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More thoughts on change in the computer industry

January 8, 2007

It really is all about change. 

 In my last post, I talked about change in the computer industry over 40 years.  Hardware used to be unreliable, expensive, and required a lot of electrical and mechanical knowledge to work on it.   I was trying to show how change in technology, affected peoples perceptions about computers, how they are sold, and then how the cost structures have changed and the implications that brought.  I almost sounded like an apologist for the computer industry, lecturing the consumer on the seemingly unconsidered effect that declining hardware costs had on the level and type of support that could be provided for free.  My point was that in the 80’s and early 90’s, hardware costs for PCs were relatively high, and a lot of overhead could be built into the price.  As price pressures have driven down the cost of the components, room for all that overhead has become squeezed out, but the customer hasn’t truly been made to consider that at time of purchase.

While talking to a friend over the weekend,  the conversation touched on the computer business I used to run.   As I talked about it and considered my thoughts from my last post, I realized that type of business only could exist at a certain point in the evolutionary continuum.   Primarily, the business built, sold, and serviced PCs.   The business also represented several name brand lines of computers available at the time, making use of those company’s reputations when selling a name brand was important.  This type of business was only viable in the time of computer “dealerships”  – places people went to buy PCs.   There was a marketplace where commoditization made the individual parts available at a price where they could be assembled and sold as a PC for significantly less than a person could buy from a top tier manufacturer like IBM, HP, Compaq, or about a dozen other brands.  It was also a time, when most people were still intimidated by computers such that they were reluctant to just order all the pieces and assemble it themselves for even greater savings.   This market niche really doesn’t exist anymore, squeezed out by drastic cost reductions from the top tier manufacturers, and a much more savvy consumer base that is willing to either buy off the web directly or assemble it themselves.

So, while this niche no longer exists, if a business still existed from those days, it would have undergone a lot of changes, most likely transforming itself into a pure services business.   The computer industry is continually changing, and as it redefines itself, so must the businesses that comprise it.  Those that don’t go the way of the dinosaur.

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2 Comments leave one →
  1. January 11, 2007 10:42 pm

    Excellent post, Mark. Interestingly enough the niche you mark dead isn’t dead in Latin America, at least for desktop computers (Laptops are a whole different story). In Argentina, for example built up PCs represent around 80% of the market share, so much for “niche”. Yet the rest applies exactly the same, and computers are no longer regarded as only work, but more and more as a hosehold appliance and play a very important role in every day’s life for an ever-increasing number of people.

  2. vijaysaradhi permalink
    May 10, 2009 11:13 am

    The same is here in India as well, around 60% and counting is based on assembled pc’s.Most of the companies are either american or from east asia add the transportation costs and the tax the governments put on those systems,they require deep pockets from the consumer’s side to get them.On the other hand assemebled pc’s are considered as value for money and people tend to obtain them for good.competitive prices are required in order to obtain more number of consumers for OEM’s if they want a good chunk of this huge market here

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