There is something of a mini-boom going on in the PC industry. You wouldn't notice it because all enthusiasm at the moment is being dampened as the IT slump drags on. Nevertheless, most vendors and distributors claim they are mildly optimistic about PC sales.
One even told CRN that sales of laptops are "very encouraging". That may sound like cautious optimism to most, but in the current economic climate, it practically amounts to a carnival atmosphere.
Once businesses forgive the IT industry for the dot com debacle and the billions wasted on Y2K, and once the recession lifts, the whole industry could enjoy a fully fledged boom.
When and if the boom comes, it will not be in the desktop PC market, though, because there have been a couple of dramatic shifts in the IT landscape. First, desktop PCs are now being outsold by laptops, according to figures from analyst IDC.
There is no general agreement as to why this is. Some argue it is because corporations are replacing desktops with laptops so staff can work at home. Others say it is because SMEs and small-office/home- office (SoHo) users now prefer laptops over desktops.
John Fitzgerald, general manager at distributor Ingram Micro?s components division, says the SoHo/SME sector is a big success story.
"We tend to see orders going through for multiples of one and two laptops rather than 20s, which suggests to me it's the SMEs that are buying PCs," he says.
Luke Ireland, commercial director at PC maker Iridium, maintains the education market is where all the money is. He says: "The education sector is proving a great market for us. They seem to be the people with most money to spend at the moment."
Whatever the cause, the effect is that more people are buying laptop PCs. But that would be of little consolation to the channel if it were not for another important change taking place in the PC market: end-users are becoming more demanding and cost-conscious.
Customers are less likely to buy a PC from a shop assistant at Dixons and are more likely to choose a custom-made machine from a reseller. They know he can build a machine to match their needs, not to mention understand their questions and answer them honestly.
"Small-business buyers are becoming a lot more savvy. They're on their third- or fourth-generation of PC and they probably know exactly what they want," says Fitzgerald.
"They won't want to go to PC World to be persuaded to pay for a PC with far more memory and storage than they need. If they're working to a budget, they're more likely to ask a reseller to tailor-make a system for them."
The idea of building one's own PC has long been popular. Most end-users would happily open up their desktop PC and install a new graphics card or CD writer, but for some reason laptops have long been sacrosanct. Nobody ever took a screwdriver to a laptop.
By the same token, nobody ever dared challenge the configuration choices that were given to them by Hewlett-Packard (HP) or IBM. Reassuringly expensive brand names tended to dominate.
This is all changing now. It is over a year since Ingram launched its Build Your Own Notebooks (BYON) campaign. It followed it up with a reseller seminar aimed at highlighting the "lucrative margin opportunities" available to resellers.
If you are able to configure and build your own high-performance laptops, you can make a fortune, Ingram said.
Delegates were treated to presentations from Seagate, Kingston and AOpen, and a live notebook build demonstration from Intel, designed to illustrate the ease with which resellers can now configure their own high-performance notebooks.
The BYON scheme was Ingram's response to the shifting trends in the white-box market. "Ingram has tried to encourage system builders by delivering high-quality, low-priced custom-built notebooks to users in the SME market," Fitzgerald says.
The programme provides UK resellers with a notebook construction kit comprising an AOpen notebook barebones system, including a mainboard, TFT display, touchpad and battery, and processor technology from Intel.
These are supported by online configuration tools and instruction videos, dedicated sales support from the UK components division, and a warranty and online returns management system.
According to IDC, non-branded PCs make up about 28 to 30 per cent of the market. Between a quarter and one-third of all desktop PCs currently shipping come from generic white-box assemblers and resellers, says Karine Paoli, IDC's EMEA personal computing research director.
"White-box manufacturers have chosen to trade the glamour of high-profile brands - with their high marketing and distribution costs - for the nuts and bolts of commodity computing," she says.
There are several good reasons for buyers to choose this route. White-box computer makers range from a local shop-front operation that custom-builds individual machines, to companies such as Iridium, with its relatively big turnover.
Most small white-box makers enjoy many of the advantages traditionally associated with smaller enterprises, including agility, flexibility and proximity to customers.
Flexibility is especially important. In an industry as volatile as IT, in which product obsolescence seems to happen overnight, vendors holding low inventory and not tied to public perceptions of established product lines can adopt innovations more quickly than their larger competitors.
They can offer a greater range of customised solutions, and they often can offer customer support at a more local level than national or multinational companies.
"You might think mass-producing PCs is cheaper, but the system builders don't have the overheads of the HPs and IBMs. They don't have to hold a lot of inventory; that is the distributor's job. All they need to do is order the components from us when they need them," says Fitzgerald.
White-box makers are often better placed to take advantage of the fluid nature of the international components market, with its opportunities for picking up spot deals on discounted products.
Not that the problems faced by white-box makers have disappeared. There remains the general perception that they use cheaper, slightly lower-quality components.
This was a frequently held misconception that sellers of brand-names did not exactly try to nip in the bud. In fact, white-box manufacturers generally use the same tried-and-true components as their bigger competitors.
Another great asset resellers have is that they give far better service and support. But the channel must get the message across that, when it comes to this, local is best.
PC World has tried to redress the support issue by producing books aimed at giving end-users step-by-step guidance. Perhaps resellers could do more in this area. It wouldn't hurt if they had their own booklets to give away to customers.
Now that end-users are demanding custom-built laptops, it will be interesting to see what sort of technology they demand.
Intel arguably kick-started demand for laptops by concentrating so much effort on the development of the Centrino chipset. By designing their processors to work more efficiently with a wireless communications workload, without the drain on battery power that this used to entail, Intel is staking a lot on the future.
If users start demanding notebooks that they can use when they are in Wi-Fi hotspots, or in wireless networks, then Intel is onto a winner, as AMD hasn't yet brought a similar product to market.
"We don't have wireless connectivity built into our chips because we believe you should have a complete product," says Patrice David, AMD's product manager for mobiles.
"There's a certain compromise on processing power you have to make in order to get wireless connectivity. If people are talking about using laptops as desktop replacements, they will want the full power of a desktop to manage applications."
That may be so, but it is possible that the nature of the competition may be about to change, according to James Yates, sales manager at distributor Target Components.
"For years AMD and Intel fought over the amount of gigahertz they could offer. It may be that PC users have all the processing power they need now."
True, Centrino is miles ahead, but who is to say that Intel is taking development in the right direction? There's not much evidence at the moment that Centrino is driving the market.
People may want laptops, and they may want customisable ones, but the jury is still out on whether Wi-Fi is the killer application. They may still prefer raw processing power.
"The wireless option has affected our sales, but it's a very slow burn at the moment," says Yates.
"Until people catch up on the broadband revolution, they won't understand the attractions of Wi-Fi. And even when they do there will need to be more Wi-Fi hotspots for Wi-Fi to become a useful asset to mobile workers."
Luke Ireland, commercial director at Iridium, agrees that education is going to be necessary, in more ways than one. First, users will need to learn a lot more about the possibilities of remote working and Wi-Fi before these factors influence their buying decisions, which will take time.
And second, the education market itself is going to provide a lot of the demand for Wi-Fi laptops, with schools being particularly keen customers of Iridium.
There is one aspect of schools and colleges that makes them good customers: they are likely to lose a lot of kit. "The thing about laptops is they are easier to steal, so when you supply schools you can sell them a few secure notebook storage cupboards as well," says Ireland.
If the lack of coverage by wireless hotspots is constraining growth in the Wi-Fi-enabled laptop market, that barrier could be about to be removed. Slowly but surely, the number of Wi-Fi hotspots is growing.
The current range of Wi-Fi hotspots is about 300m, and about 50m in a concrete building. So unless you sit in McDonald's - or wherever your local hotspot is - for the day, working remotely using wireless connectivity is not a practical option.
However, in about a month, the radius of a new Wi-Fi hotspot could be 30 miles. It all hinges on the ratification of the proposed Institute of Electrical and Electronics Engineers standard 802.16m. (The original WiMAX standard, 802.16m, was ratified in December 2003.)
Once this standard has been given the all clear, hotspot owners can install equipment from the likes of San Diego-based Vivato, which can broadcast Wi-Fi over 30 miles.
"Once that happens, we'll rapidly see coverage of the UK by Wi-Fi. And that will open mobile users up to all kinds of services," says Jim Povey, managing director of service provider Teleconnection, which aims to provide laptop users with the means of making cheap phone calls over a Wi-Fi network.
This is all conjecture, though. What are the positive statements we can make about this market now?
"The margins on our notebooks are much better than the margins for desktops," says Ireland. "The machines can be put together a lot quicker and easier than a desktop model, too."
The hard bit is finding the right parts, the most important elements being the case and chassis. System builders are advised to avoid plastic casings and instead use magnesium alloys, which several manufacturers have recently made available.
The margins are much better in the white box because, up to a point, you can charge what you want, agrees Fitzgerald.
Relatively recent estimates show the home-user market taking up almost 40 per cent of unbranded notebook output, with SMEs claiming about 38 per cent. Education and government tend to make up the balance.
Paoli points out: "Small organisations really count on the local assembler to be their main support. And what I hear from consumers is that anyone who buys a system from any vendor ends up complaining about the quality of tech support."
Laptops, then, are usurping desktop PCs - not just by taking their sales but by emulating them in other ways. For system builders it will be similar to what happened in the server business, says Paoli.
"You can buy a server from Intel as a kit, you assemble it and put your logo there, and you say 'Backed by Intel'. Your clients would feel very good about that. The challenge is how to duplicate this model in the laptop business."
John Bainbridge, Intel's UK and Ireland local OEM distribution and reseller manager, says: "Some of the system builders we deal with are very strong in the enterprise space. System builders will be helping us to launch [Centrino] in Europe."
AMD (01276) 801 300
Hugh Symons (0870) 849 0214
IDC (020) 8897 4100
Ingram Micro UK (01908) 260 422
Intel (0870) 607 2439
Iridium (08702) 202 220
Target Components (0870) 787 1999
Teleconnection (01403) 224 000
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