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Computer industry

The Computer Industry's Shift: A Reversal of Decades-Long Trends

Strategic Insights

— 1 min read

The computer industry is poised for a significant shift as the trend of vertical disintegration begins to reverse itself over the next few years. Research firm International Data Corp's (Canada) president, Paul Kennedy, says that the industry's fragmented structure, which has been dominated by intense competition, will start to consolidate. This change will be driven by personal computer vendors seeking to increase their value in the industry.

Key Takeaways:

  • The computer industry is likely to experience a reversal of its trend of vertical disintegration, with a decrease in the number of layers over the next few years.
  • Personal computer vendors currently create only about 20% of the value of their products, with the remaining 80% coming from component manufacturers.
  • PC makers are seeking to increase their share of the value by getting into the chip business, with examples including the PowerPC microprocessor developed by IBM, Apple, and Motorola, and DEC's Alpha chip.
  • Microsoft, Intel, and Novell will increasingly find their interests diverging due to changing industry dynamics, including competition in the network arena and the shift towards reduced instruction-set computing (RISC) hardware.
  • Microsoft faces a dilemma in the next couple of years on whether to focus on the business software market or the home market, with a predicted major focus on the home market due to the presence of more potential customers and competition from smaller companies.
  • IBM's software revenues currently exceed those of Microsoft by a factor of four, making it a significant player in the industry.
  • Novell's purchase of WordPerfect Corp and the Quattro Pro spreadsheet software from Borland International has set it on a collision course with Microsoft in the network arena and applications software.

Statistics:

  • 20%: The percentage of value created by personal computer vendors in their products.
  • 80%: The percentage of value coming from component manufacturers.
  • 1985: The year mentioned by Kennedy as when the computer industry began to disintegrate into many segments with intense competition.
  • 4: The factor by which IBM's software revenues exceed those of Microsoft.

Sources:

  • Newsbytes: No specific date mentioned
  • International Data Corp: No specific date mentioned
  • Paul Kennedy: No specific date mentioned

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