Google, Motorola and HP: How the Tech Industry Is Changing

  • Share
  • Read Later

Focus On Software and Services

The software and services segment of the industry are by far the most profitable, yielding margins of 50% to 80% on average. Hardware, in contrast, rarely yields margins of great than 10%—unless you’re Apple.

(MORE: Why HP Is Getting Out of the Consumer Game)

For many who know some history of the technology industry, they know that this thinking is what led IBM to exit the hardware business and focus only on software and services. In 2005, they sold off their entire business to Lenovo. It is a strategy I fully expect a number of other companies to begin to employ, as Apple has shown them all that vertical integration is a key to success.

Dell, for example, has been slowly backing off their consumer business. They have shifted resources from consumer PCs to enterprise and IT. Dell, like HP, has a robust services group as well as software, to some extent. I would not be surprised in the slightest if at some point in time Dell also exits the consumer PC business because they are bound to discover the same thing that HP has; to play in the consumer market, you have to invest in and own the entire ecosystem to meet consumers’ needs.

What Does It All Mean for Consumer PCs?

It means new entrants have more opportunities. Companies like Acer, Lenovo, Asus and Samsung, for example, now have a wider opening to gain more PC market share worldwide. But to do so, they too will need to pay more attention to providing complete solutions and ecosystems for consumers.

This is also great news for Apple as turmoil in the Windows PC world will lead more customers to Apple’s door.

The bottom line is that companies are facing this reality of the post PC era in a number of different ways. And the post PC era is already in full swing. Companies who think they can do things they way they used to in this era will continue to face difficult market challenges. It is clear we are entering uncharted territory and companies will need to innovate and take calculated risks if they hope to stay relevant. And, like Apple, if they want to be competitive and really create products that consumers want and will buy, they too may have to employ a vertically integrated approach to the market.

As these industry changes continue, I expect to see more acquisitions, spin-offs or shut-downs. And as the post PC era begins to dominate the consumer computing experience, it will be more difficult for anyone to be a one trick (hardware-only) pony in the future.

Ben Bajarin is the Director of Consumer Technology Analysis and Research at Creative Strategies, Inc, a technology industry analysis and market intelligence firm located in Silicon Valley.

MORE: Why Competing with Apple Is So Difficul


  1. 1
  2. 2
  3. Next