August 19, 2013
Dittman's hardware-buying approach also offers a better real-world explanation of mundane PC sales than the tablet-as-PC-killer mindset. Simply put, the company only purchases PCs when it needs to. It's not delaying or canceling new PC purchases because it bought iPads. Rather, it doesn't replace hardware until it is worn down to the point where productivity problems arise. That story doesn't sell well on Wall Street, but it's reality on Main Street, where hardware replacement cycles have grown longer and spending decisions require more justification than "it's new and trendy."
"There are no compelling reasons based on technology advancements alone for a business to buy a new PC or replace an older one," Agrawal said. "However, businesses are still buying PCs as per their needs [such as new hires or performance issues]." Sometimes those needs are flat-out boring; tax strategies, anyone? Agrawal noted that SMBs that treat PCs as capital equipment might stick to stricter replacement cycles because of amortization -- at a certain point, the asset becomes worthless on the books. Yet many SMBs don't take that approach, Agrawal added, and often stretch PC investments as long as possible. Eventually, they'll do the same with their tablets. There are other factors underlying tablet and PC buying habits among SMBs and consumers alike. The PC market is mature, but tablets are still relatively new and nowhere near marketplace saturation. "A household of four in the U.S. already has four PCs, but it may start with one tablet and gradually [buy more], contributing to the rapid growth," Agrawal said. "We had seen the same phenomena for PCs a decade ago when the density of PCs was low." Similarly, SMBs are currently buying tablets to perform functions that the PC wasn't intended for, such as mobile payments. Some 40% of SMBs now accept credit card payments via a card reader installed on a tablet or smartphone, according to recent BIA/Kelsey research. All of those SMBs purchased tablets or smartphones to support mobile payments, but those devices didn't necessarily replace traditional PCs -- they replaced traditional credit card readers. The media has had a hand in planning the PC's funeral. Agrawal said some of the large technology research firms, too, have played a big role. "Many analyst firms set up unrealistic expectations with regards to market size and spending whenever a new technology or a device is introduced," Agrawal said. "[That] drives the IT industry into the ground in more ways than one. Remember the debacle of netbooks." Eventually, the same factors that currently affect PC sales -- product maturity, marketplace density, extended replacement cycles and, yes, competition from new technologies -- will catch up to tablets, too. In the meantime, just like their consumer counterparts, SMBs are buying iPads and, increasingly, other tablet models. They're just not holding any candlelight vigils to mourn the demise of the PC. Jim Gardner, president and CEO of Gardner Group, said his 110-employee firm recently bought two Nexus 7 tablets from Google. Gardner Group, which provides inspections and software for the property and casualty insurance industry, will use the devices to test its new inspection app in the field. Likewise, it will pilot the potential productivity and ROI of employees using the Nexus 7 when they're outside of the office. Even if the Nexus 7 test is a resounding success, Gardner said employees will continue to use PCs in the office. "[Tablets] would not replace the PC, they would be adjunct," Gardner said. "Basically, we'd be giving them the info they have on the PC out in the field on the tablet."
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