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Making Sense of It All

by Reid M. Watts, ProgenyVC.com

Advice and Perspective for Corporate Executives

Thursday, 12 December 2002 8:30 am
Within the last week, three analysts and one major computer company have reported data giving credence to the "good enough computing" threat that I talked about here on November 20.  

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Roger Kay of IDC reported that worldwide PC sales will end the year with only a 1.6% increase over the depressed 2001 levels.  He attributed the problem to a spreading "good enough computing" philosophy.

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Dan Niles of Lehman Brothers noted that his data questions the commonly-held assumption that corporations are continuing to follow a three-year upgrade cycle on their installed PCs.  He is now projecting revenue growth in 2003 of only 3%.

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Steven Milunovich of Merrill Lynch reported that a survey of corporate IT officers found that companies want to reduce IT spending as a percentage of revenue.  Also, he noted that "we haven't been able to corroborate a major upgrade cycle".   

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H-P stated last week that it expects its 2003 revenue growth  to increase 2% to 4%. ( PCs account for about a quarter of the H-P's revenues.) 

What is the problem?  In my November 20 column I stated:

"The only solutions to the problems caused by “good-enough computing” are new applications that compel the buyer to upgrade in order to obtain their benefits.  In other words, we need new “killer apps”, as we like to call them. That is what has always driven computing and networking demand.  We are currently short on such applications.  Mix that observation with the inexorable forward march of Moore’s Law, and the effects are shrinking revenues and lengthening replacement cycles (worst fear: replacement cycles become refurbish cycles).  That is the crux of the problem currently facing the computer, software, and communications industries."

This is a serious threat to the health of the IT industry.  We must solve this problem.  

There is much to be done.

A new column will be posted here every weekday morning at 8:30 ET. Let me know what you think – email me at reid@progenyvc.com

 
 
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Last modified: February 03, 2008
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