The future is in your hand

Krishnan Thiagarajan

ANALYSTS, media observers and knowledgeable critics of the information technology industry have been presaging the demise of the personal computer (PC) for several years now. Although the mournful chant for the PC has been sung several times in the past few years, it has managed to prove its detractors wrong so far.

But as the industry makes a transition from a personal computing to a mobile computing medium, it appears likely that a ``wave of information appliances'' may substitute the PC as a medium of choice. Among information appliances, it is hand-held devices or personal digital assistants (PDAs) led by the likes of Palm, Handspring and Compaq which are poised to upstage the PC and usher in a sea change in the information appliances landscape.

There are two fundamental reasons which may account for the fading lustre of the PC industry. One, for over two decades, the PC has remained essentially unchanged and that may be the fundamental reason why its days are probably numbered. The industry's obsession with improving only the price/performance characteristics rather than designing friendlier PCs accounts for the slump in PC sales in recent times.

Two, according to a preliminary Gartner Dataquest study in July 2001, the worldwide PC shipments in the second quarter of 2001 totalled 30.4 million units, a decline of 1.9 per cent from the second quarter of 2000. According to the study, it was the first time the worldwide PC market had experienced a negative growth rate since 1986.

At the same time, in line with the slump in PC sales, the hand-held/PDA market also felt the heat of the US slowdown. According to a similar study conducted by Gartner Dataquest in August 2001, the worldwide hand-held/PDA shipments reached 2.8 million units in the second quarter of 2001, a 21 per cent decline from the first quarter of 2001.

In this context, is it the right time to be debating about the rise of hand-helds/PDAs when the US and the global economy are facing a slowdown? It is, if we realise that innovation has been at its very best only in a crisis. And to reiterate this viewpoint, there are clear indications from communication and other IT majors that R&D spending is not likely to slow down even if the economy were to slip into a short-term recession.

Inspite of these gloomy statistics, IDC Research has forecast an optimistic picture for the hand-held/PDA market. It has predicted that the worldwide PDA shipments are expected to increase at a compounded annual growth rate of 39 per cent from 13.6 million in 2000 to 70.9 million by 2005. And among these, the Asia-Pacific market will be the fastest-growing market with a compounded annual growth of 60 per cent between 2000-05 while the growth in US shipments is likely to be slower than the overall market at 38 per cent over this period.

But if the IDC forecasts have to translate into reality and hand-helds/PDAs are to emerge as substitutes to PCs, the hand-held device players have to get certain fundamentals right:

Customer needs come first: If the hand-helds/PDAs have to emerge as substitutes to PCs, the players in these markets may have to undergo a mindset change and capitalise on all the weaknesses which have plagued PCs over the past two decades. So far, the PC's strength has been dictated more in terms of the typical price/performance metrics (dictated by Moore's law) rather than changing the PC design to stimulate growth. If PDAs can bridge this expectation-reality gap through a sustainable and compelling value proposition for consumers, they may be able to break into the stranglehold of the PC markets.

And for this to happen, the conventional parameters have to be cast aside and the players in the hand-held/PDA markets will have to meet the usage needs and wishes of the consumers.

Handy productivity tool: If hand-helds/PDAs can position themselves as a handy productivity tool, they have a much better chance of success than PCs have had in the past. And for that to happen, each of these players has to provide a range of products which will help them morph from a mere tool which provides ``something for everybody'' to a more focussed tool addressing different market niches among consumers and corporates. For instance, as a productivity tool, probably the plug and play approach of Handspring makes eminent sense as it helps users plug into a cell-phone or a messaging device or an MP3 player, depending on the needs while for others, who may use it mainly as a personal information management tool, the calendar, address book and browsing maybe the key functionalities. Positioning products along this entire value chain at different (and affordable) prices may help in exploring the depth and breadth of the market.

Killer applications with a difference: As the hand-held/PDA market and the cell-phone market mature, it is likely that they may integrate and morph into each other's domain. This essentially means that a cell-phone may metamorphose into a hand-held/PDA in size, but all the applications which are currently being targeted by the cell-phone, namely, Internet browsing or transaction-processing will be offered by the hand-helds/PDAs in future. It is obvious that for these two mediums to integrate and succeed, it is important to identify killer applications which will build volumes going forward. In the cellular market, NTT DoCoMo has proved that entertainment can be a killer application in Japan, but this may not be applicable elsewhere. So players will have to identify killer applications in different countries to create a sustainable business model for the long run in these markets.

Why corporate markets matter: Most of the small devices have catered mainly to the consumer markets. And the corporate markets with their higher potential for profitability and breathtaking growth have remained unaddressed so far. Compaq, which was a recent entrant into the PDA market, has aimed to bridge this gap by catering predominantly to the corporate markets. As the packet-switching capabilities get enhanced and data assumes greater significance in future, it will open up huge markets for hand-helds/PDAs. Hence, players such as Compaq and HP can enhance their marketshare sharply if they can address this market with useful business applications and programmes.

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