The volume-centric strategies that were once used to drive PC original equipment manufacturer (OEM) partners' sales are now out of sync with the dynamics of the PC market, according to analyst firm, Technology Business Research (TBR).
“The price wars among Dell, HP Inc. and Lenovo are over, and the focus is now on protecting operating profitability and stabilising operating margins amid revenue pressures,” TBR senior analyst of Internet of Things (IoT) and device practice, Jack Narcotta, said.
“OEMs and their partners will pursue greater profit through new avenues and traditional means, such as greater sales of premium PCs or other devices, as these companies transition from volume sales to profit-first approaches."
According to the analyst firm, in 2017, vendors’ services, peripherals, and ability to generate revenue will be key factors in sales strategies to disrupt the mobile device and PC markets.
As a result, Narcotta said partners and OEMs should work in tandem to generate greater profits per sale, “unseat incumbent vendors” and protect their install bases.
“With a greater focus on services, peripherals and their relationships to hardware, PC, and mobile devices, OEMs will leverage devices as wider points of entry into their respective ecosystems," he added.
“Whether through in-house efforts or working with Google, Windows, Chrome, and Android, OEMs will target weakened competitors, such as Apple."
Consumer PC-as-a-Service makes it debut
According to Narcotta, PC vendors will explore consumer-oriented ‘as-a-service’ business models that include bundles of services, applications, and peripherals to boost profits-per-PC sale.
“PC as-a-Service will transform transactional consumer PC sales into opportunities to deepen engagement with consumers, allowing OEMs and their partners to provide greater sales flexibility as consumer use cases change, enabling them to accelerate the PC refresh cycle,” he said.
The analyst firm added that ‘as-a-service’ business models that weave in extra profits from both services and peripherals are two segments that carry margins often two or three times that of PC hardware alone.
Google to strengthen its ecosystem by merging Chrome and Android
According to Narcotta, interoperability between Google’s two largest platforms, Android and Chrome, will be the final step in offering a unified operating system.
Narcotta said Google is seeking to redefine “mobile computing”, making its platform of services appeal to the enterprise by extending consumers’ smartphone-centric computing habits and bringing it to the workplace.
As a result, Google can exploit the barriers between PCs and mobile devices that exist in both Microsoft and Apple’s ecosystems.
“Smartphone and Chromebook users’ expectations of cross-device compatibility of their apps and content grows as their productivity and entertainment preferences shift to cloud-based services,” said Narcotta.
“A unified Android-Chrome operating system will strengthen the viability of Chrome’s apps as replacements for Microsoft’s Office software suite, particularly for enterprises that have embraced a mobile-first approach to productivity, data management and content creation.”
In a unified ecosystem, both consumers and enterprises are more likely to purchase multiple devices that are guaranteed to be interoperable across apps, services, and content.
“For OEMs, this creates more opportunities to earn net-new business via sales of multiple devices, or coax users away from Apple’s comparatively proprietary ecosystem,” Narcotta said.
Weakness in Apple’s Mac division creates opportunity for Windows PC partners
According to Narcotta, Apple’s weakened Mac PC business is “fertile ground” from which Windows rivals can reap larger profit per sale.
“Fleeting meaningful design and technology innovations, and declining unit shipments due to weakened demand, show Apple’s Mac PC business is in maintenance mode,” he said.
“With the company’s go-to-market and strategic planning centered on the iPhone, the Mac PC business, once the gateway for consumers and enterprise into Apple’s ecosystem, will be relegated to a smaller supporting role within Apple.”
TBR believes Mac PC line-of-business managers are primarily tasked with maintaining Mac PC margins as even in a declining state, Apple’s Mac segment generates the highest gross and operating margins in the PC industry.
Additionally, Apple managers will more than ever be seeking ways to eke greater profit per sale as unit shipments decline.
“In 2017, Apple will be more than ever, the iPhone company,” Narcotta added.