THE PERSONAL COMPUTER AT 25 The Magic Lives On

Twenty-five years ago, electronics nerd Ed Roberts in New

Mexico, USA, put together a do-it-yourself "personal computer" kit.

His little-known company, Micro Instrumentation and Telemetry Systems, made

radio transmitters for model airplanes–and became the launch-pad for the world’s

first PC.

That

was the Altair, and the do-it-yourself kit for the "world’s cheapest

minicomputer" featured on the cover of Popular Electronics magazine back in

1975. The catch line gave birth to roller-coaster ideas.

From that DIY kit to the IBM PC in 1980 was a slow journey.

But at the end of 1981, Time magazine replaced its traditional Man of the Year

with a Machine of the Year–the personal computer. Somehow, a few visionaries

were able to see a future where the PC would be everywhere, changing the way

companies worked.

There was no looking back, except perhaps for IBM itself. But

more on that later. From a worldwide base of 500,000 in 1975, there are some 515

million PCs today, at an annual revenue of nearly $250 billion.

IBM’s PC, and its clones, initiated vast economies of

scale, and the era of business PCs began. Between 1980 and 1985, the worldwide

PC sales jumped from 1 million to 10 million units, and by 1990 the figure had

soared to 24 million. And with each passing year, the price of the PC dropped,

while the power of the machine increased–roughly according to a

"law" stated by Gordon Moore of Intel, that processor power would

double every 18 months or so. "Moore’s law" has survived over the

decades.

Nothing

succeeds like success. The spirit of enterprise and innovation brought in a new

generation of entrepreneurs–Michael Dell, et al.–who transformed the small

market into an industry. Companies like HP, Compaq and Apple joined the fray of

manufacturing and selling PCs to the corporates. South Asia’s "electronic

cottage industry", rapidly growing into mega-OEMs especially in Taiwan,

further fueled growth to the extent. Today, there are nearly 560 PCs per 1,000

people in the US–which is expected to increase to over 770 by 2005.

If the 1980s saw the corporate PC boom, the 1990s saw the

home and small business bang. This "consumer" segment became more and

more the focus of PC vendors. The advent of the Internet shook everyone up and

changed the PC horizon. The PC got networked, and went beyond the enterprise,

deep into the home.

Worldwide,changes in datacom set a new agenda for the PC industry. The power came into the

hands of consumers. Across the millennium edge, the desktop personal computer

began to morph into a digital entertainment center, with the Web as the center

of attention.

The Internet as driver

IDC projects global personal computer growth between 1998 and

2004 at 39% for desktops, and 24% for notebooks. In the Asia-Pacific region, the

Indian market has been experiencing the highest growth, despite very low

notebook penetration. The 1999 to 2004 growth has been projected at 47%, as

against 16% for the Korean market and 12% for the Taiwanese market.

The annual PC sales figure is the base benchmark figure for

an infotech industry, and the PC is driving growth in India. Of course, this

growth has been on a small base, but today, the base is a respectable

million-plus–and the growth is keeping up. Also driving this growth is the

ongoing liberalization in India. And the considerably lower duty for components

has encouraged most companies–including the top MNCs, Compaq, HP and IBM–to

assemble computers locally. The third big driver–which should become the top

driver in the year ahead–is connectivity. The 300 licensed ISPs will help, but

what will really make the big difference is bandwidth, which is still severely

limited.

The

lowering cost of Internet services has been pushing PC volumes up, making prices

of PCs affordable both for homes and businesses. Says Amitabh Kumar, director

(operations), VSNL, "The Indian Internet market has shown over 250% growth

in the last year, with Internet accounts estimated at 1.2 million by July

2000." A basic corporate desktop from IBM is down to Rs 36,500, and a

Compaq Presario 5000 B1 home PC costs Rs 42,990. Every year, there has been a

steady decline in the average selling value (ASV) of a PC. Between March and

June 2000, the ASV declined from Rs 46,197 to Rs 44,065. This has affected

vendor profitability, resulting in some shakeouts. Companies like PCL and

Unicorp were hit and failed to stay alive, despite aggressive–and perhaps

unviable–pricing.

For companies like Zenith, Wipro and HCL, survival came

through a long-term strategy of maintaining optimal inventory, careful sourcing,

the creation of well-distributed channels and brand-building. Further, vendors

rested their hopes on unit sales, to maximize their revenues. Raj Saraf, MD,

Zenith, says the key to survival is in being very focused. "Our strategy is

to concentrate only on PCs rather than diverting into different areas," he

says.

Desktop to the home

Though vendors such as DCM, HCL and ICIM had started selling

‘micros’ (later-day PCs) along with ‘minis’ (Unix or proprietary

machines) as early as 1983, their clients were mainly limited to big corporate

houses.

As the Indian computing scenario gradually changed from

mainframe environment to client-server, PCs became important. With the advent of

application software packages in areas like accounting and page makeup, PCs

became even more critical for productivity. The early part of the 1990s saw a

sharp rise in the use of word processors and spreadsheets in administrative

jobs. And along with the big corporates, the SME segment became a major consumer

of PCs.

The late 1990s saw the entry of Indian homes as the new PC

consumer segment. With this, the stage was set for the PC to be transformed from

being a mere office tool to becoming a tool for infotainment–for the first

time, the PC began to be viewed as a consumer product.

This also brought a major shift in the growth pattern of the

industry. Between 1996 and 2000, the annual growth, by value of PC sales,

increased from 5% to 45%. This steep rise was mainly driven by growth in the

home segment. IDC records only 10,226 unit sales to the home segment in 1994 (of

a total of 217,594 units sold)–less than 5%. In 1999-2000,



home PC sales were 30% of total sales.

Surviving the mobile era

The role of PCs is changing fast, both in terms of functions

and specs. Information storage and distribution are no longer the exclusive

domains of the PC. Though the Web economy is still in its infancy, it has

already propelled the growth of handheld devices and thin clients as the PC’s

competitors–or companions.

PDAs, WAP-enabled cellular phones and ultra-light laptops are

changing corporate computing and communications. In a few years, as packet

switching replaces circuit switching, all forms of communication will become

IP-based. The Web, supported by millions of robust servers as well as clients

working as servers–in the Napster-Gnutella peer model–will form the

backbone. In the home segment, MP3 players, video-game consoles and various

information appliances will lead the way beyond PCs.

So what will all these will lead to? A dominant view is that

the era of ubiquitous computing is at hand. Computing will be Web-centric, not

Windows-centric or desktop-centric. The PC will lose its importance as the

preeminent Web access device. But it’s way too early to write the PC’s

obituary.

In terms of specs, every quarter, the PC is getting faster

and packing more memory and storage. Tiny notebook computers have moved from 2

to 4 to 8 to 12GB as their basic storage in four years. Wintel still dominates,

and will probably continue to do so, AMD/Transmeta and Linux notwithstanding.

For Linux as PC OS, it’s an uphill marathon. IDC’s PC

Storeboard report for the April-June 2000 quarter suggests that Windows 98 was

installed on over 80% of PCs sold through dealer channels. Well over half the

PCs sold shipped with Pentium III processors at over 500MHz. A RAM size of 64MB–with

a market share of 67%–was the most popular, and about half the PCs shipped

with hard drives bigger than 9GB.

PC vendors are also beginning to look at design: desktops and

notebooks are becoming sleek and attractive, and not just in the consumer space.

The PC is shedding its image of a flabby, plain beige-box with bulging monitors

occupying a lot of space. Of course, design has really been the forte of Apple,

which continues to stun the world with its pathbreaking curves and colors. Two

years after the colorful, transluscent iMac, there’s a stunning G4Cube. No PC

vendor has come up to Apple standards in design so far, but many are making bits

of effort. Even Indian companies like HCL are giving much attention to the way a

PC is packaged.

Global PC demand stays healthy. IDC reports healthy worldwide

April-June Q2 2000 PC demand, with 15% unit growth over the same quarter last

year. There’s a severe components shortage, primarily due to higher

consumption and demand. For instance, there’s more than 70% growth in PC RAM

demand, due to PC numbers growth but more due to a near-doubling of RAM with the

average PC over two years.

A PC plus era?

If the business press has been writing about the "post

PC era," analysts disagree. One report says, "Such a ‘Post-PC Era’

is unlikely in the next five to seven years, despite the tremendous information

appliance proliferation in homes and businesses all over the world." The

report adds that information appliances are new opportunities for the PC

industry, because they will use PC hardware and software, and link to them. For

instance, the ubiquitous Palm series is so successful partly because it works as

an effective PC companion, "hot-syncing" its information in a flash

with PCs and notebooks.

PC microprocessors, PC peripherals like disk drives, printers

and pointing devices, and PC hardware technologies like flat displays, touch

panels and memory cards will be used in all those information appliances too.

They’ll also use PC-derived software, and IP technologies to communicate. And

if they take any sales away from the PC market, they’ll also push up demand

for millions of PC servers to serve them with information on the fly–information

to support all those information appliances.

So are we talking of a mixture of thin clients and fat PCs,

in the years ahead? In all probability, yes. Those who’re waiting for a

post-PC era have a very long wait ahead.

A DQ report with inputs from INDRANIL

CHAKRAVORTY



in New Delhi