The PC replacement cycle: Will Windows 7 light the fuse?

The PC replacement cycle: Will Windows 7 light the fuse?

Summary: How long can enterprises milk their existing PCs without having to upgrade? The answer for now is: Quite awhile, perhaps forever.


How long can enterprises milk their existing PCs without having to upgrade? The answer for now is: Quite awhile, perhaps forever. But technology chieftains are betting (praying?) that there's a big PC upgrade cycle looming and the Windows 7 Oct. 22 launch will be the catalyst. 

The consensus view is that companies will have to upgrade their PCs at some point. Many of them have stretched the desktop replacement cycle perhaps as much as a year beyond the usual 3 to 3.5 year refresh rate. 

Dell CEO Michael Dell recently summed up the consensus:

I think what we are seeing certainly is a big deferral of purchases among corporations but when we talk to them, the thing I’m hearing is they are planning on a pretty big 2010 client refresh, and they are sort of planning around Windows 7. They’ve passed over Vista and they are sort of planning for that now.

I think the client installed base is getting pretty old in these companies and I think there will be quite a powerful cycle of upgrades in the client environment. 

That said this PC upgrade cycle may be different this time. Virtualization will be in. ROI will be in. Hoteling and maybe even thin clients will get play. And the other entrant that could really disrupt the PC upgrade cycle. Nettops, the cousin of the netbook. Here's Intel CEO Paul Otellini from the chipmaker's investor powwow:

“The old boring desktop is about dead,” said Otellini. “(But) there’s an 800 million unit installed base and 45 percent of them are more than three years.” Otellini noted that there is an evolution in design on the desktop, pointing out HP’s touch screen design. Also Atom powered desktops are a growth market. 

“Nettops are the under recognized cousin of netbooks,” said Otellini, who indicated that these nettops could replace desktops. The game isn’t to reinvent the desktop, but “milk” the 800 million installed base.

The big question is whether Windows 7 serves as a catalyst for the PC upgrade cycle. There are millions of long-in-the-tooth corporate desktops. And if those desktops get replaced with nettops it's not clear whether Windows 7 is the winner. 

Mary Jo Foley writes:

Microsoft has demonstrated that test builds of even its heftiest (and priciest) Windows 7 SKUs can run on netbooks. But here’s the rub: PC makers are expected to choose Windows 7 Starter Edition or possibly Windows 7 Home Premium to preload on new netbooks because those SKUs will be the cheapest. Microsoft recently removed its three-concurrent-application restriction on Windows 7 Starter Edition, but that low-end version is still missing a number of features that Microsoft is touting as Windows 7 selling points.

Also see: Will the Windows 7 price be right?

The other wild-card here is the economy. If the economic picture doesn't improve companies may just try to milk their PCs a little longer.

Deutsche Bank analyst Chris Whitmore writes in a recent research note:

The reluctance of Corporates to migrate to Vista (~75% of install base on XP or older) suggests the PC installed base is quite old and will require an upgrade to effectively run Win 7 (despite its modest system requirements). In the interim, we expect users to extend the useful lives of PCs for as long as possible and generally opt for lower end configurations (‘good enough’) and netbooks (XP).

According to Whitmore an improving economy will make his 2010 PC unit growth estimates conservative. If not, XP will make do again. 

In any case, there's a huge gap between the installed base vs. PC shipments that at some point will close. This installed base vs. PC shipments is largely attributed to Vista. Enterprises have largely held out from Vista and plan the XP to Windows 7 jump. The good news: XP has allowed companies to squeeze more out of their machines. The bad news: Eventually, these companies will need a new OS and the PCs riding shotgun. 

Whitmore says:

We expect the magnitude of PC demand following the release of Win 7 to be contingent on macro improvement, particularly among corporates who historically have been slower than consumers to adopt new technology due to extensive testing before rollout. Further, current IT budgets are still under pressure and we expect corporates to extend the useful life of currently installed PCs for as long as possible.

The charts tell the tale. According to Gartner data, the consumer has adopted Vista at a faster rate than the enterprise. That blue bar below indicates the potential XP to Windows 7 pool.

If that crowd jumps from XP to Windows 7 the Windows operating system mix should look like this:

However, a lot can go wrong---especially on the economic front. Tech executives are hoping that the industry doesn't find out just how long you can stretch a Windows XP desktop.

Topics: Operating Systems, Hardware, Microsoft, Mobility, Software, Windows

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  • Are your figures right?

    You seem to be suggesting that in 2009 300 million PC will be converting to or installed with Vista. This seems a little on the high side.

    Windows 7 will inevitably have an impact long term how long corporates take to start their mover will depend on what they think it offers beyond what they get from their XP systems.

    The problems all PC and software makes suffer from is that everything has become incremental. You had to keep going forward in the past because things has so many bugs. Now it much more marginal.

    The killer app for the home may be when they finally work out how to integrate the PC into the home but for some reason MS stopped after media centre and has not done much to move things forward.

    The killer app for business has probably gone for ever or at least become more sparse. The cloud changes much but in some ways that takes away from the importance of the PC and PC based apps anyway.

    • Including home and office PCs ...

      ... 300 million seems about right. For the enterprise, it is less about the next "killer app" than it is about support. The older hardware gets, the harder it is to support. The smae with the operating system. Being one version back is okay but being two versions back is not an enviable place to be. Anyone still on Windows XP in 2011 will be running on a very short leash indeed.
      M Wagner
      • Two versions back

        About 20% of my systems were still running W95 in 2006. The only reason we upgraded those was because we couldn't get an SAP client for anything before W2K. In most cases I upgraded the OS to XP on the existing hardware.
        • Would you be able to get Viista on that same hardware?

          I doubt it...

          [i]In most cases I upgraded the OS to XP on the existing hardware.[/i]

          Wintel BSOD
          • I doubt it too,

            but since we don't yet have any apps that require Vista, it's irrelevant. When apps start showing up that require Vista or W7, and if those who will use those apps don't have a machine that will run those OSs, we won't hesitate to replace the hardware with new systems. But we aren't going to buy those systems now when it could be a couple of years before such apps come along.

            Operating systems don't drive the hardware replacement cycle. Applications and depreciation drive it.
  • Software should not dictate core hardware upgrades.

    Although that was the intention with Vista, software should never ever be made fat in order to drive hardware sales.

    Thin and light software is the way to go, and Win7 is attempting to jump on that bandwagon.

    As we shall see over the next twelve months, things have moved along quite a bit since a couple of years ago.

    I'll be interested to see how MS approach the marketing angle this time. Will they make themselves look as stupid as they think consumers are with another "Wow" campaign that falls flat on its face?

    Will consumers recognise the dangers of buying into yet another "market untested" sales opportunity as their computing platform?
    • Slight Misinformation

      "Although that was the intention with Vista, software should never ever be made fat in order to drive hardware sales."

      Actually, the software architecture changes made to Vista over XP were mostly vast improvements driven by software techies, things like the graphics rearchitecture, memory management, multiprocessing improvements, the I/O architecture enhancements, etc.

      Thankfully, Win 7 keeps them all, and even improves on some. GUI changes are just frosting, it's the deep internal changes that matter.
      • problem with that

        Linux has wonderful memory management, is able to use multiprocessing quite well, includes lots of extra software and has at least as good security, but it is also capable of running on older systems with modest hardware using less disk space.

        If Vista wasn't meant to drive new hardware sales, why can't it do the same work with the same hardware specs as Linux?
    • Right! PCs are no longer experimental--Hardware should last indefinitely.

      Right! PCs are no longer experimental-hardware should last indefinitely.

      1. I have a 5-tube radio built in 1934 and it still works perfectly. Correct, it's been receiving wireless broadcast signals for 75 years. So, why then does this computer junk only last three years? Because the manufacturers have convinced us that we all need upgrades about as often as we go to the little room. It's nonsense. What gullible ninnies you lot are.


      2. Here, we use MS Office 2000. In fact, if a newer version comes in we downgrade it so they're all the same for maintenance purposes. Office 2000 does everything we need. In fact, we have one machine with Office 97 on it, as the grammar checker is more reliable in that version than any subsequent version of Office. Did you all know that!! Oh, BTW, some years back we upgraded the O/S on that PC from Win 98 to Windows 2000 (for that machine that was a bit of an extravagance).

      3. I have installed Windows 7 on a machine made in 2002 and it works perfectly well. As the machine is AOK why would I want to replace it? In fact, eventually when the demo expires, I will reinstall XP. There is no need to upgrade to Windows 7, everything is ok as it is.

      4. Microsoft, has 'speeded up' Windows 7 so it works well on smaller-resourced netbooks, and they're pushing this line hard. Ipso facto, it'll work on your existing hardware (or even older stuff). Microsoft can't have it both ways. Win-7 either requires fewer resources or it does not--fewer resources means keep your old hardware. Simple English isn't it?

      5. Office PCs have been more than capable for normal office work for over a decade, any bought in the last 5 years certainly much more so. Agreed, there is specialist, high-end stuff which will benefit from being upgraded but that's no excuse to chuck away perfectly good hardware because Microsoft is feeling a bit short on cash.

      6. You look at those graphs once more. Do you realize how much electronics junk will have to be disposed of unnecessarily if those figures are correct? Think of the amount of landfill required to dump it all. Microsoft should be made aware of the tonnage of junk and the amount of pollution it causes whenever it issues a software upgrade.

      6.1 Forget the Greenies and conservationists, we don't need them to state the blindingly obvious: that this pending worldwide chuck-out will be just an immoral waste of good resources.

      Seems we've just far too much money despite the recession.

      PS: ZDNet Editors, you ought to be more responsible. Where's the concomitant report on the pollution and tonnages of waste produced worldwide by the unnecessary disposal of hardware triggered off by the introduction of Windows 7? I suggest you do one.
      • What about the disposal of hardware and subsequent pollution

        Irritated-User writes :

        ''PS: ZDNet Editors, you ought to be more responsible. Where's the concomitant report on the pollution and tonnages of waste produced worldwide by the unnecessary disposal of hardware triggered off by the introduction of Windows 7? I suggest you do one.''

        Exactly. What about the unnecessary disposal of tons of printers, scanners, computers ?? What about the toxic pollution and waste of money and resources?? Does MS$$ care??
        High Altitude
      • I've been replacing components on my PCs regularly.

        What I do at home is not what a business should bo.

        Components, like power supplies, hard drives, video boards and mother boards either stop working or become unreliable. Why? Capacitors are few and far between, so that those that are there are stressed. Bearings in fans are sleeves instead of bearings. Air filters are bypassed by gapping holes in the case. These are all PC killers. If you want reliable hardware, you just have to keep on servicing it (costly if time is money to you or the user) and/or replace it regularly.
        • Right. But this is nothing more than rotten shoddy design.

          Right--all correct. But this is nothing more than rotten shoddy design.

          Components should be selected and stressed to suit the job.

      • LOL......i wonder...

        Ha! As a ham radio operator, i know your tube radio has had many a tube replaced. And until recently (a tube company in Russia started making them again), you paid more for a tube than people paid for the radio in 1934. Tubes do not last forever, in fact, tubes fail more frequently than transistors.

        Duration cycle needs to be considered too. If you ran your "tube" radio all the time, you would replace your full set of tubes every 2 to 3 years (you might get 5 if your luckey). Computers are frequently left on for weeks or months at a time, something you would never do with a tube anything.

        As far as being green, today's recycling far out weighs the non-existant recycling of yesteryear. If you visit the local dumps, you will find that all circuit board, monitors and computer related are handled differently now.

        All things wear out, yes, computers do too.
        Nothing last forever, decades maybe, never forever.
        • I call BS...

          You have no idea what you're talking about with a statement like that. Tube gear can run day in and day out for 50 years or more without needing replacement parts as long as they're balanced every now and again and the caps in the power supply are good.

          Case in point: My dad has a tube hifi system he built in the 50's and he finally had to replace the outputs on one channel because the power supply packed it in. A pair of new 6550's and a new choke + cap (give or take a resistor) in the power supply was all he needed to get back in action. That's about 50 years service and nothing mass produced can come near it for sound.

          I've got a couple of pairs of mono-block (ultralinear) class a/b amps and some of the components go back to the late 50's or early 60's. My output tubes are new and made in San Fran and the Dynaco output transformers are from the 50's. Edit[The Dynacos are from the 60's] The big bathtub capacitors are army surplus from WWII. So... I don't believe you when you say:

          "Duration cycle needs to be considered too. If you ran your "tube" radio all the time, you would replace your full set of tubes every 2 to 3 years (you might get 5 if your luckey). Computers are frequently left on for weeks or months at a time, something you would never do with a tube anything."

          I leave mine on all day while I listen to them... They're class A/B so they run really hot.
          • heh

            well you havent repaired TVs and radios for a living as my father has and many a time we go on a service call (in the days of tubes for tv) several tubes need replacing. To say a tube can last 50 year is simply rediculous. Go bacck to school, learn about thermal dynamics and learn about material degration due to heat. Since your are not a qualified tube technician i consider your opinion worthless.

            Too bad you cant get out of the past and see the future.
          • whatever...

            I'm sure if we went head to head I would teach you a few things about future tech and past tech and maybe something about conversational manners while I'm at it too (as it seems you dad forgot to).

            It's a fact that I have electronic gear that I learned comp-sci in high school on back in the late 70's early 80's that still does what it was designed to do. Caps can go if they're left out of use and then snapped back into service but if they're used day in, day out and within spec they'll keep going. Go ahead, ask your dad. Tubes just last... They loose their sparkle over the years and they will drift but if you keep them balanced and make sure the voltage/current is within the safe limits they will just keep going.

            ...And, yes I have some of my dad's tube amps (and some new ones) that have been going strong for 50 years or more.

            You probably don't believe or understand any of this stuff because you haven't actually experienced equipment, cars, furniture that was engineered to last but some time ago (pre 1980's) things were built to last and to be maintained. We live in a disposable world now driven by manufacturers who design things things and use materials that fail.

            All I'm saying is that you are wrong about tubes only lasting 3 to 5 years and we should demand products last longer.
      • YESSSSSS!

        You covered about everything I have been thinking!

        My PC is 8 years old and runs perfect with XP.

        I for one am repairing many, many older machines day after day ... they RUN fine for my clients.

        New not necessarily better. ZDNet is letting down the majority of users in my mind.
        • Windows 7 is essentially 'subscription software' introduced by stealth.

          Right. I'm definitely no Luddite which some are implying, in fact when I was at school I was nicknamed 'The Prof' for my obsession with technology--just about everything electronic within my grasp was pulled apart to see how it worked. Today, I eagerly look forward to receiving my weekly copies of the AAAS journal along with other tech publications and I've always worked in high-tech.

          What I'm really sick and tired of is being an automatic teller for big multinationals who seem to think they have some innate right to extract money out of me whenever they feel like it.

          It seems that just about every product they sell us has but one function that's far more important than everything else--that is to ensure it has to be replaced with a newer model whenever the corporations dictate--whether the owner wishes it or not. This is nothing more than renting but doing so by stealth, Windows 7 is the quintessential example. For a long time Microsoft has wanted subscription software, now it's gotten its way through stealth.

      • Replacements - Environmental impact

        A strong statistic I keep at hand was it takes two tons of raw materials to make one desktop PC.

        If you can stretch the reuse (not recycling where the machine is shredded and remelted etc at great energy cost) the environmental impact is huge.

        The laptop I use for presentations (consulting engineering at Fortune 10 companies) was built in 1999, is a Pentium-3 running at 500Mhz. It runs Xubuntu 8.04 - so all the latest up to date security and full linux power. I use Open Office that covers 98% of the user base needs for documents and data analysis.

        By the way, that 10 year old laptop has only half the performance of those 'new-fangled' netbooks being pushed now.... wait until the ARM chip systems show up and push the price below $200 - and those net-desk-tops maybe cheaper yet.

      • You raise some...

        ...very good points.

        I've done systems service work for a contractor to a governmental department (non-US) that still uses WINNT as their main OS.

        In their particular case they operate in almost the opposite manner to what you highlight. The life-cycle for hardware is roughly a triennial affair with photo copiers, printers, monitors, keyboards, etc, being replaced with newer hardware - however, they have only recently begun a network-wide, systems upgrade from WINNT to XP Pro. Yes, you are hearing me correctly.

        I have also noticed that many SME's and larger enterprises that i have done contract work for have a strong, almost 'ingrained' penchant for staying with W2K or XP. At face value, the layman (i.e. those that do not have a grounding in business economics) might think that to be an odd (even strange) mentality to adopt. However, considering how important bottom-line is to operating 'any' business, this doesn't seem as 'odd' a decision as many would make out.

        Personally, i think the idea of using XP - let alone WINNT - to be an unwise decision, simply because of MS's decision to end all support for their former dOS (desktop OS) flagship in the next few years. But then again, i'm not running a SME or large enterprise, so obviously don't have their major fiscal issues and bottom-line concerns.

        Which leads me to the hardware aspect. Yes, i completely agree that it can be an awful waste and poses major concerns from an environmental aspect. Unfortunately, as someone mentioned earlier, driver support for older hardware does eventually erode over time and having a migration plan to newer peripherals is unfortunately another reality of operating a modern business. Granted, there are bound to be some SME's that are still using old OS's and (say), for example, dot matrix printers, but this obviously depends on the business context. Point in case, a 7-11 doesn't need anything more then a dot-matrix if all they are ever use it for is printing receipts/invoices. Conversely, for larger buinesses the simple reality is that when speed and timeliness is vital, newer hardware that performs accordingly, becomes a necessity.


        "...Where's the concomitant report on the pollution and tonnages of waste produced worldwide by the unnecessary disposal of hardware triggered off by the introduction of Windows 7?"

        I appreciate this too, but i think ZDNet could report on the issue, but to what end? I strongly doubt it will have much impact on corporate America - or anyone else for that matter, if they (i.e. corporate entities/citizens) aren't already aware of the well publicized repercussions of such overhauls.

        Again, a very good post.