Are PCs Dead? Not For SMBs

Aug 19, 2013 (12:08 PM EDT)

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Tablet Buying Demystified: 10 Tips
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Tablet Buying Demystified: 10 Tips
Tablets are in vogue, with surging sales that have only recently shown signs of tapering off. PCs, on the other hand, are not cool. Sales have plodded along, failing to impress a tech industry that's perpetually fascinated not only with what's new but also what's next.

The conclusions drawn from these trends are to be expected: Tablets are cannibalizing PC sales! The PC is dead! Mobility reigns! Yet recent research from Techaisle, which focuses on small and midsize business (SMB) IT habits, suggests some of the sky-is-falling proclamations about the future of the PC are at best misguided, if not altogether off-target.

"Those who predict that the PC is dead are not seeing the picture correctly," said Techaisle analyst Anurag Agrawal in an email to InformationWeek. "They are probably getting carried away by the current wave of tablet adoption."

Agrawal, who recently wrote a blog post on the topic, said that there's no doubt that some people are buying tablets in lieu of PCs -- especially consumers who are put off by a confusing and complex PC purchase decision.

[ Can Microsoft win in the tablet arena? Read Microsoft's Next Surface Tablets: 7 Must-Do's. ]

But for the majority of small and medium-size businesses, the tablet-as-PC-replacement scenario simply isn't a reality: 68% of U.S.-based SMBs that have purchased tablets did so to fill new or complementary functions, not to replace PCs. Only 16% bought a tablet specifically to replace a traditional laptop. The complementary scenario numbers tick higher in some other countries, according to Techaisle's recent polling of 9,500 SMBs worldwide: 75% in Canada, for instance, and 70% in the U.K. Among U.S. SMBs planning future tablet purchases, 74% said the devices will be used to complement, rather than replace, PCs.

This rings true for Steve Cummins, director of digital marketing and communications at Dittman Incentive Marketing. The 35-person firm, which manages group travel incentive programs for sales teams and other corporate clients, recently purchased iPads for its "travel team" -- on-site event managers and coordinators who accompany customers on trips. The Apple devices aren't taking the place of PCs; rather, they're replacing big binders of paper and fulfilling tasks that were never optimal on a laptop or desktop. Dittman's corporate office remains 100% PC-based.

"The use of tablets hasn't shifted our purchasing schedule for PCs," Cummins said via email, adding that different devices best suit different tasks. "The advantage to us with tablets is their ability to be easily carried everywhere and 'always on,' and this is most important when we are on-site at a resort destination managing one of our travel programs," he said. On the other hand, the tablet isn't a be-all tool; for example, employees have found spreadsheet work challenging on the devices, noted Cummins. "Even with a Bluetooth keyboard, this can be cumbersome on a tablet," he said.

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."