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PC makers try to refocus

Personal computer makers are increasingly turning to small businesses as the next growth engine, but many are ill-equipped to service the needs of these potential customers.

    PC makers try to refocus
    By Jim Davis
    September 18, 1997, 6:00 a.m. PT

    special report Personal computer makers are increasingly turning to small businesses as the next growth engine, but many are ill-equipped to service the needs of these potential customers.

    Hardware companies have an enormous opportunity in The large vendors need to do a better job in refining products. small businesses, but many players in the PC market are having trouble understanding the needs of "the forgotten 7 million," as one analyst calls them. Small companies usually lack information systems personnel that deal with technology service issues and have more limited budgets for purchasing equipment, making their needs quite different from those of a Fortune 1,000 company that big vendors are used to serving.

    Although many PC manufacturers have announced marketing initiatives aimed at the small business, industry analysts say that these efforts amount mostly to words and little action.

    "The large vendors need to do a better job in refining products," said Ray Boggs, director of the small business research program at International Data Corporation. "It's not someone that needs all the multimedia bells and whistles, or a corporate customer that needs all the horsepower of a workstation."

    As a result, large PC companies find themselves in fairly stiff competition with no-name vendors. In desktop computers, for example, Compaq, IBM, and Hewlett-Packard lead in the small-business market, but analysts say there is no single dominant player.

    That may change as larger manufacturers fully recognize the vast potential of this market. Last year, IDC estimates that there were 7 to 8 million small businesses with fewer than 100 employees in the United States. These businesses employ about 53 percent of the private workforce, according to the federal Small Business Administration, and IDC estimates that these outfits will grow at twice the rate of the overall PC industry.

    "We see small and medium business as a huge opportunity for us," said Ed Ellett, director of desktop marketing at Compaq. "It's one of the fastest-growing markets."

    And so far, those markets We see small and medium business as a huge opportunity for us. seem wide open. Analysts note that Hewlett-Packard is one of the few with any kind of focused product lines. Gateway 2000 and Dell Computer also have an edge on competitors because of their ability to custom-build computers and sell them directly to customers at a savings.

    Apple is doing well with small businesses too because it offers systems that are tailored to specific company needs, as well as having a reputation for excellent customer service, according to recent industry surveys.

    Basically, analysts say, what PC makers need to do is become the information systems department for the small-business owner. HP, for instance, ships DSVD (digital simultaneous voice data) modems in some of its Vectra business computers, which allow a user to talk to a technician performing a diagnosis from a remote location.

    "It's important for these systems to be easy to install and maintain," IDC analyst Eric Lewis said. "The reason that this market isn't being addressed aggressively by major players is that, on a per-unit basis, it's a market that's very costly to service--therefore, the large guys just don't put a lot of resources into it."

    Compaq, IBM, and HP are taking a number of initiatives to address the needs small businesses have for inexpensive PCs and servers that are easy to set up.

    Virtually all the vendors that normally sell through VARs, or value-added resellers, have announced plans to offer built-to-order systems like Dell and Gateway do. IBM and Hewlett-Packard will ship basic components such as cases and core electronics to resellers and distributors for assembly, while Compaq will still do the assembly at a central location. The end result, the companies are hoping, is a reduction in PC prices that will make big brand name companies as attractive as the no-names.

    The big players, as Boggs said, "are awakening to the fact there is an opportunity there."  End of story

    Go to: Mom and pop getting wired 


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