Computer industry beginning rebound

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The computer hardware market had been seriously lagging behind other industries in rebounding from the economic downturn of the past three years. However, several research firms report that computer hardware sales-particularly PCs and servers-are finally staging a significant comeback.

In a recent Forrester Research report on IT spending, analyst Andrew Bartels predicted that computer hardware spending would increase by 14% in 2004, and by a 10% compound annual rate from 2003 to 2008.

"The main driver of this new investment will be improved price and performance, the spread of Linux operating systems and other open source software that uses generic computer chips," Bartels said.

Growth from replacements

David Sommers, VP-electronic commerce for the Computer Trade Industry Association (CompTIA), emphasizes that a lot of the growth is coming from buyers looking to replace old equipment rather than from new sales. "Most companies have been holding off for more favorable economic conditions to upgrade their computer hardware," Sommers said.

Additionally, computer manufacturers have ramped up their investments in research and development of new technologies, said Rob Leavitt, senior director of the Information Technology Service Marketing Association (ITSMA). "Right now there are several tech areas that are hot, ranging from network security to storage solutions," Leavitt said.

Bartels sees advanced storage devices-especially drives and servers-in particularly large demand. There's also much interest in voice over Internet protocol and distributed infrastructure products, Sommers said.

The overall upturn in the computer market comes as welcome news to OEM component and software vendors, which have been hit equally hard by the slowdown in computer spending. Computer makers' increased research and development spending provides them with many new opportunities.

Joe D'Elia, director of research for iSuppli, said components will help spur major changes in PCs, including form factors, electrical systems and microprocessor architectures.

But whether you're marketing components or software, becoming a supplier to a major computer manufacturer takes a significant commitment in time and money, said Bruce Raynor, editor in chief of Waltham, Mass.-based Electronic Supply & Manufacturing magazine.

Building awareness

"These types of relationships are developed on a wide range of levels, but the most critical lie with senior management in a peer-to-peer fashion," Raynor said. "Supply chain and manufacturing level relationships are important, too-product designers and engineers often are chief influencers-but the ultimate decisions come at the C-level because you're talking about millions of dollars."

Getting your foot in the door can be very difficult. "IT manufacturers tend to stick to the vendors they've worked closely with or names they know well," Leavitt said. "You need to establish brand presence, industry knowledge and demonstrated performance before most will even look at your product. It's kind of a Catch-22."

This is especially true in what Raynor calls a "Category A" component-any part such as a microprocessor, disc drive or operating system that is critical to performance. "`Category B' components such as resistors or capacitors are much more of a commodity and manufacturers are much more likely to be swayed by price," Raynor said.

How do new-to-the-industry players begin to make themselves known? "Traditionally, suppliers try to build awareness by placing ads in the top engineering and computing publications, such as ESM or EE Times," Raynor said. "Also, good PR strategies with the press can go a long way in getting innovative technologies noticed."

Making your presence known at industry events is critical to gaining recognition, too, Sommers said. "Vendors should participate in presentations, make speeches and set up one-on-one meetings at relevant conferences and trade shows," Sommers said. "Comdex has, for all intents and purposes, gone belly up, but there are hundreds of smaller, specialized events [that] are better anyhow for forwarding business relationships. Inevitably all your marketing efforts will come down to how good you are at one-on-one sales with top executives."

Raynor stresses, however, that building relationships with computer makers takes much more than sales or marketing savvy. "You need to have design compatibility with your target client, plus compatible corporate cultures," he said. "And you must be able to make a tremendous commitment of manufacturing capacity, because if you make a deal with a major player, it will be for millions of units."

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