Researchers see tough times for PC makers

Shipment growth of personal computers in Europe and the US stagnated in the second quarter compared to other regions, according to market research figures from both Dataquest and IDC as the saturation of the major markets begins to create very real problems for the manufacturers.

Global PC shipment growth was 18 per cent according to Dataquest, and 14.5 per cent according to International Data Corp (IDC). Both market researchers released preliminary second-quarter shipment figures that showed some remarkable similarities. Worldwide, PC manufacturers shipped 30.1 million desktop and mobile PCs and PC servers in the quarter, said IDC, while Dataquest set the figure at 31.5 million units.

The researchers reported somewhat different figures for US shipment growth. Dataquest pegged US growth for PC shipments at 11.5 per cent in the second quarter of this year compared with the second quarter of 1999, while IDC reported 7.2 per cent growth.

Both Dataquest and IDC blamed saturation of the US PC market for the low growth compared to emerging markets in Japan, Latin America and the Asia-Pacific region. In particular, Dataquest said vendors in the US must find ways to persuade end users to replace their PCs more frequently.

B2C cruises through dot-com shakeout

According to the Giga Information Group, US business-to-consumer (B2C) sales over the Internet will grow from an estimated $US25 billion in 1999 to $US152 billion in 2002 and will then extend to $US233 billion in 2004. As a share of total consumer spending, Giga analysts estimate Internet sales will grow from 0.4 per cent in 1999 to three per cent in 2004. Giga believes dot-com merchants and mail-order convert merchants will share the growth in B2C Internet sales, but multi-channel companies will dominate B2C Internet sales by 2002.

Business-to-consumer Internet sales are still showing robust growth, but with a likely flattening of the growth curve in 2002. Consumer use of the Internet for product research will grow, but the majority of sales will still close in stores where consumers can touch products and take them home immediately, Giga analysts said. This pattern plays to the advantage of click-and-mortar companies that can operate in real-world, telephone and Internet sales channels.

Online music market to rocks on

Despite the absence of major label initiatives, consumers have turned online music into a mass-market phenomenon, where US online music sales are expected to reach $US5.4 billion in 2005, according to Jupiter Communications. While individual Internet downloads will continue to be effective marketing tools, the majority of digital music sales will come in the form of online subscriptions, the company advised. Music labels looking to prevent market erosion by digital music consumption must actively license their catalogues to third-party digital music providers and be prepared to market the resulting services in tandem with media and commerce partners if they wnt to survive in the new regime.

In what has become an annual tradition, Jupiter released its vision for the online music industry during the opening session of Plug.In: The Jupiter Online Music Forum in New York. Jupiter projects that the online music market will secure approximately one-quarter of the total US music market within five years, with digitally distributed products representing 28 per cent of total online music dollars, or a $US1.5 billion market in 2005.

However, Jupiter sees a complication as the growth of networked music sharing, such as Napster, reveals consumer readiness for subscription services, which will account for $US980 million in 2005 versus. a la carte download music, which will grow to $US531 million in 2005.

Linux growth to outpace the market

Despite a 17 per cent increase in server operating system environment shipments worldwide, revenue in that market will increase by just over one per cent by 2004, according to a study recently conducted by International Data Corporation (IDC). Lower-priced products - notably the open-source Linux operating system environment - are generally blamed for the discrepancy by the market researcher.

Even though it recently slipped past Novell's NetWare into the number two market position in terms of new license shipments. Linux brought in just $US67 million last year, which is insignificant compared to Microsoft's revenue. "The cost of the Linux shipments going out the door are at a very, very low price compared to competitors," an IDC spokesman explained. "It is drastically less expensive, but it can't do some of the things other operating systems offer. But if (people's) needs fit within those boundaries, people will buy it.

"Companies like Red hat Software can get Linux for free on the Internet, add services to the operating system and sell it for a profit," he added. Copies of the Linux software obtained freely off of the Internet were not included in the IDC study, making the prescribed rate of growth very conservative.

Networking to the centre of gravity or a black hole?

According to recent research from META Group, intense consolidation in the enterprise management market has focused on providing end-users with integrated end-to-end enterprise views. Application response-time vendors - like FirstSense, VitalSigns, Ganymede, and NextPoint - have been purchased by monitoring companies, which will integrate them with network and system monitoring elements.

While laudable, on-site customisation is still required, and META believes new functions in B2B and B2C will make it difficult to manage this externalised environment. Its analysts therefore warn that users should be wary of any out-of-the box solution claims; and should further prepare to acknowledge that configuration work will probably cost more than the software itself.

META argues that the bottom line is that while increased end-to-end functionality is positive, users should insist on fixed-cost estimates for any follow-on consulting work to ensure new insight is obtained with acceptable costs.

Vendors should pay more heed to SMEs

Often viewed as a single entity, the small business market is very diverse and hard to reach, according to IDC. To be successful targeting the growing small business market, technology providers must recognise and understand the distinctions between small business segments, the research company warned after analysing the differences between small businesses by industry.

Because small businesses are so diverse, it isn't possible for vendors and service providers to effectively reach all vertical markets with specialised programs. Instead, to succeed in the small business market, vendors need to identify the most attractive targets based on current and future technology acquisition potential, IDC analysts found Banking/finance, accounting, real estate and insurance industries stand out as the most sophisticated and intensive IT consumers in the small business space. Retail firms are at the other end of the spectrum, with the lowest technology spending and adoption rates. Nevertheless, IDC won't single out an industry as the most or least attractive for IT vendors because each has it strong points. For example, the real estate industry exhibits high use of wireless communications and many retail firms invest in e-commerce-enabled Web sites. Transportation/communication has high use of local area networks and accounting firms tend to use portable PCs, IDC discovered.

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