Computer pack top dogs lose their bite
Your next purchase could be very different. You may go into a store to select from a range of slicker multimedia machines and to make sure there is someone you can turn to when things go wrong. The processor could end up being a less powerful chip from AMD, a perennial also-ran to Intel. The machine will almost certainly still run Windows – but when you turn it on, you may be greeted by software from Google.
These are all glimpses of the future as envisaged by none other than Michael Dell, who has profited more than most from the old ways of the PC business. At 41, the boy wonder of the industry realises that things are changing. So it is a shame that he, like his counterparts at Intel and Microsoft, is simply not best positioned to handle this shift.
It has become accepted wisdom in the technology world that innovation on the PC is over – indeed, that the PC era itself will soon be over, as mobile phones, videogame consoles and other computing devices take up the running. This is yesterday’s computing platform.
The reality is more subtle. The PC is far from dead – annual sales have jumped from under 50m to more than 200m a year in the past decade and are still rising steadily. The PC ecosystem, however, is starting to shift and in ways that Microsoft, Intel and Dell itself can no longer control.
Consider what has been going wrong with the old system. To establish their dominance of the PC world, the Big Three relied on mutually supportive business models. Microsoft added more and more features to its software to encourage users to keep upgrading to new versions of Windows and Office, Intel made faster and faster chips to handle the new software, and Dell used its direct sales approach to sell cheaper and cheaper boxes. More, Faster, Cheaper became the mantra behind successive waves of new PCs.
This approach no longer works as well as it once did. Instead, it has become a recipe for bloated software, inefficient chips and bad service.
Just look at the troubles the Big Three have run into. Microsoft is years behind schedule with its next version of Windows: the program got too big to be managed. By delivering its software as a service over the internet, Google has been able to release new products more quickly.
Intel has reached the physical limits of speed: smaller, faster chips leak too much power. AMD, by putting a number of slower processing "cores" on a single chip, has come up with a better design, forcing Intel to change course.
Dell’s approach to low-cost production still works fine. The trouble is, other companies such as Hewlett-Packard and Lenovo have learnt how to copy the advantages of its methods, while the disadvantages – a lack of sales and service support – have become more apparent.
Step forward Mr Dell, who has come up with three intriguing notions over the past month that suggest how things are changing. One has been to end his exclusive deal with Intel in order to start building AMD chips into some of his company’s servers. This is a seismic event in the tech world, a weakening of one of the industry’s closest alliances, and is widely expected to lead to the appearance of AMD chips in Dell PCs as well.
A second change of course has been to start loading Google software on to Dell PCs before they are shipped. This is partly defensive for Google, which needs to secure a position in front of its users before the arrival of the next versions of Windows and Office, which will favour Microsoft’s own search software.
Google may be known as an internet company, but it now has a "software-lite" strategy for the PC, using Dell to distribute lightweight "toolbar" and desktop search products that stand in marked contrast to the bloated software of Microsoft. Eric Schmidt, chief executive, last week promised more to come.
The sight of Dell distributing software on behalf of Microsoft’s arch-enemy should warm the hearts of antitrust regulators in Washington. Windows may still be ubiquitous, but the days when PC makers feared reprisals from Microsoft if they stepped out of line seem to be over.
Mr Dell’s third notion is to open stores to sell his company’s machines. This is a telling moment for a company founded on the economic advantages of selling over the telephone and internet. The low-cost, commoditised box is no longer the be-all and end-all of the PC business.
Microsoft is now in the unfamiliar position of trying to copy Google’s approach to software development, while Intel is aping AMD’s approach to chip design. Dell, meanwhile, is trying to look more like Apple, whose company-owned stores have helped to breathe new life into the Mac.
What is interesting about all of this is not that the Big Three are about to be overthrown. It is that others have found ways to make money on the desktop, profiting from a computing platform that was thought to be securely in the hands of Microsoft, Intel and Dell. History suggests that the old dogs, accustomed for so long to being in charge, will find it hard to learn new tricks.
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