Computer Software
Companies that design, develop, market, and support systems and application software used in personal computers, servers, embedded systems, and mobile devices.
INDUSTRY OVERVIEW:
Even in times of economic uncertainty, software remains a significant component of the global economy. The drive for greater efficiency and the increasing globalization of business markets spurs much of the spending, as companies continue to invest in the hardware and software infrastructure that enables them to operate in increasingly competitive markets. The software industry has experienced significant consolidation of late. Enterprise application giant Oracle was responsible for two of the larger acquisitions, purchasing PeopleSoft ($10.3) and Siebel Systems ($5.9 billion) in recent years. Particularly vulnerable are smaller best-of-breed software providers that specialize within certain niches; unlike their larger brethren that provide broad suites that address a variety of functions throughout enterprises, best-of-breed providers have little to fall back on if growth stalls in their particular industry. IBM's enormous software holdings have largely been built with acquisitions. Mirroring past trends in maturing markets such as apparel and electronics manufacturing, an increasing number of software and IT services providers are outsourcing a significant portion of their operations to foreign countries. Software companies can hire developers in countries such as China, India, and Russia for a fraction of the domestic cost. The corporate scandals that shook financial markets around the turn of the century are also revitalizing the software industry. The Sarbanes-Oxley Act requires companies to provide real-time disclosure of events that might affect their financial performance and keep records of e-mails and instant messages exchanged between employees. The US Patriot Act determines that financial services companies must be able to effectively detect money laundering activities, and the Health Insurance Portability and Accountability Act requires health care companies to store e-mails in the same way they store medical records. Software providers are also embracing and developing new technologies, including a new class of applications loosely referred to as Web services. Designed from standardized building block components, Web services can theoretically be assembled in a variety of ways, allowing companies to develop business applications that function across a variety of software and hardware platforms. Another growing trend in the software industry was pushed by the open source movement. Perhaps best known as the driving force behind the Linux operating system, open source has become a counter-intuitive business model for companies that distribute their products for free, generating revenues from associated training and services.
From Hoovers Company Profile Database in Lexis Nexis |
Personal Computer
Companies that design and manufacture desktop and portable PCs, Internet access appliances, and other personal computing devices.
INDUSTRY OVERVIEW:
Consolidation has altered the landscape of the PC market and the computer hardware industry as a whole in recent years. At the top rule an elite group of multinationals that maintain double-digit worldwide market share. In the personal computing segment specifically, two companies--Dell and Hewlett-Packard--dominate. They have significantly more share than their closest competitor on a worldwide basis, and in the domestic market they account for roughly half of US shipments. Though smaller, second tier providers include companies with well-known brands, some with annual sales exceeding the billion mark. Large Asian providers such as Acer are commonly categorized as second tier PC vendors. The bottom of the PC pyramid is comprised of companies ranging in size from regional systems integrators to single-owner shops offering built-to-order systems. Many of these companies sell non-branded, or "white box," PCs. Some target niches such as high-performance systems for gaming or ruggedized computers for industrial and military settings. Major-brand PC providers are commonly referred to as OEMs (original equipment manufacturers), a misnomer in the computer industry where large PC vendors increasingly rely on contract manufacturers (CMs). Though you never see their brand on a computer, firms like Flextronics, Solectron, Hon Hai Precision Industry, and Quanta Computer are often responsible for all but the final configuration of a PC. Many CMs also provide design services. OEMs cut costs and minimize risk by letting CMs manage the complex component supply chains. CMs often utilize cheaper overseas labor, and some realize additional cost savings because they double as motherboard component manufacturers. Once assembled, a PC can travel multiple routes before landing in a home, office, or school. Though Dell's success popularized the direct-sales model, resale channels still make up a huge percentage of the overall market. Many customers turn to traditional and online retailers when shopping for PCs, and businesses in particular count on local systems integrators and resellers that can offer more personal service and support. OEMs typically utilize both direct and indirect sales channels, selling straight to end-users and through resellers. This can create a touchy relationship, as OEMs that rely on channel partners also pose a competitive threat to those resellers with their direct sale operations. Blurring the sales channels even further, some OEMs have also experimented with their own retail operations. Today most PCs have an Intel processor and run some version of Microsoft's Windows operating system. Intel and Microsoft largely control PC sales cycles, major software updates and faster processors being primary market drivers. The dominance of Microsoft and Intel has leveled the field for PC performance, creating a commodity market with standard components and little innovation. With any commodity, grabbing market share means trimming margins, and companies at the top of the food chain can more afford to cede profit. None of the major OEMs are pure-play PC vendors, and in fact most generate more revenue from high-end computing equipment or support services. To the benefit of consumers (and detriment of smaller providers), Dell and HP have engaged in intense price wars across consumer, enterprise, government, and education markets. While it hasn't seen radical technical innovation of late, the PC industry still looks to new technologies and new markets for growth. Sales of notebook computers, a bright spot in recent years, have been stimulated in part by the rise of wireless networking. Other deviations from the standard desktop form factor have enjoyed varying success. Sales of handheld computers have slowed as they face growing competition from low-end notebooks and high-end mobile phones. Tablet PCs have been lauded as another possible growth product, but they have yet to gain much traction. Many OEMs have expanded into consumer electronics such as flat screen televisions. Domestic PC vendors have also made significant investments overseas, where countries such as China still enjoy burgeoning markets.
From Hoovers Company Profile Database in Lexis Nexis |
