expectations,
Impact in 2003
Learning from the downturn, in 2003 more than 50 percent of enterprises will adopt as a formal strategy a four-year desktop life cycle for mainstream users.
Slower-than-expected demand and falling component costs will drive average desktop system prices down by 5 percent compared with 2002.
IT decision makers will continue to buy in high-end value or entry-level mainstream price bands (currently the $800-to-$1,100 price range).
Reacting in 2003
Industry participants should expect the replacement cycle in 2003 to be more muted than had previously been believed.
End-of-life-cycle issues rather than technology innovation will be the major reason for upgrading PCs in 2003.
In this highly cost-conscious environment, vendors should extend their offer of platform stability to include lower price bands.
To maximize the savings offered by extending PC life cycles, enterprises should deploy asset-management databases.
Enterprises will need to evaluate whether extending PC life cycles will have a negative or positive impact on total cost of ownership (TCO) or return on investment.
Enterprises considering leasing need to ensure that that the length of their lease matches the extended life of the PC assets being leased. Extending leases or buying PCs at the end of a lease term can create unnecessary additional cost.
Prediction No. 2
Average Professional Desktops in 2003 Will Boast 2.8GHz CPUs, 160GB Hard Drives and 256MB Memory
Impact in 2003
The average configuration of a professional mainstream desktop PC system in 2003 will be 2.8GHz CPU speed, 160GB hard drive, 256MB system memory and 15-inch flat-panel monitor.
Reacting in 2003
Enterprises should focus desktop PC acquisition decisions on real business value additions such as platform stability rather than technology and reduce costs by eliminating unnecessary legacy.
Enterprise customers are encouraged to use stability – rather than technical features or performance – as the key decision criterion to evaluate hardware choices within budgeted price bands
Vendors must differentiate their product portfolio by featuring clear price bands and creating brand value messages that focus on stability, image standardization and value-focused products.
Prediction No. 3
Small Form Factor PCs Will Be the Most Important Desktop Design Innovation in 2003
The mainstream desktop form factor has existed since the advent of the IBM PC in 1981. Technology constraints as well as the absence of a clear business case for changing the form factor have been major reasons for the lack of change. The advent of serial bus technologies will allow greater levels of form factor experimentation. A key technology will be PCI Express, scheduled for launch in 2004.
Impact in 2003
Expect limited form factor experimentation in 2003. Most innovation will focus on small factor designs that provide legacy ports as an option.
Desktop formats based on proprietary architectures that disaggregate (partition) the input devices and monitor from the system will continue to be deployed only in niche environments.
Reacting in 2003
Faced with revenue and profitability challenges in 2003, PC vendors will focus scarce research and development funds on established desktop formats. Innovative desktop PC formats will remain in the concept stage.
Large organizations should limit risk by continuing to focus on image stability rather than format experimentation. Small form factor PCs should be investigated as a route to reducing cost or improving value.
Prediction No. 4
Falling Flat-Panel Prices Will Sound the Death Knell for CRT monitors
Impact in 2003
Increased capacity, higher yields and greater competition will drive flat-panel display prices down in 2003. End-user fifteen-inch flat-panel displays are projected to cost $290 by the close of the first quarter of 2003, and 17-inch displays will cost $490 and 19-inch displays $750 by mid-2003.
By 2003, the price premium for a 15-inch flat panel display over a 17-inch cathode-ray tube (CRT) monitor (with almost equivalent viewing area) will be less than $100.
Reacting in 2003
Large enterprises should transition to 15-inch flat-panel displays as the corporate mainstream standard by mid-2003.
Longer product life, lower energy consumption, reduced space and the minor premium compared with 17-inch CRTs will make 15-inch flat-panel screens attractive.
Prediction No. 5
Lack of Network Standards and Widespread Broadband Availability Will Stifle Home Network and Device Growth
The confusion created by multiple home networking standards and the debates on digital-rights management issues continue to be two important barriers in the uptake of home networks. Resolving these issues, together with the widespread availability of broadband, will be a critical step in accelerating home network adoption and the proliferation of network connected devices.
Impact in 2003
Most home networks will be set up by enthusiasts and will be based on piecemeal architectures and legacy devices.
In 2003, PC and consumer electronics products that focus on communication rather than integration with other devices will be more successful than products that focus on achieving all-in-one functional integration.
With the exception of Japan, integrated PC and consumer electronics devices will be a small percentage of PC shipments because of the high price and unclear value statements associated with these products.
Reacting in 2003
In the absence of networking standards, vendors need to develop easy-to-install “out of the box” home networking – and partner with service organizations to do in-home installations for users unwilling to get involved in the technical details.
Home products that focus on integration should be carefully targeted and priced to appeal to early adopters.
Vendors should ensure that their products are “communications capable.”
Vendors should take a long-term view of the home network device opportunity and invest only sparingly in 2003.
Prediction No.6
International Vendors’ Share of the Developing Markets Will Decline in 2003
Saturation and slowing growth rates in the developed region (the United States, Canada and Western Europe) mean that international vendors are increasing their focus on the developing regions as one tactic in maintaining growth. However, local vendors and small system assemblers dominate in these markets, and typically international vendors have struggled to replicate the dominant market positions they have achieved in developed regions. Key factors are lower prices and brand-agnostic users.
Impact in 2003
The combined international vendor market share in the developing regions will decline in 2003 compared with 2002.
Expect international vendors to expand white-box programs in the developing regions as a strategy to penetrate these markets.
Most international vendors will not be profitable in the developing regions in 2003.
International vendors will continue to struggle to establish the equivalent brand equity and clarity they enjoy in the developed regions.
Reacting in 2003
International vendors should specify a small number of key target countries they wish to grow their market share in rather than trying to expand broadly across whole regions.
The cost-conscious nature of these markets means that vendors must explore new business models and partnerships if they are to be competitive.
Vendors should focus on acquisition price – TCO is unlikely to resonate in this market.
Key Issue
What market forces are affecting computing hardware platform shipments and revenue, now and in the future?
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