While revenue and shipment declines in PC and mobile devices markets gain the most attention, there are an increasing number of new vendors garnering consumers’ and enterprises’ attention.
As these vendors advance in the market, in some cases competing head-to-head with stalwarts such as Apple, Samsung and Microsoft’s PC OEMs, they will usher in new business models that will transform the way devices are developed and sold.
2016 is the year PC as a service arrives
Trend: PC-plus-services, which includes PC-as-a-Service (PCaaS) becomes the default go-to-market strategy as Windows PC OEMs shift from a hardware-centric business model to a PC-plus-services model to rekindle growth and stoke demand.
Driver: Prolonged and steeper declines in consumers’ interest in PCs combined with lengthening refresh cycles in commercial markets and wider commoditization of some PC types compels vendors to realign their go-to-market strategies with market changes.
Result: Larger OEMs such as HP, Dell and Lenovo will reset their PC go-to-market strategies and incorporate a broader range of support services, financing programs and subscription-based PC as a Service solutions. Customer adoption of these new programs will redefine vendors’ revenues, profits and margin expectations and result in further vendor consolidation.
Most consumers’ attention, particularly in APAC, has been focused on smartphones, which for some represents their primary computing device; the effect is not as pronounced in commercial markets, but mobile devices are also complicating incumbent PC vendors’ relationships with their install bases. Without a radical overhaul of their PC go-to-market strategies to include beyond-the-box capabilities and services that bolster the value proposition of their devices, PC OEMs risk losing their footing to vendors with devices that are more in sync with customers’ usage habits and pricing expectations.
Device makers angle for a piece of a more than $50b opportunity
Trend: Wearables and other connected devices drive a flurry of hardware and service alliances between unlikely partners.
Driver: TBR projects the global wearables market to generate more than $50 billion in revenue by 2020, highlighting the opportunity for PC-centric or mobile-device-focused vendors to make inroads into this lucrative segment that promises to provide some relief for beleaguered PC, smartphone and tablet segments.
Result: Larger, better-funded wearables startups acquired smaller competitors in 2013 and 2014, but 2015 featured partnerships such as Samsung and Under Armour, HP and Movado, and Garmin and the iOS and Android developer ecosystems.
Apple Watch validated connected device and smartwatch markets, and competition will intensify as vendors stake claims for the more than $50 billion in revenue expected by 2020. A broad range of partnerships with consumer and commercial brands, as well as technology innovators and component manufacturers, will be critical to success, particularly as Intel, Samsung and Qualcomm create more advanced and autonomous wearables that threaten to relegate PCs and smartphones to supporting roles.
New ways to pay for smartphones level the Android playing field
Trend: A drop in entry-level Android smartphone ASPs to nearly $50 industrywide, and new smartphone financing programs will enable lagging OEMs to kick-start growth in China and leading vendors to capitalize on growth in India.
Driver: Slowing growth in developed markets such as the U.S. and Europe and rising levels of saturation in emerging markets such as China and India force vendors to lower ASPs to remain competitive; and lower ASPs trump technical specifications as the primary purchasing differentiator.
Result: Smaller, more nimble and innovative vendors upset the established order in the smartphone market. In tandem with Android smartphones inching toward becoming a commodity device, the life cycle shift from the typical two-year refresh cycle to one that is nearly on-demand or ad hoc fuels growth of these vendors and raises them to market share heights nearly equal to those of Samsung and Huawei.
“Good enough” devices dominate Android markets, and vendors such as Samsung with significant stakes in premium markets are enduring consumers shifting their purchase habits for primary devices from premium price bands to midrange and entry-level prices. In contrast, vendors with volume-centric business models designed to run at thinner margins such as Asus, Acer, Karbonn, Coolpad and Xiaomi are finding greenfield opportunities with Samsung users looking to switch brands.
Jack Narcotta is devices practice analyst at Technology Business Research
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