The channel stands corrected: Hardware is a refresh cycle business now The tech hardware industry may be facing something of an existential crisis if one veteran analyst is correct – the days of shifting boxes are going to be limited to mere replacement cycles. This was the message delivered by Steve Brazier, formerly CEO at Canalys until it was bought by Informa, where he is now a Fellow. "I …
Hardware in the seventies was really expensive. In the eighties it became cheaper and the nineties had a price war starting around 1995/1996 that's how a lot of families got their first computer.
But today hardware is freaking expensive and there is not a huge improvement from a computer from a decade ago from one released today save for the fact the computer from a decade ago may not he able to run Windows 11.
So there is not much motivation to replace hardware yearly like there was at a time when a computer today was way much faster that a computer a released mere one or two years ago.
Desktop hardware is amazingly cheap - you can do most things with an RPi400, the problem is that IT doesn't like handing out things that look like toys and people don't like feeling that IT has issued them with a toy. If you insist on giving employees portable computers then the bottom of the line MacBook is also enough for most things.
In several areas where costs have stayed high performance has soared with it - a 4080SUPER card is an absolute compute monster.
The problem is bigger servers, where Intel and AMD's attempt to appeal to the market for huge boxes for data centres means they have no incentive to keep decent 1U servers at the £1000 mark; you're paying more than that for a 1U box with a motherboard in, before sticking in the processors whose pricing starts in the high hundreds and goes to the stratosphere.
>"you can do most things with an RPi400"
That is only a partially correct. Let me help...
"...you can do most things that you need to do with an RPi400"
The problem is, with all the embedded bloatware to track & monetize the user after they sale, it is necessary to upgrade the hardware because "you cannot do most things they force you to do with an RPi400"
What do you mean expensive?
You can buy brand new (not refurbished) Windows laptops for as little as $120 at Best Buy. Regular price, not sale price. Yeah the specs suck (4 GB RAM / 64 GB eMMC) and the 14" screen is probably not that great but what do you expect for $120?
If I decide I need to have 16 GB / 500 GB as minimum config I can still find one for under $200 (and a 16" screen to boot) though it is a clearance model.
That's looking at only one retailer. PCs are cheaper than ever (even without taking inflation into account) but I suppose you can claim that a PC that meets your approval costs $1000+. If so, I'd ask when you bought your first PC, because any PC costing $1000 or more today couldn't be purchased at any price 10 years ago.
A decent computer always costed about £900 to £1100 (from 2000 or so) with a top-notch one costing about £1800 to £2000. Now they have got more powerful since then, but then the software has got more needy too as well as expectations of the users with regard to graphics performance. A new cheap one was always about £500 if you were only using for typical office tasks or light gaming.
But for most people the expectations and software requirements have levelled off, hence the need to MS to make hardware requirements based on non-performance hardware so they get their WinTax from new hardware.
We spend around 450-500€ for PCs and 800-900€ for laptops. We used to pay a couple of thousand for laptops in the 90s.
Yes, you can get high-end devices for more money, sure. But they are still cheaper than an IBM PC or a Mac from the 80s and early 90s.
OK, our servers cost a lot of money, but we are on a 5-7 year replacement cycle there.
Money is one aspect. The other is the partial death of on-prem IT.
Once upon a time you might have a server room. If you were a big company wanting to run SAP on-prem you might use a suitable channel partner to provide and service certified hardware. Maybe you maintain some stuff yourself but channel partners help with more specialist gear.
Now you rent a certified config in Azure - and MS buy hardware direct from supplier, not the channel. Likewise M365/Google Workspace - there are MSPs who resell that, but most people do it themselves.
If you run anything on-prem it's commodity storage servers or stuff that you look after yourself, and outside that you're basically left with desktop and laptop support, which they don't need partner support for - just call Dell/HP/Lenovo and order x00 of the required spec.
Of course the death of on-prem is overblown and plenty of places maintain on-prem gear. But the shift outlined above is easily sufficient to account for the drop in channel sales where a reseller needs to add some value (e.g. specialist/certified hardware, or providing a neck to wring).
Not sure what you're smoking - hardware is CHEAP. All these years since mid-90s, £2000 would get you a top tier, and it still does, and you can get a £150 laptop off AliExpress and install Linux on it and have a very decent experience with it.
It has never been this cheap and this fast.
Growth always looks exponential and it never is. Whatever space something is growing into is finite. Whatever resources are needed is finite. In the early stages these are not limiting factors so growth looks exponential but it's really the start of sigmoidal growth which flattens out when those factors do become limiting. Any ecologist can tell you that and I'd hope an economist would as well.
What's more, for a longish lived product that applies to the total number of units sold. Monthly/annual sales are just the first differential of that.
TL:DR You're lucky to have replacement sales.
The visionaries will not be deterred by your discussion of maths. There are winners and there are losers, if scientists were winners they would be(*) rich like the visionaries. They are not, ergo don't listen to them.
No sarcasm tag; need an icon for banging my head against the wall.
(*) Some of them are, though. Slightly suspicious when that happens.
I've said that on here for years. I've been in more than several retail businesses, plus manufacturing, and "infinite growth" is an illusion. But worse, a LIE, a lie that they've convinced themselves is true so that they can sell the lie to investors to keep the investment income flowing.
All markets for durable goods is finite, as people don't need double of something that lasts years for them. Contrary to Amazon's algorithm, you won't buy a 2nd NAS drive one month after you bought the first one simply because it's listed on your "Buy Again" shopping list o_O
Tl;dr: business leaders are greedy and all too often shortsighted, only looking at "What have you done for me lately?" short-term gains rather than sustainable goals. Ignore them and let them rot in their own stupidity.
It's been obvious since the start of the computing industry, that eventually everyone who wanted a computer would have one, and we have definitely reached that point (probably 5-10 years ago tbh).
However, it sounds like most of the CEOs interviewed seem to think that there's still some way the business can go back to it's 1990-2010 heyday, when whole new swathes of markets were opening up, and the pace of technological change was high enough that people were always upgrading.
It's time for 'the channel' to face facts: there's no new markets for computers opening up, and most of the drivers for upgrades, such as 'AI' and Windows 11, are seen by most customers as nothing more than sales tactics that can safely be ignored.
For example
Sønsteby continued: "I feel comfortable that the IT industry will keep on growing as digitalization has never been more critical.
I guess the advantage of a being a CEO is that you can be utterly wrong, and still get paid. Sucks for the rank and file at his company though, they're working for a fantasist.
@phuzz
"It's been obvious since the start of the computing industry, that eventually everyone who wanted a computer would have one, and we have definitely reached that point (probably 5-10 years ago tbh)."
Plenty of low income families would still like one (or more) but cannot afford them in the UK - as many schools discovered the hard way during lockdown when they found lots of kids did not have suitable kit for online work.
But, in reasonably well off countries, demand probably met for the more affluent sectors of society.
MS are trying their best to force unwanted hardware refresh cycle with the W11 debacle though.
... Plus there would be all sorts of demand in less wealthy countries where a computer is still aspirational for a large chunk of the population.
As Tom says above, an RPi400 or the like would be suitable for most situations an might well fit the lower income home family budget but PC box-shifters* aren't going to demean themselves. It wouldn't give them the margins. It will probably take them (and Microsoft) a good while to realise that their market is now saturated.
* Yes, I know they like to dignify themselves as The Channel nowadays but that what they always were.
I observe that 95% of the apparently-poor, homeless people I've encountered do have computers: their ever-present smartphones. (Not that I'd want to compose a resume or documentation on such a tiny screen ... but a tablet might work for me.)
(Note to self: plug my smartphone into a charger, and do a timed system build of a *BSD, and a timed transcode of a 1080p video. Just to see.)
Regarding Sønsteby's seemingly irrational exuberance : Mandy Rice-Davies applies [0]. I doubt he's really that far into denial. But under what circumstances would a CEO frankly admit that they're in a declining business? You lie, say things are going wonderfully, and (if you're a good guy [1]) try to figure out how to get the company of the hole into which it's plunging, or (if not) try to get as much for yourself as possible while looking around for your next job.
[0] Yank here, but one does pick up on various useful UK-isms in these fine fora...
[1] I realize the epidemic cynicism hereabouts would deny any such possibility, and it does seem unlikely for such a CEO to exist. I'm just covering all bases here.
I think the normal steps here apply:
Market is saturated, no more growth. Growth becomes "turning on each other". The smaller players get eaten by the bigger players, until there are only 2 or 3 major players, and perhaps 1 or 2 serving a very, very small niche. The market then settles in to an equilibrium with higher prices, little competition nor innovation and the enshittifiction process begins.
"All markets tend toward a monopoly or comfortable duopoly"
Thank you; you are correct. I'd edit that to be "epidemic endemic" if I could. The inability to edit posts after ten minutes is sometimes annoying...
It'd be nice were the cynicism merely epidemic (i.e., nasty but likely to burn out and we'll all move on). But it's more likely to hang in there. Personally, I try to hang on to my bright, cheery, un-cynical world view. But reality often makes that difficult to do.
Funnily enough their new beacons of hope look just like the things that they give as stuff that previously failed to become 'material businesses'.
They convince themselves that the lastest new thing will become massive where the reality is that it's probably useful enough to survive, but not at the scale they think it will, and a lot of the demand will remain at the hobby/toy level.
There'll be people who make decent ongoing income in those areas especially from those who find a genuine use case but the hype will never be fulfilled.
As with most bubbles the secret is to sell into the initial rush without fooling yourself it's all real and investing into supporting future illusionary growth. Sell the shovels, but don't commit to a new dedicated shovel factory arriving in 5 years...
That is indeed what OP is referring to but, as they note, even then you have to be aware of the short-termism as there's no point committing to a long-term investment in a shovel factory catering to a passing fad.
Particularly if it won't open until after the rush/fad has died and all those who got burned or disillusioned have long since moved on.
. . . but what, pray tell, is The Channel?
At the risk of being boring: Sales channels are the places you offer your products or services to reach your customers.
Typical sales channels are manufacturers selling direct to large customers, or resellers/Value Added Resellers etc. expanding the manufacturers sales force to take on smaller customers. Personal buyers would go to a retail outlet or buy online, with few options for customisation or discounts.
"The Channel" in this case is the resellers.
Yes, it is the stretch of water between England and France.
It is also the route by which a product, in this case computers goes from the manufacturer to the end user customer. So the wholesalers, retailers, the value added resalers who set up the computer to the end-users requirements.
When I look at how people around me use computers:
• Desktops: my mother has one and it will be replaced soon by the local computer shop because it is running Windows 10 and Windows 11 is not supported. She uses it for genealogy research and email. It is not an expensive computer by today's standard nor will the next one be. One teenage nephew is getting into games programming and is saving up for a desktop with a beefy GPU.
• I have an expensive, powerful desktop that is underused. Freud (or ego) may play a role here.
• My teenage children and many of my colleagues have not-especially-expensive laptops that they have to use. Their preferred tool are their smartphones, which are all at least twice as expensive as their laptops.
• My wife has a Surface which she uses as her work machine.
• At work, almost everything is virtualised. A blind woman has a desktop on account of her brail reader. There are a few Mac Minis, possibly for the testers.
Computers are now things that people don't really use willingly except maybe for gaming or some specific task like making a video or making PowerPoint presentations for homework (my children have cruel teachers).
I'm not surprised that sales channels are drying up. Computers at an entry level are powerful enough and people don't really care about them anymore.
I'd say people don't think about computers like they used to. They used to be thought of as a discreet object "I'm getting a computer!". Now, they're a means to an end "I need to do X, I buy a device to do it".
So, people buy whatever device does that task - be it a phone, laptop, console or smart fridge.
It was something that was talked about when I was at university, and the eventual appearance of "ubiquitous computing" - that the tech would just be in everything, so the idea of having a box on your desktop which you go to for specific tasks would disappear.
When "the cloud" is california, and the gold is data collection, the picks and shovels become cpus and memory, and the power to supply your robot overlord.
That is why computers are expensive, and tech is used to an unsustainable, unimaginable amount of silly money being thrown around. He's saying the tech companies are going to force you to refresh out of necessity, and microsoft just said their plan for 2025 is the same. Their plan is to force everyone to buy new kit while the kit is expensive. They need new cars and doomsday bunkers after all. It's THEIR money we are talking about here, they just need to pull it out of your pockets.
Also, seems all these tech companies have kissed the ring of "The Mob", to continue with business as usual without much consequences. 2025, and the foreseeable future, is going to get very, very bad for consumers.
Resellers can only "add value" by passing on part of the practical volume discounts that come with transporting "a containerload" compared to an individual cardboard box.
That's almost the whole thing. Any reseller claiming much else is a charlatan, and the question is whether they're lying to their customers or themselves. Probably both.
As above, the market is pretty much saturated and unless you plan to do serious gaming or else high powered CAD / mathematical modelling than the average laptop is perfectly adequate.
* My son has a gaming desktop, a laptop that he has used since university and is still fine, and a work laptop. He does have a masters in Computer Science and works in computing.
* One of my friends does everything off a Samsung tablet (with external keyboard) including writing her dissertation.
* SWMBO is quite happy with her Dell laptop, but all she does is emails, writing short documents and internet surfing.
My £95 Linux box (10 year old Fujitsu Q520, i7 with 8GB of RAM) does almost everything I need other than my windows specific CAD program. OK, the screen cost another £300 but total price for the kit was less than £450 including a decent mouse & keyboard.
One of my customers has gone from a 3 year (leased) laptop replacement to 4 years as their current laptops do everything that the team needs. Their hardware supplier has been hassling them to go back to 3 years but their comment is that they are saving over £35,000 per year just on replacement hardware.
Other than serious gaming or this strange AI stuff very few people NEED anything more than a decent spec i5 (or AMD equivalent) laptop for their day to day needs. So yes, that market is more or less saturated.
If you want to use Photoshop (or some other Adobe software) work, keep an eye out for a graphics designer selling off his/her old Mac Pro 5,1.
They usually have an activated version of Adobe Creative Suite v4 or v5 on them, the hardware is not bad even if the bus speed is relatively slow and the version of Mac OS is no longer supported by Apple. It doesn't have to be on the Internet.
I picked up a Mac Pro 3,1 with CS2 for this purpose back in 2019 for the equivalent of GBP40 and it's a great machine.
Sounds like they are effectively relying on Microsoft discontinuing support of older kit to get sales.
Refresh cycles used to be 3yr, then 5yr and now things are only replaced when they break or compatability becomes a compliance issue for business.
A 10yr old machine is perfetly usable still with minor mods (basically an SSD).
AI on the desktop is an irrelevance for the vast majority right now. The reality of AI for most is CoPilot annoying them on their laptops to do things they are not interested in.
But I'm not sure any of this is new, surely the channel has been in the replacement cycle for about 10yr already. There has been precious little that is new and innovative in the last 15yr really.
Yes laptops have gotten smaller the lighter but that's the cart leading the horse, most users want bigger laptops screens and bigger keyboards (I know I do). Nothing worse than having to work off a 12" laptop screen and a shitty little chiclet keyboard.
I had hoped that folding screens would result in a small fast laptop with a 30" roll out screen but nope, I get another 12" laptop but now with AI Clippy instead.
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