STAMFORD, CT – Business leaders of PC vendors face a stark choice and must decide between overhauling their businesses or leaving the PC market by 2020, according to Gartner. If they decide to stay, they need to determine what changes to make or what alternatives to adapt in today's over-penetrated PC market.

"The PC business model as we have traditionally known it is broken. The top five mobile PC vendors have gained 11% market share over the past five years — from 65% in 2011 to 76% in the first half of 2016, but this has come at the expense of profitable revenue," said Tracy Tsai, research vice president at Gartner. "While this does not mean the PC market is finished, the installed base of PCs will continue to decline over the next five years, with a continuing erosion of PC vendors' revenue and profit.

"The traditional way of gaining shipment market share by competing on price to stimulate demand simply won't work for the PC market over the next five years," said Tsai. "Today's PC vendors need to adjust to the new realities that are shaping consumption, including the fact that PC users are extending PC lifetimes until end of life; business PC applications and storage are moving into the cloud, and are less reliant on PC performance, and, crucially, that price and specification are not enough for a user to upgrade a PC. A new and better
customer experience is the only true differentiation."

Gartner identified four alternative strategies PC vendors can use to adapt to the PC market of the future based on corporate culture and assets, business operation and technology innovation, and revamping the business:
1.       Current products and current business model: This alternative is the most conservative approach, with the vendor running a current business operation and selling a current PC product. It requires high volumes to generate enough cash flow to cover the cost of business, so in a declining market, consolidation of vendors is inevitable. The purpose here is to protect and keep the PC business running, but the risks are high, especially given Intel's and Microsoft's alternative focus moving forward, says Gartner.

2.       Current products and new business model: This alternative suggests PC vendors form a new team that can experiment with new business and revenue models for PC products, such as PC as a service.

3.       New products with current business model: The third alternative is a way to explore new product offerings and new market opportunities, such as making PCs smarter in terms of sensing, speech, emotion and touch; expanding new products for the connected home; or developing products targeted to vertical markets. It's a gradual way for PC vendors to expand into new products based on their current business model.

4.       New products with new business model: Alternative 4 is the most aggressive way to transform in terms of business operations and product innovations. In this scenario, PC vendors could establish a new business unit to run business in a different mode and explore new technology solutions to create a new product line. This would include working with new channel partners and independent software vendors and partnering with startups. The resources and revenue model might be completely different from a vendor's existing structure.

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