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Partners: Economy, Tablets Change PC Refresh Cycle

Partners think the emergence of tablets, the struggling economy and technical advancements have rewritten the rules of the PC refresh cycle.

PC refresh cycle arrived

For system builders, tablets are not only extending the PC refresh cycle, but also fundamentally changing it. Todd Swank, vice president of marketing at Burnsville, Minn.-based system builder Nor-Tech, thinks customers are undecided about what hardware to buy, and are waiting to figure it out.

"I still think there is a big question from customers across the scale about whether to replace desktops with notebooks or tablets," he said.

Research firms IDC and Gartner issued similar reports in July outlining the decline in PC sales across the U.S. in the second quarter of 2011. IDC pegged the decline at 4.2 percent year-over-year, while Gartner calculated a 5.6 percent decline from the same quarter in 2010

IDC attributed the decline to contraction in the netbook space and a shifting focus in the corporate market from PC sales to software services. According to IDC, corporate buyers continue to focus on cloud and virtualization services as they did in the first quarter of 2011, and consumer interest around tablets softened PC sales in the consumer market. Gartner expanded on the role tablets are playing in the PC sales and said retailers are getting more conservative with PC orders because of the hype around tablets, while some are even dedicating store space for tablets that would have previously gone to PCs.

Swank thinks the recent success of operating systems from Apple and Google shifts the dynamic away from Microsoft, a company that has traditionally impacted the refresh cycle more than any other.

"In the past [the refresh cycle] was just about getting the newest version of Windows. Now there are a lot more choices," Swank said. "The transition from Windows XP to Windows 7 will continue to make sense for many customers, but users are also demanding features that they aren't seeing from their traditional PC refresh process. That's where Android and Apple are changing the game."

Partners also see customers avoiding the PC refresh altogether and purchasing new equipment on an as-needed basis. "We definitely see a longer cycle. A lot of people are waiting until something breaks and will then update one or two systems at a time," said Sean O'Connor, a project manager at South Easton, Mass.-based solution provider Advanced Computer Solutions.

This piecemeal strategy can cause compatibility issues or increase costs for customers that downgrade new machines to maintain compatibility with existing machines, said O'Connor. "We can roll back to Windows XP, but we charge a little extra for it," he said. "And then sometimes people want Windows 7 on the few machines they're updating, but later they'll realize that they need some program that isn't compatible with that operating system."

Darrel Bowman, CEO of Tacoma, Wash.-based MyNetworkCompany.com points out that advances in technology also impact the refresh cycle, because machines do not break as quickly as they did in the past. "People's machines are still working, so they don't see a competitive advantage in upgrading," he said.

That philosophy extends all the way to the silicon, according to Justin Quon, senior marketing communications specialist for AMAX, a Fremont, Calif.-based system builder. "CPUs have gotten to the point where they are extremely efficient and extremely fast," he said. "I'm not sure how soon we're going to see people move over to a new generation based solely on getting the latest and greatest technology."

In spite of a struggling economic recovery, the upheaval caused by the tablet and two consecutive quarters of declining PC sales in the U.S., both Gartner and IDC are bullish on PC sales for the second half of 2011. Partners, however, find it hard to look past the present.

"We have a median age of five years for our customer's PCs," said Joshua Liberman, president of Net Sciences, an Albuquerque, N.M.-based system builder. "In the 20 years I've been in this business, we have never had that long of a refresh cycle."

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