By Anurag Agrawal; special to InsightaaS.com from Techaisle
InsightaaS perspective: Over the past several years, the major IT research houses (except, to be fiar, for Gartner) have contracted, but the overall IT research industry has expanded tremendously. Individual analysts have created new firms that reflect their interests and research preferences.
Techaisle is an excellent example of how this trend improves the overall scope and depth of information available to IT-focused professionals. Its founder, Anurag Agrawal, ran an extensive research practice for IDC's Asia Pacific operation. Anurag is committed to basing analysis on highly-credible survey samples, and to extending his scope to include both established and emerging markets.
This post illustrates the benefits of Anurag's approach. Techaisle conducted a survey of 9,500 SMBs, located in eight countries on four continents: Canada and the US in North America, Columbia, Argentina and Brazil in South America, Germany and the UK in Europe, and Australia. By combining survey results with third-party perspectives and his own extensive market knowledge, Anurag uses data to answer a question that is on the minds of many vendors and IT managers who are wondering how many "screens" they need to depl9y and support: to what extent are tablets replacing PCs within SMBs?
In 2012, a total of 47.2 million households and 1.9 million SMBs purchased a PC for the first time (Techaisle estimates), increasing global PC penetration by 2% in both the consumer and small business segments as an average of 5,200 small businesses and 130,000 households per day purchased a PC for the first time.
According to IDC, a total of 350 million PCs (desktops + notebooks) were shipped worldwide in 2012. Assuming that each first-time buyer in both the consumer and small business segments bought one PC, a total of 49.2 million PCs were first-time purchases. Therefore, the remaining 300 million PCs purchased in 2012 were either for increasing density or for replacements.
There are three elements that contribute to PC shipments. These are:
- Increasing Penetration: businesses or households that purchase and use PCs for the first time.
- Increasing Density: purchase of and use of PCs for either additional members of a household or employees within a business
- Replacements: replacing older PCs with new PCs
PC market penetration will continue to be driven by emerging market countries. There are 1.26 billion addressable households in emerging markets but only one in four have a PC. Similarly, there are 44.7 million SMBs in emerging markets, but only two in five have a PC. Both of these figures indicate a huge opportunity for new PC sales as there are still 26.4 million SMBs and 994 million households that have yet to buy a PC — a huge gap indeed!
(click on images to enlarge)
It is true that many of these households and small businesses may choose to purchase a tablet first rather than a PC if the planned usage is focused on consuming content through activities such as emailing, browsing, playing games, following news and watching videos. However, it is also true that PCs will remain an important part of the device market. A tablet’s weight, portability and convenience cannot be ignored, but Techaisle believes that the tablet market may reach the same set of conundrums — lengthening replacement cycles and fully saturated addressable density — that are affecting the PC market today, causing tablet sales to skid. Since 1982 when the first PC was introduced, a combined one billion households and small businesses have yet to purchase a PC. It is hard to say that tablets will fill that void, especially when the market gets flooded with too many configuration choices and a profusion of different brands with unique value propositions; for a majority of buyers, the tablet purchase decision process will become as difficult as for PCs.
Increasing density is certainly a problem area within mature markets as the household PC density is more than 1 in most countries. However, in emerging markets the household PC density varies from 0.5 to 0.9 devices per person depending upon the country. Similarly, in the case of small businesses the density is also almost 1.0 in mature market countries and varies from 0.4 to 0.7 in emerging market countries. There is therefore potential for PC vendors to increase density in emerging market countries both within households and small businesses. But here again, we may find that tablets become a device of choice thus impeding density increase. However, these conditions will also hold true for tablets in the next 3-4 years when the number of tablets within a household and a small business will reach a density saturation point beyond which no new tablets will be purchased for additional employees or household members.
This is where the most brouhaha is currently. PC replacement cycles are getting extended and users — both corporate and consumers — are buying tablets. Notwithstanding the tepid acceptance of Windows 8, the PC buying process has become a daunting task even for the most technological savvy individual. PCs are variously categorized as Ultrabooks, ultra-thins, light and thin, long battery life, anti-glare screen, Premium HD screen, SSD, HDD, All-in-ones — it makes one’s brain dizzy. So the consumer ends up either pushing back the decision or continues to shop for a suitable configuration at an affordable price. "A PC in hand is worth two in a bush" begins to hold true. The consumer may then default to a tablet, which is still a novelty device. But the question remains, at least, within the context of small businesses — are the tablets they are purchasing really replacing PCs? Let us look at Techaisle survey data below based on total sample size of 9,500 SMBs (click on images to enlarge).
Above data (will not add to 100 percent due to multiple responses) clearly suggests that while there are some incidences of replacements, consistently over 60 percent of SMBs either currently use tablets or plan to use tablets as additions to PCs. However, it is interesting to note that the density of tablets in many small businesses is not always 1.0. For example, a small retail store may have 4 employees but uses 6 tablets and 2 PCs. These tablets are used for point-of-sale, display advertising or self-serve terminals. So in effect tablets are doing the work of PCs with more convenience and a smaller foot-print. It is debatable whether retailers would have used PCs for these tasks in the absence of tablets.
This brings us back to the point that we started with. If 300 million PCs were purchased for either replacements or density increase, are tablets then really replacing PCs, or is the PC market itself getting saturated, with fewer compelling reasons to purchase additions or replacements? Are the PC vendors sufficiently targeting the first time buyers, as this group would have the highest potential for increasing penetration and driving increasing density? IDC also said that a total of 128 million Tablets were shipped in 2012. Approximately 32 million Tablets were purchased by SMBs assuming that SMB share was 25 percent. The two charts above show that an average of 15 percent of SMBs replaced PCs with Tablets, which, when combined with IDC data gives a rough number of 5 million tablets displacing PC sales. The data for SMBs demonstrates that tablets are not replacing PCs, but are being used in addition to PCs.
Techaisle’s bottom line: PC vendors should therefore market PCs to new users and current users with two very distinct messaging to open up the market.
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