Gartner Spells Out Changing Tech Scenarios
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REDWOOD SHORES, Calif. The coming few years will feature continued consolidation, financial pressures and changes to the hardware business, requiring different IT strategies for the future than what people have been using in the past.
IT consultancy Gartner made these predictions during its Hardware Insight conference here Thursday. Employees of firms like Intel, HP and Sun listened to presentations that often focused on where their companies may be headed in the coming years.
Some of the usual trends will continue, like market consolidation. Research Vice President Roger Cox noted that 85 percent of the storage business is in the hands of seven vendors, and "they are not advancing the technology. They are just moving along, milking their huge user bases." It's the startups that are bringing out new, innovative products, and will likely be acquired, he said.
In the next four years, Gartner sees continued consolidation of vendors, consolidation of servers through virtualization, a move toward green IT, an expansion of cloud computing and "hardware as a service" i.e. hardware rental.
Green IT won't be just confined to the U.S., it will be a global effort. Gartner estimates two percent of worldwide carbon emissions are attributable to IT. "IT vendors are seen as part of the problem, so it will be necessary to get your house in order," said Cox.
Even though it is viewed as an emerging market with a much smaller IT infrastructure than the U.S., China is already concerned with power consumption and the government is coming up with guidelines on for businesses on power consumption policies. Those policies have not been released yet, but it shows the issue is one even for high-growth areas, not just mature ones.
A late start to the slowdown?
Gartner Research Director George Shiffler then spoke of hardware spending as it relates to the economy. He ate some crow and admitted Gartner's earlier predictions of a downturn in sales due to economic conditions didn't manifest. Hardware spending remained strong in the first half of 2008.
The U.S. did better than expected in the first half of this year, "despite some awful headlines," thanks to interest rate cuts, policy actions to give liquidity to banks, the falling dollar making exports more appealing and the tax rebates for consumers.
Citing research from the financial analysis firm Global Insight, Shiffler said there could be a notable drop in spending in the U.S. and Europe, which would result in slowdowns in sales in the second half of this year and the first half of next year. Hardware spending would rise 6.6 percent in 2008, down from the 10.0 in 2007, and fall to just 3.8 percent in 2009.
However, it's a slowdown, not a plunge like after the dot com bubble popped. "We don't see the bottom falling out in spending like we did in 2000-2001, even in the worst case scenarios," said Shiffler. How much impact it will have is an open question. "Spending is not affected so far. The U.S. hasn't slowed enough yet to impact the market," he said.
He later told InternetNews.com that the cost of energy, while dipping slightly in recent weeks, remains a problem, people spent their tax rebates from the government very fast, and Europe is now having housing problems of its own. But don't panic yet. "It isn't people stopping, it's people going slower and seeing how this plays out," he said.
Changes in the server and desktop market
The server market has to deal with a number of changes all at once: the economy, the decline of RISC and ascension of x86, the game changers that are virtualization and cloud computing, and the drop in average selling prices (ASPs).
In the U.S., from the first half of 2007 to the first half of 2008, unit shipments rose 7.1 percent, but revenue fell 4.3 percent. Dell was the leader in unit shipments while IBM was the dollar leader. HP held steady and Sun declined in both units and dollars.
One reason for that, according to Heeral Kota (CQ), a senior research analyst at Gartner, is that cheaper x86 servers are being sold. "A lot of times people buy more than they are using. So now they are buying minimal and buying more if they need it. You can always buy more capacity," she told InternetNews.com.
The server market would be better off if the economy were better, but it hasn't been impacted that much to the down side, either, said Kota. Mostly it's just that customers are realizing they don't need to buy super-decked out computers like they were buying last year. "They realized they don't need that much capacity," she said.
Gartner believes cloud computing could be a disruptive force in the market, particularly for server vendors, and that server vendors will need to target a range of external and Web datacenter providers as customers try to avoid making commitments and go to pay as you go cloud services.
On the desktop side of things, Principal Research Analyst Mikako Kitagawa said that soon, China will surpass the U.S. as the single largest PC market. The U.S. is 22 percent of worldwide PC sales but China is coming on fast.
The reason for that is the U.S. is a "highly saturated" market, where people own two and three and four PCs, and much of the business is in upgrades and replacements. China is still growing as a market and has not reached saturation.
There is also market saturation for vendors. HP and Dell combined hold about 55 percent of the total market, with Apple coming in third with around 10 percent of the market, and the best annual growth rate of 37.9 percent quarter-over-quarter. Acer, which now owns Gateway, has around 10 percent of the market, followed by Toshiba, a laptop-only player, Lenovo and Sony in the high single digits.
That doesn't leave room for much else. Kitagawa said there would likely be some vendors exiting the market. "This is a scary picture if you are a small player, because you've got no place to go. It shows the consolidation trend that has gone on recently," she said.
Kitagawa also predicted it would be very bad for white box PC vendors, locally-owned and established stores that build their own PCs, to compete against juggernauts like Dell and HP.
The mini-notebook boom
Gartner is predicting mini-notebooks, also sometimes called netbooks, will ramp up significantly, led by ASUSTeK, with its popular Eee-PC. Mini-notebooks will be a consumer phenomenon, with 89.1 percent of sales in 2Q08 going to consumers. ASUS had 50 percent of the market in that quarter, but that might get spread around a little with the entry of more players, including Dell.
The mini-notebooks sell in the $300-$500 range, which makes customers feel more comfortable about buying them outside the traditional channels. Many of them are being sold through Amazon, because the $300 price point is one consumers are comfortable with, according to Angela McIntyre, research director in the client computing markets team.
Worldwide, Gartner expects mini-notebooks to hit more than 50 million units by 2012 under the best case scenario and around 25 million units under a most likely scenario. It will be difficult to track because they will appear under the brand name of small local vendors, so there won't be a dominance of a few big players like with PCs and laptops. By making them locally, costs can be kept down.