Why the corporate PC upgrade cycle may have legs

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.

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TOPICS: Hardware, CXO, PCs
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Windows XP and the Future of the Desktop

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

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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

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23 comments
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  • Electronic lifetimes used to be about 7 years.

    That was partly due to the acid solder used.

    Newer manufacturing and better techniques (lead/acid solder isn't used anymore - too much hazardous materials involved) have increased the usable lifetime.

    Electronic parts should last about 15 years (and possibly longer - I still have disks that over 10 years old and still work, and PCs with an old 75Mhz PIII still work).
    jessepollard
    • No acid

      Don't recall ever using acid core solder except on plumbing. Always resin core and 63/37 lead/tin ratio. Most solid state failures have always been caused by heat or poor power. Mishandling or mechanical abuse causes many failures as well.
      DKFlorida
      • Failure

        These days the most likely things to fail are the capacitors on your mainboard or perhaps a cooling fan.
        TehBlahb
        • SSD lifecycle

          ultraportables and tabletsmay have a fixed lifecycle because there is a finite life for the flash in SSDs...
          mary.branscombe
  • Has the Windows 7 hardware specification suddenly changed?

    Windows 7 IS 5 years old and strictly speaking it's hardware spec is identical to Vista's meaning it will run fine on 7 year old PCs too.

    Plenty of our work XP PCs came with Windows 7 licences, sticking in an SSD and they've got plenty of life in them yet.

    These aren't in any way decrepit, they are 5 years old though, some older.

    p.s. Naturally if it's an XP era PC then it is for the scrap yard.
    bradavon
    • Never mind that the replacement will cost more...

      Just replacing a disk drive will extend the life of a PC.

      Just normal maintenance should keep a system working for 10 - 15 years. Newer processors just are not that much faster. Yes, a bit less power hungry, that is more a target of laptops/tablets.
      jessepollard
      • Until

        Until they come out with USB4, SATA+ or something.
        Buster Friendly
    • Funny

      Just this week one of the ZDNet talking heads here whinged that Vista had bloated hardware requirements. Just one more denizen of the 2006/2007 Apple funded anti-Vista echo chamber I guess.
      dilettante
  • Monitor fade

    With enterprise all-in-ones that are real nice for space saving, the life of the system is linked the monitor fade. You also have new people coming in all the time if the company is expanding.
    Buster Friendly
  • Likely accurate - Mostly

    The global company I work for is executing PC updates/upgrades depending on region this year. This is predominately driven by the move from XP to 7. Windows 8 is not in the path and not likely to be for some time. Far too many enterprise level programs that are not "touch ready" and will take significant work to get them there.
    Upgrade/Replacement yes.
    Windows 8 and Touch no.
    rhonin
    • Not required

      Windows 8 is no way requires touch.
      Buster Friendly
      • Windows 8 is a touch first system

        And while Windows 8.1 makes some adjustments to improve life for desktop users, standard Windows 8 arrived with a lot of touch-first UIs tossed at the user, with large sweeping mouse gestures required to simulate the touch input they favoured (closing a Metro app, for instance.) Accidental mouse gestures could drop you into a Metro app if you accidentally hit an invisible hotspot.

        Windows 7, on the other hand, is a pure desktop OS. There's no doubt about how inputs works from app to app, and UI elements look and act consistently from screen to screen, and app to app. It should be unsurprising to all why it is being favoured for corporate roll outs.
        Mac_PC_FenceSitter
        • Not true

          That's false of course. Corporations are upgrading to 7 because their planning started before there was an 8 and certainly before full vendor support for 8.
          Buster Friendly
          • Don't really buy it

            Upgrades implementation planning and onward typically take a year and a half (I'm leaving out the financial, budget, and capital planning.)

            Windows 8 has been on deck and plannable since September, 2011.

            Windows 7 is most business' upgrade target because it doesn't require user retraining, is largely WIMP exclusive for the WIMP hardware companies deploy, and has a solid reputation.

            I've been around a long time. I saw how quickly Win95 got out there. I saw Windows 2000 - a much, much more drastic upgrade, since it was a totally different OS codebase from 95/98 - fly out of the gates.

            We know what's happening here, and there's no reason in pretending it isn't what it appears to be.
            Mac_PC_FenceSitter
        • I disagree

          I think most people that object to windows 8, have never used it on a touch device. Everyone at my company uses laptops, they cart them around from meeting to meeting. The track pad on laptops blows, always has. When companies start issuing touch devices ( why wouldn't they? ), that's where Win8 will start to shine.
          bmonsterman
          • I actually agree with that

            Windows 8 is much better on touch. The problem is that touch is pretty rare in business systems (except for POS systems.)
            Mac_PC_FenceSitter
        • For some real fun

          Try using a trackpad on Windows 8. Some of those gestures are nearly impossible (the long down swipe to close a Metro app comes to mind). For someone who is mobile a lot and isn't always in a place to use a mouse, it was a true PITA.

          In hindsight I guess by "fun" I mean "horrendous torture".

          That alone may not have been a deal-breaker for me, but it showed me that Microsoft hadn't put a lot of thought or effort into the UI beyond touch control. Throw in a bunch of other issues and it became too much to bear. I went from being a multi-decade Windows developer/administrator/enthusiast with more Microsoft certifications than you can shake a stick at to being none of the above pretty quickly. Luckily I had Linux skills to fall back on.
          TehBlahb
  • Trusted Platform Module

    Even though older PCs might run Windows 7, if they don't have TPM, organizations may still want to replace them. When used with an OS that supports it, TPM makes is an added line of defense in the ever-escalating war to protect data theft.
    robradina@...
    • Sorry -- no edit button...

      ... in the ever-escalating war to protect against data theft...

      :)
      robradina@...
  • Why the corporate PC upgrade cycle may have legs

    Absolutely it has legs. Corporations can't survive on old hardware and software forever. That is why Microsoft refreshes Microsoft Windows every few years to keep up with the demands of big businesses.
    Loverock.Davidson