A Black Hole in PC Software Revenues Looms

Hot on the heels of my blog yesterday on the demise of the European and UK PC market as exposed by Gartner Group's latest figures for Q2 2011 on the back of a similar drop in Q1, it would argue that at some point software vendors are going to see a nasty Black Hole open up in their revenues.

The rise of mobility computing or whatever you want to call it as signified by tablets and even smartphones set against the 53% drop in mini-net books in Europe and a 20% drop in mobile computers shows that there is a fundamental change going on in both the consumer and professional PC markets.

Recently, when faced with an upgrade question, I chose to not replace my two year old PC but bought upgrades to the software. In hindsight, the upgrades have actually not done a great deal of good and certainly have not extended the life of my PC or enhanced my experience much - certainly nowhere near enough to justify the price tag. However, in the course of the year I have bought two Apple devices - an iPhone 4 and an iPad 2, both of which of revolutionised the way I work and relax. I have no doubt which way my future lies.

For volume software vendors and even their Broadline Distributor partners, the Gartner figures must be a nightmare. Such a huge drop in PC shipments will inevitably hit the revenue figures in short order for current shipments but renewals are going to be hit too. The simple fact is that by 2014 around one third of the global PC market will have been surrendered to tablets. That means less software sold as we know it today. The other obvious fact is that the main way for tablets to receive their Apps is via the Cloud and the price of software on these adaptable devices has collapsed.

The mood of change at a user level is not pretty too as companies look hard at their software base via Software Asset audits and management tools. On the one hand big software vendors have played the 'Enterprise Licence' game to get big sales, they also use a 'true up' method to assess if enough licences have purchased. Over a given period, if the licences consumed are lower than the original estimate, the vendor charges a massive difference on each new licence bought. While big companies are ruled by Governance issues and don't want to be accused of 'pirating' this works. But it is obvious a storm is brewing as companies also assess how much they actually use of the software provided, particularly on those who provide a 'Stack' of goodies most of which never sees the light of day. There will be a time when large companies will stop being the honest drivers who pay all the fines on behalf of the real road menaces to use an analogy and they will say they want to pay a fair price for what they actually use. Consumptive pricing may not be far away.

All this, if you are a volume PC software provider or operating system vendor, must be bad news. The squeeze is on at all ends.

The tablet market represents the biggest threat as it hits business and consumer. I now use my iPad for around 80% of my work functions. It is light, adaptable, has a superb battery, is always on, doesn't have long-loading clunky operating systems and it doesn't require heavy and expensive software. I run over 85 Apps on the machine and I have no idea how much I have spent on Apps and music etc. But I do because it's easy and there are no corporate restrictions that networks impose.

And some of the software is really useful, better than staid PC applications in many instances. Microsoft and others are wrong to suggest that users require machine based versions of their Office Suite - we want to run Office 365 as a Web App and why not? Why have local Office? Why have files resident on the machine and use SharePoint's daft check in and check out system? Just have one repository in the Cloud, for heavens sake. Google have it so much more sensibly worked out but they are yet to be a credible alternative. You get the feeling only time will tell.

BUT, Microsoft watch this carefully. It isn't about an iPad not having a USB port - that's a dumb and typically narrow-minded argument and fails to truly realise what tablets are doing. The fact is, if you think about it, the iPad is nothing more than a glorified and clever USB device itself. It needs to be tethered, backed up and refreshed by iTunes which runs on a PC and Mac. It must have a mother ship. Therein lies its inherent weakness as a device. The printing issue will get solved but the micky-mouse filing structures are hopeless until you realise that Dropbox is the best solution. Apple will have to up its game to fill the 20% that I have to go back to my PC. Mainly Excel but PowerPoint too and file structures are my main issue.

But iCloud may well change all that if Apple is serious about business and that may be the turning point in this market - the point of no return and Microsoft had better be ready for the fight and have its Office applications truly in the Cloud to have a chance of retaining its dominant position. In my opinion, anyway.

If only Microsoft innovated instead of tree-hugged, with all its brain power and money it could turn this market inside out. Instead it thinks it can have its cake and eat it. Hybrid Cloud is what they think will win, Windows 8 on tablets clunking away not Windows Mobile and we will all value Office run locally and a USB port. And we will all continue to worship at their alter and pay top dollar for ropey old software.

Well the puppy is off the lead and is running around wildly and people are enthralled. There isn't a way back. You either embrace the fact that tablets and smartphones are serious business tools or you die. You either rewrite your applications to get slim and cheap and embrace the Cloud or you die.

Microsoft is not alone by a long chalk. All those vendors who have enjoyed massive sales on each PC should be very scared by the Gartner numbers.

The good times are over and the really groovy times have started. Users and companies will never again be slaves to expensive, buggy and out-moded software. We want innovation and usability and we want it at a very fair price. And we want it business -grade for the future.

And if you do not believe it - go study those PC numbers very carefully because it tells you that I am not making this up. Companies and users have cast their vote with their wallets and it's there to be seen.

Apple and Google must be smiling this morning.


- Posted using BlogPress from my iPad