SMEs key to PC market's success

The small business sector will come into its own in the first half of 2000, driving the PC industry as corporate sales lag.

According to a report by analyst International Data Corp (IDC) it will be a spike in sales to the SME market as it prepares for the GST that will fuel the 4.7 per cent increase for the PC market, rather than the traditional corporate sector.

Underlying this prediction is the Federal Government's 100 per cent deduction on all GST-related hardware and software between July 1 1999 and July 1 2000 for companies with revenue below $10 million, which includes the ongoing costs of professional advice and training.

`That's a big incentive to get on with purchasing,' said IDC analyst Bernie Esner. And with the second quarter of the year traditionally the largest for the PC market, GST-generated sales are the icing on the cake for those focused on small business.

`This is a double wammy for some companies, especially seeing that the Australian Bureau of Statistics estimates that 20 per cent of small businesses don't even have a computer.'

Contradicting this healthy outlook for the PC industry however, is the troubled corporate sector. With companies like AMP and Westpac laying off 3500 and 3000 workers respectively, and the Finance Sector Union claiming the overall figure is actually 15,000 lost jobs in the banking sector and 3000 in the insurance industry over the last year, PC sale opportunities in the corporate space have been significantly diminished.

And to rub salt into PC resellers' wounds, auction houses will actually benefit from this. `Most of the jobs have been full-time employees in bank branches, suggesting a surplus of PC hardware will flow into auctions,' said Esner.

Massive Y2K projects will also contribute to the slowdown in the corporate sector, with a lot of big corporates having already upgraded to new systems over the last six months.

The end result will be huge discounts and sales incentives by companies such as Compaq, Hewlett- Packard and IBM, who collectively cover about 51 per cent of the corporate market. Intel has already started the ball rolling with up to 54 per cent discounts on its Mobile PIII range.

Yet Esner rates this strategy as short sighted, both as a corporate incentive and as a means of taking advantage of the GST bonanza he envisages.

`Vendors and resellers need to prepare for a change in buying patt-erns. They'll need to stimulate demand, reassess inventory, look at their bund-ling strategies and their credit and distribution logistics, because you only get one opportunity a year to cream the market,' said Esner. He suggests a collective IT industry marketing campaign, similar to the one the car industry is currently undertaking, in which the ramifications of the GST and possible solutions are explained.

`The PC industry has not even decided whether or not PC products will be cheaper or more expensive under the GST and I haven't seen one bundled solution package,' added Esner.

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