copyright 2004-2008 by Nicholas G. Carr
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Nick Carr's essay blog
March 09, 2005
The desktop personal computer is one of the great products of the last 50 years. It’s changed the way people work and live, and it’s formed the core of a big, vibrant and exciting industry. But the personal computer is changing, and one thing seems increasingly clear: The PC in its traditional form is becoming obsolete, both at work and in the home.
In business, the rise of robust, high-capacity networks has diminished the PC’s once-central role. Computing resources, from processing power to storage capacity to applications, can increasingly be provisioned to users from afar. And that’s exactly what’s happening: To gain economies of scale, companies are consolidating their hardware and software assets in central data centers or even renting the capabilities they need from far-flung utility suppliers. No longer the engine of business computing, the PC is just a cog—and not a particularly important one at that.
Just think how little of a modern PC’s power is actually used. Most workers employ their desktops for a few routine tasks—typing reports, creating presentations, running spreadsheets, checking e-mail, browsing the web. These aren’t exactly the kind of applications that require the latest Intel or AMD chip; most of them were mature years ago. With each new upgrade, the gap between the capacity of PCs and the needs of average business users yawns wider. IBM estimates that about 95% of the average PC’s available computing cycles go untapped. And as for those gigabyte-rich hard drives, just take a peek into your own. Odds are it’s either empty or crammed with junk.
A Ridiculous Device?
Some argue that PCs have become so cheap it doesn’t matter that they’re largely wasted. But that’s silly. Sticking a capital asset worth a thousand bucks or so on every desk in a company—and then replacing it every few years—is not a trivial expense. It becomes even less trivial when you factor in the considerable labor and other costs that go into maintaining and updating fleets of computers and all the software that runs on them. Then there’s the fact that PCs often represent the biggest security hole in today’s companies, a gateway for the evil-minded hacker and a repository of ready evidence for the litigious. It’s getting harder to look at a business PC and not see an anachronism waiting to happen.
Yes, others have said similar things before. In the late 1990s, Oracle CEO Larry Ellison took a load of flak for calling the PC “a ridiculous device” and predicting it would be supplanted by so-called thin clients—terminals and other stripped-down appliances connected to central computers and applications. But if Ellison’s timing was off, his assessment was not.
Today, real alternatives are out there, and they’re getting better all the time. Companies like Wyse, Neoware and Sun Microsystems are offering cheap, durable desktop terminals that draw all their power, storage, and applications from central servers—they don’t even have their own operating systems. Researchers at IDC predict that the thin-client market will expand at an annual clip of nearly 23 percent through 2007, far outpacing the growth in PC sales. On the software side, web-based and hosted applications, which users can tap into through a simple browser interface, are proliferating. As the utility computing model takes hold, the case for keeping desktop computers in companies will only grow more tenuous.
The Death of Drab
At home, the role of the PC is changing as well, though it’s changing in very different ways than in the workplace. Now that basic computing functions are mature and well-established, consumers are starting to demand a higher fashion quotient in their digital devices—just as they do for other commonplace appliances like refrigerators and televisions, coffee makers and speakers. Suddenly, buying just another cheap colorless box is not so appealing.
Early signs of this transformation in consumer demand are widely evident. Apple’s market share, for instance, is beginning to grow again after years of erosion, thanks to distinctive products like the iMac, iBook and the diminutive new Mac Mini. A number of other manufacturers are finding success with PCs aimed at market niches. Alienware, for instance, has become one of the country’s fastest growing private companies by selling tricked-out, high-performance machines to hard-core gamers. Niveus Media is winning raves for its silent, fanless computers designed to be hooked in to home theater systems. As computers continue to move from home offices into living rooms, the demand for sleek, striking designs will only grow.
What’s going on here is nothing new. It follows a common pattern in consumer markets. Just think of the auto business. Ford Motor Company came to dominate the car market a century ago by turning the automobile into a cheap, mass-market good. Other manufacturers couldn’t compete with Ford’s extraordinarily efficient operations. By the early-Twenties, sales of Ford’s drab but well-built Model T surpassed those of all other U.S. car marques combined.
But then the market changed. As consumers began to take the basic functions of cars for granted, they started looking for a little pizzazz in their vehicles. An unadorned black roadster was no longer enough; everyone suddenly wanted a stylish set of wheels. Niches proliferated. Fashion mattered.
General Motors president Alfred P. Sloan saw the change coming. Popular consumer products, he understood, tend to evolve through three phases. They start out as luxury goods, expensive to produce and pitched to a small, elite market. Then, as maturing technologies and economies of scale drive down manufacturing costs, they become mass-market commodities. Finally, once they’re established as affordable necessities, consumers start looking beyond the price tag for distinctive designs and features. Form begins to trump function.
Ford's Challenge - and Dell's
While Ford continued to churn out one-size-fits-all Model Ts, GM introduced a string of attention-grabbing Chevrolet models with smart new features. It also began tweaking its models every year, following the lead of clothes designers. By 1926, Chevrolet was stealing market share from Ford. By 1927, Chevys were actually outselling Model Ts. The market had gone, to use Sloan’s terms, from “mass” to “mass class.”
Ford was slow to respond to the rise of the mass-class market for cars. But it did finally take action. On May 25, 1927, the company announced it was discontinuing the Model T and would close down its main factory in order to revamp it for a new line of more attractive models. But the carmaker’s glory days were over. It would never again come close to dominating the market the way it had just a few years before.
Ford’s fall stands as a cautionary tale for all companies that have thrived by riding the commoditization wave of a new consumer product. And in PCs, that means Dell. Up to now, Dell, has been able to use pretty much the same strategy in selling computers to consumers as to business buyers: Offer functional, standard machines at cut-throat prices. Focus relentlessly on taking costs out of the supply chain. Don’t worry about product design.
That strategy still makes sense in the business world, where the PC is just a commodity - and one whose value is falling. But in the home, there’s still a lot of room for innovation in the design of PCs and the software that runs on them. In the consumer market at least, Dell’s Model T strategy may be running out of gas.
Earlier versions of this article originally appeared at BusinessWeek Online.