Warning of Cloud Shakes for Year Ahead
January 2012

Our peer group did 12% less business with us in the year ended December 2011 than the year before.  At the same time, cloud operators bought 100% more computers from us.  This situation agrees strongly with the trend of cloud computing.  If we consider the 2 groups together, our business in 2011 is roughly the same as the year before.  This indicates that our larger peer base is being eroded by a smaller group of upcoming web based operators.  

The economy was also at play without doubt.  Let us use Gross Domestic Product (GDP) as the single indicator of the New Zealand economy.  Statistics New Zealand normally takes 3 to 4 months to compute GDP figures on a quarterly frequency.  What we are able to get hold of in January 2012 is up to September 2011.  On a Year on Year comparison basis, the country shrunk 1.9% by September 2009 whilst in recession, grew 3.5% by 2010 as the reversal of recession to a growth mode took place, and a smaller rate of 1.3% by 2011 inclusive of the contributions from the Rugby World Cup.  We can quickly see that 2011 has a slightly bigger economy than the year before (being in a growth mode) whereas our computer production business did not grow.  This disparity points to a technology adoption lifecycle issue.

Even in the business to business context (as against selling to consumers), there is a trend that desktops are replaced by mobile and portable devices, and local servers are replaced by clouds.  This trend is responsible for holding our computer production business stagnant.   If we look closer into individual peer business data, we have found that our larger and established peers all declined in desktop and server hardware purchase whereas 7 smaller peers increased their purchases from us.  We would be keen to learn from these 7 peers.  Without breaching any confidentiality, we can repeat what we said in the last Tech Briefing seminar that collaboration among peers is one effective way of improving business.  Leveraging the brand value and technical resources of Compucon is another way.   In a shrinking industry such as the PC industry, collaboration and resource optimisation are 2 effective measures for business growth.

Most peers are engaged in information system networks inclusive of servers and information delivery devices.  This is the traditional core business of electronic data processing.  When such business is under threat by cloud computing, we recommend that our peers consider end-to-end IP based digital solutions seriously.  Compucon entered IP video surveillance in 2008 and GPU for CAD in 2011.  Peer participation level has been very low so far.  We will do our best to provide more guides to peers over the next 11 months and we hope we can help more peers to do better.