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AuthorITies: Redmond Watch


March 20, 2000

A Little Perspective Is Worth 30 IQ Points

By Stuart J. Johnston

O ne of the reasons that people quote clichés is that they often are true, if over-used. One cliché-in-the-making that I've heard a lot lately states: "Perspective is worth 30 IQ points." Now, if you're like me and are among the 99.99% of the population that is not a certifiable genius, then perspective can be a great equalizer. It's empowering to think that someone who can calculate the velocity of the expanding universe in his or her head while sipping a latte might not be as good at making decisions as you are.

And speaking of perspective, I've seen some bum news reporting lately (though, thankfully, not in InformationWeek). And on thinking about it, here are my picks for the top two bum story concepts of the past decade.

First: Have you ever noticed that whenever Microsoft comes out with a long-delayed, long-awaited upgrade, there's a flurry of stories about whether the product will actually sell? Forget the concept of pent-up demand. The format is usually something like, "Windows 2010 shipped last week, but The Big Analyst Company just issued a report questioning the need for the new software, and doubts abound that anyone will buy it."

These stories typically paint their own private universe, one in which Chicken Little would feel right at home. Microsoft is bound to release a system that nobody wants--say, Windows CE. But these bum stories classically follow the old news adage that you should "never let the facts get in the way of a good story." You can easily identify such misfires if you use a little common sense and don't let your personal feelings get in the way.

Let's look at recent history. Do you remember the Windows 95 launch 4-1/2 years ago? Do you remember that flurry of "maybe it won't sell" stories that came out? A couple of analysis firms said Microsoft may not sell as many units by the end of the year as had been predicted. Microsoft's stock took a dive for a few days, but at the end of the year, the software maker had sold almost exactly the number of units that had been predicted initially. Same thing with Windows 98 -- it sold even more copies than Windows 95, so you have sales record on top of sales record. There's a pattern here, and some patterns tend to repeat themselves for solid reasons.

There have been similar stories about Windows 2000 in recent weeks, but ask yourself this question: If Windows 3.0 set sales records, and those were topped by Windows 3.1, followed by Windows 95 and then Windows 98, why should this time be any different? Well, Windows 2000 is a new creature. OK, but in the last two years, sales of Windows 2000's progenitor Windows NT 4.0 have skyrocketed. Still not enough?

Then I look at well-designed research surveys of IT professionals like you. An entire series of five or six surveys conducted by InformationWeek Research since March 1998 have consistently found that Windows 2000, both desktop and server versions, is likely to have the fastest adoption rate of any system to date. In the most recent survey, which ran in February, the numbers indicated that more than 90% of all businesses will upgrade in the first 18 months.

What I find so compelling is that the results of these surveys conducted over a two-year period have never wavered. And my experience -- and thus part of my perspective -- is that such surveys have been extremely reliable. Indeed, Microsoft recently announced it sold 500,000 copies of Windows 2000 Professional, the desktop version, at retail in just the first two weeks. The retail market is where Windows 2000 is expected to do the worst, given its huge resource requirements and the fact that the company went out of its way to urge consumers to buy Windows 98 instead.

Finally, the second type of bum story that I see making its way into the media is that "PC sales growth slows" means the same thing as "sales of PCs slump." Annual sales growth of PCs is a standard measurement of the health of the PC and chip industries. When sales of new PCs slow from, say, 25% year-over-year growth to 23%, it doesn't mean that the market is tanking. It just means that sales growth has slipped a little, from utterly spectacular to merely phenomenal. In covering this particular aspect of the industry, there is apparently a tendency to ignore the difference between the kind of information that is relevant to stock traders and the kind of information that matters to IT professionals.

Sales of PCs have never shrunk since they were first introduced in the late 1970s. Even when sales growth slows, sales are still increasing, so there will still be more PCs deployed next year than ever before -- some 300 million worldwide at this point and perhaps as many as 500 million in the next couple of years. In fact, I remember when the total installed base of PCs in the early 1980s was just a few million. But what we frequently see is wild speculation about the death of the PC. To me, that is a little like the old philosopher's statement that we begin to die the moment we are born. With that logic, once you leave puberty and quit growing at a phenomenal rate, you're done for. You'd better enjoy those last few years of life because, after 18, you're just marking time.

I'd suspect that most of us are living proof that this is a fallacious argument. I'm long past the untamed growth period--I suppose you could call me "a mature market." And I may not be a genius, but I do have a couple of decades of perspective to fall back on. So as the cliché says, that is worth 30 IQ points. And here in Redmond, that and $2 will get you a latte.


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