A new analysis by McKinsey, the venerable consulting firm, has food for serious thought, for the hardware industry. The prognosis is very simple: The days of heady hardware growth are over and the growth rate (in the US of A) may be pushed back to what it was before 1995.
The reasons for this conclusion are many. The race between Intel and AMD for the megahertz crown, the increased spends for Y2k, the growing requirements of Windows and other application software and the explosion in home purchases to access the Internet.
McKinsey argues that growth will slow down because fewer software upgrades will happen in the next five years, PC penetration in homes is nearing saturation and penetration at the workplace would reach its ceiling by 2003.
What it has discounted are two things.
First, the study seems to cover only the US market. The potential hardware growth in non-US markets, specifically India and China, has not been taken into account. If the other elements of the study are true, then we may have a situation where hardware growth rates in the rest of the world, specifically in India and China, would outpace that of the US. This means that we should be seeing some aggressive action by the hardware majors in this region pretty soon.
Similarly, the study is quiet on the contribution of the dotcom hype to the growth phase and the contribution of the dotcom bust to the slowdown. The dotcom era was all about hype outpacing hype and in turn being outpaced by further hype. It was all about tall claims that did not have an iota of truth in the first place.
Talking of hype, one would have thought by now, vendors would have given up on it and would be more grounded in reality. Far from it. “Global IT consulting, software services and products powerhouse from India announces strategic technology partnership with foreign bank,” screamed a press release that landed in my inbox one day.
Wow! What great news. What could the partnership be all about? What would be the outcome of this exciting new venture? Surely, there must be something great to look forward to.
Bursting with curiosity, I read the press release in detail. Unfortunately, I could not find any, beyond the fact that the bank was installing software from the company in question. To be doubly sure, I wrote back for a clarification. And when that came, it was clear that that was all there was to it. A simple case of a software vendor selling software to a bank.
I hope that this one is an aberration, and that the shining stars of Indian IT have not given up the quality that they are known for, and started becoming part of the hype machine that can never deliver on its claims.