Reasons to be cheerful

With the summer now gone and the autumn blues coming fast upon us, Christmas is usually something to look forward to.

Even though there's not a bank holiday on the horizon until December, we manage to coax ourselves into the shortening winter days with the consoling fact that we can look forward to shopping for a few festive goodies in the lead up to Saint Nick's day.

Usually, it's a time of eager good cheer for both buyers and sellers, and this is no more true than for the IT industry.

Traditionally, sales of PCs and their related kit increase during this time and both buyer and seller seem to be happy with this arrangement.

However, an ill wind has swept across the retail landscape and we're seeing a real change in the way that business and home users are approaching their IT-related purchases.

At the time of going to press, two reports were released that showed a continuing downward trend in IT spending. The first is IDC's latest PC tracking survey, and it makes for grim reading.

In a nutshell, PC sales have been essentially flat since 2000 and its projections for PC sales growth for 2002 shows only a slight lift of 1.2 per cent, from 134.1 million in 2001 to 135.5 million for 2002.

The second report comes from Intel itself in its mid-quarter update. The company stated that third-quarter sales were expected to be less than $6.6bn (£4.4bn), which is at the lower end of its earlier forecasts.

While both these figures look impressive number-wise to the untrained eye, the fact is that they both represent what is going on with the IT world in general; and that is stagnation.

No matter which way you look at it, the days of double-digit sales growth in the IT sector are a thing of the past and it's caused a lot of consternation and head scratching to those in the business, as well as industry watchers.

Intuitively we all know why. From a business point of view, the economy has slowed, revenues are down, and IT managers are reluctant to upgrade their systems just because they can.

From a consumer's point of view, almost everyone who wanted a PC has already bought one. Where once a two-year upgrade cycle was the norm, it's now extended itself to a firm four-year cycle and there's even talk of it becoming longer. Even the expected back-to-school sales lift hasn't materialised this year.

And why should this be? It all boils down to over-capacity and under-utilisation of the technology in front of us.

We all remember the days when we longed for 20GB hard disks, 200MHz processors and 64MB of Ram just so that we could use some of the higher functions of Excel or whatever digital imaging software we were running.

Today, we'll soon see PCs with 3GHz processors, 256MB of Ram, 80GB hard drives, 5.1 surround sound and graphics cards that have 128MB of their own memory.

In other words, your average PC will be a powerhouse, not unlike what's been released over the past two years anyway.

The competitive drive towards one-upmanship has allowed us to have more power on our desktops than Nasa Mission Control had in its entire computer department in 1968.

The problem is that we're not launching rockets to the Moon, and there's no killer application (bloatware doesn't count) or service that makes us want to upgrade, except for the feeling that we may be left behind.

Hence, as IDC puts it, consumers in mature economies have decided that they do not need to replace 'old' PCs.

Naturally, this is pretty bad news for the PC and processor manufacturing industry, but there are some positive signs in which to take comfort.

While desktop sales are flaccid, the fact is that PC prices have never been lower. And notebook sales are on the increase.

IDC predicts global sales to rise 10.5 per cent in 2002 and we've found a corresponding shift in reader interest that roughly matches this.

And even though consumers and businesses are putting off buying new or replacement PCs, they haven't stopped upgrading them.

With the entrenchment of true plug-and-play functionality, more stable operating systems and greater user confidence, the component and peripheral market has never been stronger.

The fact that Dabs.com has picked up an annual award from Personal Computer Worldfor best online shopping site speaks volumes about user interest in PC upgrading, and provides a silver lining to an otherwise dark cloud: while PC sales may have diminished, the interest in them hasn't.

So regardless of the doomsayers, there is still lots of mileage in the market yet, and that's something to celebrate.

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