The Recession: A Disaster for Vista and the PC

Having just spent 3 days at CA World and talked to a good number of IT users including a few CIOs, it’s becoming fairly clear that there’s going to be carnage in the PC market in the coming year. Most companies have taken their first steps in responding to the emerging recession by deferring the annual refresh of PCs for a year. Some have frozen hardware purchase altogether in the expectation that virtualization initiatives will make the purchase of new servers unnecessary.

However, among the various IT staff I’ve spoken to, the desktop is where the economies are focused – and many companies have, as a natural consequence, deferred the move to Vista. Given that Windows 7 is expected to be available in 2009, it’s quite likely that many companies will simply skip Vista altogether. Much depends upon how  good Windows 7 proves to be. And if Microsoft has any sense it will move mountains to ensure that Windows 7 is very attractive indeed. It might then be able to sweep Vista under the carpet and pretend it never existed.

Desktop Virtualization

The recession will slow the momentum that has built up behind desktop virtualization but I doubt if it will stop it. It should work in favor of cloud-based offerings from companies like Desktone and Simtone. Desktone has been claiming, with some justification that its particular mode of desktop virtualization is significantly more economic than the alternatives and it provides a credible justification for that. But that’s not the defining point. Most alternative desktop virtualization options demand the purchase of a SAN and server hardware. There’s very little capital expenditure associated with a cloud based solution, it’s pretty much all op-ex from the get-go. Add to that the fact that you can trial the service with a handful of users and the attractions of the approach are obvious. You can try it and adopt it at your leisure.

Microsoft, Dell, Lenovo and Sun

Microsoft reported a decline in Windows revenues in the last quarter, but not in its MS Office revenues. However, those revenues are very likely to be challenged by the various open source PC offerings. Open Office is particularly attractive for those that don’t make extensive use of office software products. There has been nervousness about adopting some open source PC products in case Microsoft initiates legal action of one sort or another. However, it’s possible to buy Open Office from Sun Microsystems, which sells it at a low price under its original brand, as Star Office. Buying from Sun gives you indemnity against Microsoft legal action, as Sun received blanket indemnity as part of its legal settlement with Microsoft.

Of course, you might also be worried about the future of Sun, and quite rightly so. Microsoft may have a tough time of this recession, but Sun is already having a tough time, is far more vulnerable and may soon be acquired. Sun posted a $1.7 billion loss for the quarter ending in October and its stock price has collapsed by 70% since the end of July. It’s hard to imagine how it can survive the coming year.

Dell and Lenovo also look to be stuck between a rock and a hard place. Dell stock has dropped by 60% since the end of July and Lenovo is down 70%. HP, whom you might also think of as vulnerable has only seen a 30% dip in its share price. It has a much broader market position and it is actually well situated in the consumer PC market. It’s the corporate PC market where the damage will be concentrated.

By Contrast, The Mainframe

IBM made the right bet when it sold off its PC business. The timing was almost perfect. While the PC is moving into decline the mainframe is actually gaining traction. CA is seeing a renewed enthusiasm for the mainframe stimulated primarily by the low cost of Linux virtual machines. (There are also rumors that Windows virtual machines will also be available at some point.) The economy of Linux on the mainframe makes life a little difficult for IBM, as puts itself in competition with its other servers. Nevertheless, anecdotal evidence suggests that the Linux TCO is lowest on the mainframe, primarily because of the manageability of the mainframe.

So, for a moment in time at least, the market is standing on its head. The mainframe is resurgent and the PC is in decline. The dinosaurs are back – and they’re angry.