Fighting back

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This article appeared in the March 2015 issue of CRN magazine.

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Fighting back

"What Andy Grove giveth, Bill Gates taketh away.”

If you were around for the halcyon days of the 1980s and ’90s, when a new Microsoft operating system spurred PC and hardware sales, you might fondly recall this cutting sentiment.

But in the case of both Windows Vista in 2006 and Windows 7 in 2009, the cycle broke. Home and corporate users jumped off the upgrade train. This led Windows XP – released in 2001 – to accidently become the most long-lived and best-selling operating system in desktop history. XP was so successful that Microsoft extended support and only finally euthanised it last April.

The imminent arrival of the superior Windows 7 and more recently Windows 8 in 2012 and Windows 8.1 in 2013 also did little to spur upgrades. 

For many, the hardware was good enough to do everything they wanted: surf the web, send emails and use Word and Excel. This upgrade malaise was only intensified by 2008’s GFC, which led many to delay their desktop refreshes. Meanwhile, lighter modes of computing such as iPads and smartphones stepped in.

But this could all be about to change. The biggest driver was surely the 21 January announcement of Windows 10. Already, analyst firms point to a small uptick of a few percent in sales last year that will gather steam as Microsoft readies for general availability of the new operating system later this year.

[Related: eight things Microsoft just revealed about Windows 10]

In fact, tablet sales have plateaued: for the first time since the market’s inception in 2010, global tablet shipments dipped year over year, declining in the fourth quarter of 2014 by 3.2 percent, according to research firm IDC.

Meanwhile, Gartner expects the global PC market to grow in 2015 as the decline in sales bottoms out, though Australia is expected to remain flat. The analyst firm also predicts that Windows 10 uptake will be stronger than Windows 7, with 50 percent of PCs in enterprises to be running Win10 by the end of 2018, 25 percent higher than the percentage of PCs that were running Windows 7 in the same timeframe after the launch.

While the analysts are optimistic of seeing renewed vigour in PC sales, in part driven by Windows 10, we’re not exactly sure of Microsoft’s expectations for the new OS and what it will mean for partners. Unfortunately, the US software giant refused repeated invitations to contribute to this article.

All Microsoft would say when pressed was: “January 21 marked the beginning of our Windows 10 journey and there will be lots more news in the coming months, including what this means for PCs and the channel.”

[Related: Australian resellers react to Windows 10]

While Microsoft plays coy, its partners are buoyant. And although it’s early days, the signs are encouraging for hardware and PC sales, says Theo Kristoris, managing director of Australian distributor and system builder Leader Computer Systems.

“We’re seeing a lot of excitement around Windows 10,” says Kristoris. The company has been demonstrating Windows 10 to partners on a prototype system. 

“The first impression was it’s superb; it looks like a winner. The major part is having the one device – if you’re using a PC and Windows 10, and you have a tablet, then pick up your PC, you’ll see everything you saw on your tablet.”

One aspect of the Windows 10 announcement that caught many off guard was the pricing – Microsoft is giving the new version away as a free upgrade to users of Windows 7 and Windows 8.1, as well as Windows Phone 8.1, who upgrade in the first year.

Although Kristoris admits to being disappointed that Windows 10 will be free for the first year – “so it won’t force people to go out and buy it if they have a recent PC” – he expects that sales will “spike” overall “because there’s a lot of PCs that need to be upgraded”.

“Last May, we saw a big spike in sales when Windows XP ended. If this upgrade is as good as we expect it to be, we expect PC sales [to grow].” 

He says Leader sales are up about 20 percent on the same time a year ago. And while tablet sales are flat or in reverse, sales of the two-in-one PC-and-tablet and 14-inch Ultrabooks are growing, he says.

Next: adoption issues

Adoption issues

Perhaps typical of many end users, Newcastle University will skip from Windows 7 to Windows 10, says desktop technologies team leader Mark Jefferys.

“We’ll treat Windows 8 like a Vista,” says Jefferys who is responsible for 9,000 desktops over 10 sites, 90 percent of them Windows. “The [Windows 8] user interface will scare the natives; there will be adoption issues. It’s good for tablets that are touch-enabled but it’s not intuitive for PC users.

“We’ll skip straight to Windows 10 and have some teaching areas seeded next year. It depends on how it hits the market – there’s the adage about waiting for first service pack.” He says that deploying a new OS is a “significant investment in scale and rework”. Not so much for student labs – “those machines have no data on them so we can roll them out at a rate of knots” – but for academics who receive a “valet-style” service.

Jefferys says upgrades in the academic staff environment require special care – “we potentially have the cure for cancer”. Staff also need high-touch services “so they don’t break stride”. He hints at growing opportunities here for IT service providers.

“As people become less computer literate [on upgrading PCs], that becomes a real pressure. Researchers and academics are asked to do more, so then they’re more time-poor,” Jefferys says.

“We’re thinly resourced for what we need to do. We’d like a partner to do PC commissions and decommissions so we can add higher-end value. We can [ask], ‘What are you researching in terms of teaching; from a technology point of view, what could help you to do it better?’ ”

Newcastle University supplies Dell PCs to staff and students, and an increasing ratio of Apple Macs. And while there are some old XP machines still on campus, these are being weeded out. The big growth is in all-in-one PCs and iMacs, Jefferys says, because they’re easier to deploy and popular with users. And although he’s unsure of the academic benefit of touch-enabled all-in-one PCs, these went into labs in a ‘wait-and-see’ approach.

Bryan Ma, IDC’s Singapore-based vice president of client devices research, tells CRN that while he’s not predicting some huge PC sales spike driven by Windows 10, the combination of the new OS and hybrid devices should be a winning formula. 

“The value proposition for Windows 10 is going to be more obvious with 2-in-1 devices rather than just your everyday clamshell notebooks, so if anything, it will likely help that segment more. But, of course, 2-in-1 devices are coming from a smaller base.”

Ma tells CRN that the new operating system is an improvement, but despite expecting a little bump around the launch at the end of 2015 as the Microsoft marketing engine kicks in, he isn’t forecasting a huge sales spike. 

“Windows 10 is definitely where Microsoft should have been with Windows 8, but even then, we aren’t necessarily expecting it to translate into huge PC upgrades right away.”

“Consumers will get free in-place upgrades using existing hardware, while businesses are likely to cling to Windows 7 for as long as they can, rather than making any massive shifts to Windows 10. In that sense, upgrade cycles should generally just proceed as usual,” says Ma.

Next: in good form and PC sales forecasts

In good form

The coming Windows 10 mega-refresh is not the only technological advance adding some much-needed jet fuel to the upgrade cycle. Small form factors are another growth area. Intel’s ‘Next Unit of Computing’ (NUC) style of PC is winning fans in a growing number of niches, from security and education to digital signs, says Intel product manager Josh Carr. 

“It was one of the fastest-growing segments. While towers were in decline we saw a pick-up in ultra-small form-factor designs,” Carr says. (See box below.)

“For 2014 and beyond we’re looking at a growth rate of 20 percent. We’ve seen doubling of channel resellers adopting our NUC and end-users being very open to this form factor.”

Over several years, Intel has seen a five-fold improvement in performance even as the size has shrunk to something that fits in a soft drink bottle; this creates new opportunities for the channel, Carr says. “We’re looking at doubling the business this year.”

It’s not the size that’s important, as much as what can be done with it. Increased price-performance ratios should drive more sales, says Intel Australia national sales manager VR Rajkumar. “While there were small form factors five years ago, it wasn’t compelling. Most consumers relied on an optical drive; now there’s no need because applications download from the network or wirelessly,” Rajkumar says. 

“Ever since Sandy Bridge and Intel brought graphics into the processor, it removed the requirement of a graphics card. Performance is 100 times compared with four years ago. The NUC can drive triple-4K displays; five years ago you needed a dual graphics card.”

Rajkumar is bullish on the ability of Windows 10 to kickstart the long-stalled upgrade cycle. And he says new, lightweight form factors such as all-in-ones, two-in-ones and NUCs will boost sales this year.

“The NUC is taking [resellers] to places they haven’t been before. Digital kiosks, media centre PCs, digital signs, digital jukeboxes. It provides an opportunity for them to innovate and get into spaces.”

Lenovo agrees that creative form factors are helping change consumer appetites. There’s a growing desire among road warriors for the two-in-one at the expense of tablets, says managing director Matt Codrington. And the demand is coming from the business, short-circuiting procurement and CIO, he says.

“Especially with two-in-ones, we have the traditional notebook capability in a productivity tool, and flip out into a tablet with a pen,” Codrington says. “So an insurance guy on the road gets their customers to sign on the device and whisk the data into the cloud. You get good efficiency out of a device like that and it’s very secure.”

Codrington says Lenovo’s versatile Yoga PC is settling into schools and businesses, and hints there are pen-based announcements just around the corner. “We’re aiming at a more simplified, user-friendly and capable device,” he says. “There are cynics who say PCs are dying but the PC market is coming back and is growing. The netbook has gone away but even as tablets sales have slowed, PCs are coming back.”

Long the bastion of the school laptop PC, Toshiba is also witnessing a sales revival especially in 13-inch devices, says the Japanese vendor’s Australian marketing manager, Justin White.

“We’re seeing a shift back to primary computing hardware away from secondary consumption devices such as tablets,” White says. “People are starting to realise that their primary computer where they do the bulk of their work on is a few years old, and the new ones are slimmer and faster.”

Toshiba’s Portege Z20t Ultrabook is among the vendor’s hottest sellers because of its adaptability for use as a stylus tablet and laptop, White says. And selling a Dynadock with screen, keyboard and mouse for desktop work is an easy added sale. And as to the impact of Windows 10 on upgrades, White says Toshiba is “extremely excited”.

“It’s going to bring back a much more familiar interface for users,” he  says. “Up to now, there was a fairly large number of users who walked into a shop and worked out they had no idea how to use [Windows 8] but Windows 10 has the best of both worlds. The learning curve isn’t as steep and it lends itself to multiple environments.”

But despite the hype and hope surrounding Microsoft’s new OS, Bundaberg reseller Geoff Augutis sounds a note of caution on whether Windows 10 will lift PC sales. Augutis, director of Queensland Computers, says the poor response to Windows 8 risks backfiring on Windows 10.

“It comes across as an admission of guilt from Microsoft,” Augutis says. “While most computer people don’t have issues with Windows 8, the public did not accept it.” 

He is concerned that users may see the free upgrade as, “Windows 8 was so bad they are giving us Windows 10 to make up for it. When in reality from Microsoft’s perspective it is more a matter of, Windows 8 adoption rate was slow; how can we rectify this?” 

Resellers also won’t push something that they can’t sell. “Why will a store such as ours push a new operating system if we cannot sell it and make money from it?”

Augutis won’t use his business customers as “test dummies”. 

“No, we won’t be rolling out to fleets straight away. For our retail business side, we find consumers don’t mind the changes so long as we are there to support them through the teething stages.” 


Units (K) 2013: 4,180
Units (K) 2014: 4,332
Units (K) 2015: 4,330


Units (K) 2013: 316,825
Units (K) 2014: 317,559
Units (K) 2015: 320,947

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