Why the corporate PC upgrade cycle may have legs

Summary:The consensus says that Windows XP has boosted corporate PC sales and acted as a performance enhancing drug. There's an argument that enterprises may keep refreshing PCs because the installed base is ancient.

Special Feature

Windows XP and the Future of the Desktop

Microsoft support for Windows XP officially ended on April 8, 2014. There will be no new security updates, non-security hotfixes, and no free or paid support options for XP. Here are resources from ZDNet and TechRepublic to help you navigate the transition.

When Hewlett-Packard reports its fiscal third quarter results today there will be a lot of talk about the Windows XP PC replacement cycle in the enterprise and how it is helping profitability.

The big question: How long will the XP replacement cycle last and has it already peaked?

Wall Street analysts, who are expecting HP to report third quarter non-GAAP earnings of 88 cents a share on revenue of $27 billion, are mixed. Some analysts are saying the enterprise PC upgrade cycle is like a performance enhancing drug that boosts results but as soon as you go off them the fun is over.

Evercore analyst Rob Cihra said that he things that HP's PC growth has already peaked at about 7 percent year over year and will fall back to the 2 percent range. 

"As particularly easy comps start to lapse and the Windows XP end-of-life benefits ease, we expect this to already prove the peak in HP's year over year PC growth, which we see slowing back to around 2 percent year over year in the Oct quarter and fiscal year 2015," he said.

Cihra's take is probably on target, but there are reasons to believe that the enterprise PC cycle has some growth ahead even as the Windows XP replacement pop subsides.

evercoreHPPCgrowth

Special Feature

Tablets: Where's the Productivity?

The hottest device in the enterprise remains the tablet. Executives have pushed for them, IT departments have accommodated them, and users continue to clamor for them. Are they a fad or game-changer? We examine the productivity benefits, opportunities, and myths.

We recently caught up with Tom Garrison, vice president of Intel's PC Client Group, in New York. Garrison, who used be general manager of Intel's data center engineering group, is now learning the ropes of the corporate PC enterprise cycle. Naturally, Garrison believes that corporate PCs should be refreshed more often, but there are reasons to believe that the PC refresh shutdown cycle has been overdone. Even if you account for tablets replacing PCs for some roles, laptops and their cousins are still used most for work.

Garrison outlined the following arguments for a PC upgrade cycle that goes beyond Windows XP in the enterprise:

The corporate PC upgrade cycle largely tracks gross domestic product. GDP fell in recent years and the PC upgrade cycle went with it. When GDP bounced back IT buyers weren't convinced. Now GDP is stable and growing IT buyers are likely to entertain PC upgrades. "PCs haven't gotten back to the (GDP) trend line," said Garrison. "In the U.S. hiring in the large enterprise has recovered, but not in small and mid-sized businesses."

PCs are too old. From 2007 to 2014, there was a 34 percent increase in corporate PCs four years or older. PCs 7 years old or older showed a 81 percent increase in the installed base. "The reality is there's a finite life of how long these things can last," said Garrison.

New form factors. Two-in-one devices that double as laptops and tablets may not be a consumer purchase, but for an enterprise they can make sense. For instance, PepsiCo uses 2-in-1 devices that are tablet mode as drivers enter a store and talk to managers and then are used as PCs inside the truck for enterprise applications. Garrison is also hoping that enterprise PCs start leading the way with cutting edge features while offering the same consumer fashion sense.

"The strategy is to reduce the difference between what is a commercial and consumer device," said Garrison.

Meanwhile, mini-PCs---basically computing bricks---are selling well in the enterprise because they can be hidden easily behind signage and don't require a lot of maintenance.

New business cases for PCs. Garrison is trying to position PCs as a workplace transformation tool that will improve productivity. Anyone stuck with a 10 pound XP machine---like the poor PR guy taking notes in my meeting with Garrison---knows there's a productivity hit with a decrepit machine. J.Gold Associates found that falling PC prices mean that enterprises should consider two-year replacement cycles over the four-year plan that has been a staple for years.

jgold

In addition, modern machines can gain work days via better productivity.

jgold2

Even if you take those statistics with a heavy grain of salt, it's clear that you're not doing your company any favors with a 5-year old PC for workers.

Should those arguments gain traction there could be some life to the enterprise PC cycle beyond the XP replacement pop---even assuming tablets poach some sales.

Topics: Hardware, CXO, PCs

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.