Netbooks – The New Reality

Netbooks arrived in a perfect storm of cost, clouds and generational change.

Rather than being a fad, netbooks are indicative of a paradigm shift on the computing scene. If you talk to many of the old hands in this business, netbooks just don’t make sense – they are not particularly powerful, many are tough to type on and the displays are downright puny. For anyone bought up when desktops reigned supreme, netbooks are an aberration, something to sneer at.

This particularly myopic view is not shared by netbook users, who view netbooks as just right for what they need… and therein lies the paradigm shift – what does it take to compose/pick up emails, do some light spreadsheet and word processing stuff? Not a lot of horsepower. Further, push heavy duty apps into the “cloud” and lots of local processing horsepower is not needed.

What is also happening with cost pressures mounting as the economy tanks is that all workers are not equal power users. Many folks use their PCs for fairly light duty work and they don’t need the latest 8 core 16 hyperthreaded PC with 4 GB DDR3 RAM. How fast can you type? Even power users are finding that with apps in the “cloud”, lugging around a 7 pound full-featured laptop is not necessary. My son, the systems architecture guru, now uses his Dell Mini all the time, at work and on the road – it’s all he needs.

Netbooks are starting to hurt traditional sales of notebooks, generating downward pressure on prices across the spectrum. Microsoft looks to be caught between a rock and a hard place – where a desktop version of Windows XP bought in $65 from OEMs, netbook XP costs OEMs only $32 a copy. Not only a hit on M$s earnings, but Windows 7 pricing has to fit this cost profile – charge substantially more and Linux begins to look very attractive. Increase the cost of netbooks and consumers rebel.

Looks like a squeeze play all around.

But I think there is a more fundamental attitude shift taking place – the “more is better” culture is taking some hits as “The New Reality” takes hold – ie when the dollars aren’t there, you’d be surprised what folks can do without. And that’s the shift that’s caught a lot of folks by surprise, not the least Bill Gates, who expected mega-PCs to be the rule and sized Vista accordingly:

“During the October 2003 Microsoft developer conference, Chairman Bill Gates laid out Microsoft’s vision for the PC in 2006. The design goal, which Microsoft used for Windows Vista development, called for 4GHz processors and 3X increase in graphics performance. Instead, PC performance decreased, as notebook sales surged against desktop PCs. Early mininotebooks turned out to be way underpowered for Windows Vista”

Source: eWeek

Consider what M$ would have designed if they foresaw a decrease in PC performance – or consider that this scenario does not fit their “more is better” business model and like GM, designed what they think consumers should have that fits their business model, not what consumers want – “Let them eat Vista!”

Moore’s Law works OK for CPU transistor density, but does not work for PC computing power at the user’s fingertips. I remember we did a number of surveys on our reader’s intentions to upgrade current equipment, and the majority basically said “For what? Where are the killer apps?” Considering that many users are more interested in accessing Internet sites such as Twitter and Facebook, raw horsepower PCs are overkill.

Aside from hard-core gamers, second and third generation gear is perfectly adequate for 99% of user’s needs. So in this case more is not better – the newest gear costs more for not all that much increased functionality at the user level.

Seems to me this is a tough row to hoe which will require a substantial re-thinking of current business models. The winners are going to be those who can think outside the box – maybe like Google with net apps? The losers are the ossified giants who right now think they are king of the hill – success breeds failure for those who can’t see beyond their own nose.