Striking the right note
As prices drop, technology improves and working practices evolve, notebooks are proving to be the bright spot in the PC market. Martin Lynch reports.
There was a time, not so long ago, when people on packed rush-hour trains with notebook computers attracted the same kind of hatred as mobile phone users.
Notebooks were the Ferraris of portable computer technology and only a very small number of people had them.
In the business world notebooks have, for most of their lives, been seen as executive toys - status symbols that, like the sleek, high-performance company car, come with the job.
For years now notebooks have been shedding many of these labels, becoming indispensable tools for a lot of professionals.
It has been a slow process, though, and has taken many years of clever marketing, changing work practices and better technology to convince businesses that notebooks can offer many benefits.
After 10 years of hard graft and slow progress, the past 18 months have seen the notebook go from a 'might have' to a 'must have' piece of IT.
The overall PC sector might still be depressed but notebooks are flying off the shelves, thanks to a combination of cut-throat price competition, cheaper components, innovative technology and changing work practices.
According to analyst IDC's market research for the second quarter of this year, the notebook sector continues to drive overall PC sales, recording stronger than anticipated results thanks to a 30 per cent jump in unit sales.
"As anticipated, many vendors continued to clear notebook stocks to make way for Intel Centrino-based systems," explained Andy Brown, programme manager for European mobile computing at IDC.
"Notable currency fluctuations and continued declines in component prices, as well as for memory and hard drives, helped to drive down average notebook selling prices, fuelling the price war on mobile systems."
It is often the case that IT trends in the US cross the Atlantic to the UK and the rest of Europe a year or so later. If this holds true then notebooks could be outselling PCs in the UK next year.
According to research by NPD Group, notebooks outsold desktops in the US for the first time ever in May.
Taken from its point-of-sale tracking system service, the NPD results showed that, in dollar terms, notebooks stole a 54 per cent share against PCs, while unit volumes rose above 40 per cent for the first time.
No longer toys for the boys
There is now little doubt that notebooks have shed their executive gadget image. "They are certainly no longer viewed as expensive toys," claimed Luke Ireland, logistical director at Centerprise.
"In all sectors of the market - consumer, SME, education or corporate - users have some mobile requirement, whether it's for flexibility or to cater for those working from home or out of the office.
"Our customers have said that between 50 and 60 per cent of their requirements will be for notebooks in the coming year. We are now selling three times the volume of notebooks that we were this time last year, and this is expected to rise."
Ian Snadden, channel and SME sales director at Fujitsu Siemens, agreed. "Notebooks went beyond a gadget or executive toy some time ago to become a business tool in the same way that the company car is. It enables business," he said.
Loay Lawrence, business manager at Ideal, added: "The notebook has proven its worth now and is accepted as a business tool, not a luxury. It's now something you have to have."
According to Matthew Wilkins, senior analyst at iSuppli, notebooks are well on the way to shedding the executive toy image. "While you will always have top-end £4,000 laptops, most are affordable now," he said.
Affordability has been the main reason for the rapid rise of the notebook. Whether it is the ceaseless competition between vendors or the falling component prices, notebooks have become a lot cheaper in a very short space of time.
"Price points have come down a lot, with the average selling price falling considerably over the past year. It's the main reason for the growth," explained Lawrence.
"There has been a lot of competition in the market and, whereas the rest of the PC sector has stabilised and is seeing lower growth, there is a lot of growth in the notebook arena.
"Notebooks are no longer the luxury they used to be. They are no longer just for early adopters but are now affordable to everyone."
Ireland agreed. "There is only a 20 per cent delta between desktops and notebooks, which these days is not a lot," he said.
Wilkins added: "One of the big drivers has to be the falling costs, but it is important to remember that when businesses are looking to roll out notebooks, cost is not necessarily the overriding factor, but total cost of ownership is."
Cheaper screens
Behind the falling prices of notebooks has been cheaper key components, particularly LCD screens. In fact, the cost of screens has always been the main reason for the large price difference between notebooks and PCs.
Alongside the rise of notebooks has been the rise of flat-screen LCDs for the desktop, which have become so cheap over the past year that they are coming as standard with many PCs.
Thanks to better manufacturing processes, LCD manufacturers have been able dramatically to reduce the cost of panel production which, while making flat-screen LCDs a commodity product, has also resulted in cheaper screens for notebooks.
"Prices for notebooks have come down about 25 per cent in the past year," explained Lawrence. "The most expensive part of a notebook is the screen and, if you look at the prices there, you can see massive discounts.
"Component prices in general have come down. Right now the cost of a notebook and a PC with a flat-screen LCD is quite similar."
Wilkins claimed that the falling cost of LCD panels has contributed in part to the lower cost of notebooks, even though they still retain some premium.
"Just look at the impact of the Taiwanese giants Compal and Quanta, which build notebooks for all the major players as well as supplying barebones systems. The more of the market they eat up, the cheaper notebooks will become," he said.
Notebooks have taken the expression 'taking work home with you' to a whole new level. In fact, people with notebooks rarely go anywhere without their work, which has led to a boost in productivity, according to certain studies.
"Research shows that employees with notebooks work longer at home and at the weekends, resulting in a boost in productivity of up to 20 per cent," said Snadden.
"In the current economic climate productivity-per-head is a factor when companies are trying to control their costs. Notebooks also allow companies to reduce fixed costs by letting people work away from the office."
Wilkins agreed. "The versatility of notebooks has played a key role in their success," he explained.
"Companies are giving these products to employees to allow them to work from wherever they are. In certain cases they can promote people working more outside business hours.
"There used to be more of an [office-based] nine-to-five component to working, but this has changed to people working in a variety of locations. In our organisation, for instance, a lot of people work over the weekends - a few hours here or there."
The shift to mobility
The mobile workforce and home working phenomena are two of the main trends underpinning the shift towards notebooks. The rise in popularity of notebooks is not a temporary thing, but marks a turning point in the buying patterns of businesses and consumers.
"The notebook market is thriving because there is a shift away from desk-bound computers towards mobility," said Snadden.
"That shift is moving more quickly because the cost of notebooks has fallen, but it should be remembered that customers are now only buying IT that reduces costs and increases productivity, which is something notebooks do.
"This is not a blip on the radar but a permanent change in the way IT is used. I think it will get closer to the 50/50 split with PCs, but it will never be totally mobile because not everyone needs it."
Ireland agreed that the surge in the notebook arena represents a fundamental change in corporate and consumer attitudes.
"Within a few years there will be no reason to buy a desktop PC," he stated. "Home working is still not at the level that was forecast a few years ago, but it is happening, and the restrictions to mobile working are disappearing.
"For instance, users no longer see a difference in performance between being connected to the office network by a cable or via wireless technology."
Wilkins, too, argues that the move to mobile is more than just a phase. "We are looking at a permanent change that will not be easily reversed," he said.
"Once a firm realises the value in using notebooks it is almost impossible to go back to a desktop-bound approach."
Notebook technology has come a long way and has played as big a role in the device's new found acceptability as price cuts and changing work patterns. It is no longer the poor cousin of the desktop, and comes in a range to suit every job and budget.
The rise of the 'super notebook'
In the past year, a surge in very powerful notebooks has opened a new channel of business with the performance junkies. These are notebooks using high-end PC processors and boasting the kind of specs found on high-end PCs.
They might weigh a few pounds more and have a laughable battery life, but they strike a chord with the power user who wants a mobile that does not compromise on performance.
It was system builders that created this market niche, and it is a niche for which every major notebook player now has a model.
Innovation has also led to bigger screens, faster processors, bigger and faster hard disk drives, combined DVD and CD-RW drives and more memory.
"All the reasons from the past why someone might not buy a notebook have gone away," Ireland pointed out.
"When I'm asked by customers whether they should buy a notebook or a desktop I have to say that there is no real reason not to buy a notebook. That's a big thing now.
"For instance, graphics performance has always been a problem with notebooks, but now both nVidia and ATI have introduced mobile graphics chips that close the gap with desktop graphics performance.
"Obviously they are not going to be able to match dedicated graphics cards in PCs, but users can now run most games on a notebook, whereas before it was always a problem."
The two biggest drivers on the technological front now have to be the proliferation of wireless technology and this year's arrival of Centrino, comprising Intel's first dedicated mobile processor with integrated wireless technology.
"Wireless and Bluetooth have been very influential in the success of notebooks," explained Lawrence. "Processing power has increased a lot and battery life - a very important factor - is getting better, particularly with the arrival of Centrino."
Snadden agreed. "The advent of Centrino is certainly helping sales," he said. "It's the first time Intel has successfully implemented a message that is not just about more power.
"The mobility package has been a milestone. Also, the cost of wireless technology has fallen and that is an increasingly good selling point."
From a channel perspective, Lawrence suggested that everyone is paying more attention to the notebook space. "All of the manufacturers and resellers are very active and competitive in this arena now," he said.
"It is no longer a poor relation of the desktop. Today, notebooks are a requirement in most kinds of solutions. We have taken on a lot more notebook resellers, especially in the past 18 months."
The notebook may have become accessible to new customers because of falling prices, but underpinning it all, notebooks have grown up technologically.
Working life now suits the mobile approach, and attitudes towards notebooks have been reversed. As Ireland pointed out: "These days the question is why do you want a desktop, not why do you want a notebook."
Where the smart money is going
Although corporate budgets are still restrained, spending on notebooks by consumers and SMEs has been strong.
The other UK notebook goldmine for vendors and the channel is the education sector, which has gone mobile mad in recent times.
Thanks to massive government grants and initiatives, a lot of money has been set aside for notebooks, particularly through the Laptops for Teachers initiative.
Notebooks are seeing increasing use in the classroom. Government funding for the Laptops for Teachers initiative has trebled since it was announced in 2002, to £300m for the period 2002 to 2006.
For notebook manufacturers and their partners, getting on the approved list is a priority because the local education authorities, which buy on behalf of their schools, will purchase from listed companies only.
When the scheme kicked off in June 2002, 24 companies were given the green light by the British Educational Communications and Technology Agency, and more than 100,000 teachers now have laptops.
This June the number of approved suppliers was increased to 38. Most recently, 28 of them were awarded three-year Framework Contracts, on the condition that they could guarantee three-year warranties on their notebooks, even after insolvency.
Getting on that list might not be easy, but it is seen as a great way of building a serious presence in the education sector, which usually has budgets for IT.
CONTACTS
Centerprise (01256) 378 000
www.centerprise.co.uk
Fujitsu Siemens (01344) 475 000
www.fujitsu-siemens.co.uk
IDC (020) 8987 7100
www.idc.com
Ideal (020) 8286 5999
www.ideal.co.uk
iSuppli (0118) 903 6001
www.isuppli.com