HP recently announced it was dumping personal computers as part of its business. (The company also announced its plans to ditch tablets.) It also moved more aggressively into the software business with the acquisition of Autonomy.
The Economist Magazine has an article in its August 27, 2011 issue entitled “Aping IBM” that talked about the possible reasons behind HP’s decision. The article stated: “To grasp what HP has in mind, one has to understand the two main currents in the IT industry. First, nearly any new technology quickly becomes a commodity that is easily copied and hence not very profitable. This is why IT firms are always trying to move “up the stack” into software and services, where margins are higher. Second, the biggest IT firms typically control what is known as a “platform”: a digital foundation on which others build their products, such as Microsoft’s Windows. This allows them to capture a disproportionate share of the industry’s profits.”
The article also commented on the possible reasons why HP bought Autonomy: “Buying Autonomy also helps HP to move onto higher-margin terrain: the British firm’s operating margins exceed 40%. But the main reason HP paid a 64% premium for its shares seems to be that it believes that Autonomy’s technology could be turned into a platform to help companies make sense of their ever-growing pile of data. This includes not only “structured” data (payroll records, sales figures), but also the “unstructured” kind (documents, e-mails), which now makes up more than 80% of the information that flows through a typical company.
Such a platform would allow firms to do some nifty things. A retailer, for instance, might decide how much beer to stock based not just on previous sales records, but also on weather forecasts, party chatter on social media and schedules for sports matches.”
I understand why HP would be interested in building a platform. Any surveyor who’s dealt with the headaches of mixing surveying equipment and software from different vendors would understand that desire. I’d like to blog more in the future about what makes a technology platform, and about the conflict between technology platforms, consumer freedom, and open technology standards.
I don’t understand this: Why is it so hard to make money selling personal computers? Could it be a result of how easy it is to get a bogus patent for software? This would give software companies the advantage of overcharging for their products that hardware companies don’t have. Or is it because HP didn’t do a good job of selling their hardware with an appropriate business model? For example: If personal computers are a commodity, as the article implies, you have to offer something more. This could be great customer service, reliability, value, a bullet proof warranty, or something else that will attract consumers. What are the other personal computer makers failing at?
The Sunburned Surveyor