CRASH CRISIS

Manufacturers of personal computers have failed to achieve the penetration of other consumer goods. Under threat from cheaper network-based computers, they must swiftly solve their notorious unreliability problems and tailor their products mor

The computer industry is involved in a global marketing disaster that makes Persil Power look like a storm in a twin-tub.

The market is prone to highly publicised recalls of defective products – Intel chips last year and Hewlett Packard printer cartridges recently – but the problem is far more wide ranging than this.

The 300 million personal computers with hundreds of brand names and dozens of formats all have one thing in common. They don’t all work properly.

The global computer market which is now 18-years-old is being held back by flawed products.

As one senior IT analyst says: “What is the first thing you are told when you go on a computer course? – ‘save, save, save your work’. That’s because everyone expects the machine to crash and why you have so many support services set up around them.”

Rana Mainee, director of consulting services at International Data Group, says that although some brands are better than others, a pervasive frailty of equipment dogs the whole industry.

Mainee says: “We know computers don’t work as well as they could do. The technology is still immature. In the motor industry, virtually everybody who gets a new car is happy with that experience. You can get in it, turn the key and drive off. With a computer in comparison, you can turn the ignition and it won’t even start.”

The home PC market has been dogged by an over-zealous rush into the market without proper research and development.

Richard Wentk, author of The Which Guide to Computers, blames the intense manufacturing cycle for the existence of flawed machines. The industry mantra in recent years is that every 12 months prices fall and specifications double. Wentk says: “In that atmosphere, the thinking is to get the machines out as fast as they can. Manufacturers don’t say ‘Let’s work on this product for a year and make sure we get it right’.”

The slow uptake of home PCs has been attributed to the difficulties of getting the product to work. The US, which has the highest proportion of PCs in the home, has a 30 per cent penetration. In the UK the figure is only 18 per cent, according market research group GfK.

In comparison the CD player, which made its entrance into the market at the same time, has a 45 per cent home penetration. And the video recorder, which first made an appearance in British homes 18 years ago, has reached 78 per cent penetration.

Observers say there are two problems that have prevented the PCs success in the home market. The first is that the machines are too expensive: IBM’s Aptiva range is typical of the home PC range in costing from 1399-2749. The second concerns function. What exactly are you going to use the computer for, once you have bought it?

Ian Joslin, marketing director of computer peripherals maker Kyo-crea, says: “The price is still very high and it has got to come down much further before it can make any real impact in the home. Also, the machine still lacks a compelling application. People have videos, even if are not totally proficient in their use, because it has a clear purpose that nothing else can do.”

Many home PCs are also simply too powerful for most peoples’ uses. Industry studies show that the majority only use ten to 15 per cent of the machines’ capacity.

Oracle chief executive officer Larry Ellison, who has been conducting a pitched battle with the PC on behalf of the network computer, refers to the complexity of the PC by calling it “a mainframe on your desktop”. Or as Oracle UK managing director Philip Crawford puts it: “The way we use PCs is like buying a Ferrari and only using it to go down to the corner shop.”

The machines include inappropriate programmes in an effort to be bigger and more powerful than the rest. US-based research company the Gartner Group says that half of the costs of running a PC goes on “end-user operation”. This can be defined as all the time a person sits in front of the machine engaged in non-productive work and fiddling with the PC to get it to do what is required. This could be anything from surfing the Net and playing games, to using training packages, or adjusting fonts.

Because of the slow uptake in sales and the cumbersome nature of existing products, computer manufacturers have sought to improve margins by taking millions of pounds a year servicing their defective machines.

Gartner has put the average cost of owning a PC in a business environment over five years at 29,250. It stresses this is an average figure and that it found companies which were spending between $6,000 (4000) and $16,000 (11,000) a year running its PCs.

Many companies make a large proportion of their profits from servicing the machines they have sold to businesses. For instance, American-based computer giant Unisys last year had profits of 6.2bn, of which 2bn came from the service and support part of the business. IBM and Hewlett Packard are other giants that make big profits from servicing their own equipment.

Simon Levin, a research director at Gartner, explains that the cost of running a machine for five years breaks down into four areas. There is the non-productive work; the actual cost of the machine itself, which represents only 15 to 18 per cent of the total; and technical support and administration which together accounts for between 35 and 38 per cent of the costs.

IBM admits that sales and service are increasing parts of its business. PC marketing manager for IBM UK Qamar Hasan says: “The service and support arm of our business is just under one-third of our company profits and is growing.”

Market research company Dataquest says that the amount of money spent on either hiring or contracting in professional IT services across Europe is 15bn, which it says will rise to 34bn by the end of the century.

Businesses have invested too much money in PCs to step back from them for now. The equipment is hard to run, so companies are bringing in professionals to look after them.

But computer companies are trying to resolve these problems with – you guessed it – new technology.

IBM will be the first major manufacturer out with a network computer product in November. The IBM NetStation is a stripped down version of the PC. It has a monitor, a mouse, a keyboard, but no hard drive to store work. Word processor or spreadsheet programmes are simply downloaded from a central mainframe computer and then passed on. The new IBM machine will cost about 650 and is aimed at the corporate market.

Oracle’s machine, called simply the Network Computer (NC), will launch next month in the US, and, it is hoped, before the end of the year in the UK, and is to retail at 300.

Oracle thinks this price will make the machine attractive to small business users, the home market, and to corporate business departments which want to centralise information.

Not surprisingly, Crawford thinks that the NC is the machine that will break into the largely untapped home market. “Complexity is what has stopped the PC from becoming ubiquitous in the home. NC will plug into the TV, where it can access a variety of games, education and business programmes as well as take advantage of an Internet connection.” However, many critics see the network computer as yet another of the computer boffins’ answers to a consumer problem.

Critics say a black box is even less aesthetically pleasing than a PC, and the fact that you can’t own any of the programmes fights against the consumers instinct to own products.

Wentk is more forthright: “The NC is doomed. It is a complete misunderstanding of what people want. It falls between two stools – it is not good enough to be a PC, but it will not be as easy to use as a phone.”

Analysts say it is unlikely that the network computer will solve the problems in the computer market or accelerate the increase in uptake.

Critics say the NC’s reduced hard drive capacity will have trouble downloading programmes quickly over the Internet, which already has a reputation for being slow. Others claim that constant billing for programmes and applications will irritate customers.

Although computer manufacturers continue to argue that consumers are willing to forgive defective machines in return for drastically cutting down mundane and repetitive daily tasks, they are not realising the possibilities that exist in the market to expand home and business use.

Rather than racing ahead with upgrading machines and making defective machines more powerful, they need to take a leaf from the video recorder market, by correcting defective products, and tailoring computers more closely to consumer needs.

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Tom Fishburne is founder of Marketoon Studios. Follow his work at marketoonist.com or on Twitter @tomfishburne See more of the Marketoonist here

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