Law Office Computing
Winton Woods
I
opened my Wall Street Journal the other day and was immediately drawn to a
full-page advertisment from Dell
Computer advertising a desktop computer for under $500. When I checked out the specifications it
turned out that the $500 computer was in fact more powerful and better
configured than a computer that I had spent $1500 on only a year ago. The fact
is, Dell has started a price war not just with desktop computers but with
servers and laptops is well. The
question is whether this is a temporary phenomenon or not. Here is what I think is happening.
By
the end of last year, the market for desktop and server computers was
saturated. That was a product of
ordinary equipment acquisition policies coupled with the Y2K purchasing binge
that was necessary to bring older computers up to speed so they could handle
the Y2K glitch. As you know, we had
very few Y2K problems and that is largely because most of the computers at risk
were replaced. The second factor is
that a year or so ago we reached a state where current computer technology was
exceptionally good. In a sense, the
computer companies and major software companies like Microsoft found themselves
in a position where their wonderful successes over the preceding couple of
years put most computer users in a situation where they could see no real need
to replace their existing equipment.
Since the days of the 486 computers, the market has been driven by both
new purchases and replacement of existing equipment that became rapidly
outdated. It was a huge change when the standard chip went from 200 to 600
megahertz. It was a very big deal when the standard hard drive went from 5
gigabytes to 20 or 30. It changed
computing profoundly when the standard RAM in an entry-level computer went from
32 Megs to 128. If you have a 600 megahertz Pentium III with 128 megs of RAM
and a 40 gigabyte hard drive you are hard put to find a business case for
replacing it now or in the foreseeable future. In the last year many of us have
made a decision to not upgrade hardware and software because the cost of doing
so provides only a small marginal benefit to our office functions. Microsoft Office 97 was a powerful product
that drove many businesses to upgrade their computers and their software. Office 2000 had a similar effect but the
fact of the matter is if you have now Office 2000 you have a software setup
that will handle the vast majority of your business needs. From a business
standpoint, is hard to justify spending thousands of dollars for what is at
best a marginal improvement and the addition of features that you probably will
never use. The same thing is true with
computer hardware. Once you get a
computer with at least 128 K of RAM and a Pentium III chip running at 500 MHz
or above you will find only marginal improvement by upgrading to a faster chip
and more RAM. But many of you don't
have machines like I have just described.
Many of you have computers that are three or four years old and are
running older versions of Windows with all of its many problems. You know you're going to have to replace
those computers and the question is whether the time is now?
I
believe that the time is now. I
believe that basic entry-level computers for businesses will stay at around
$600 until the current inventories are exhausted. I think that will be sometime this summer or early fall. If the economy recovers by then many
businesses will start to replace or refresh their information technology
hardware with the then most current machines.
They will be much faster and have more memory than the $600 machines
that are now on the market. They will
have the latest operating systems and lots of other bells and whistles. They will be machines you probably do not
need to buy in terms of your office functions.
I think that right now there is
a buying opportunity for both stocks and personal computers. There is in fact a blood bath going in the
PC business and at the end of the day only a few of the major computer
manufacturers will still be in that business.
In the same way that IBM dropped out of the personal computer business a
few months ago, other companies with well-known brands will withdraw from the
marketplace and focus on more lucrative aspects of the business as did
Micron. Dell, Hewlett-Packard, and
Compaq are fierce competitors who will remain in the PC business. Marginal manufacturers like Gateway and
others may disappear. But when that
shakeout is done the current stock of computer hardware will have been depleted
and the new machines, which will be much better and much more powerful, will
certainly cost more. Here is what you can get today from Dell (www.dell.com) on
a $30/month business lease: Dimension L
machine with a Pentium III Processor at 933 MHz, 256MB of Ram, and a 20
Gigabyte hard drive. Compaq (www.compaq.com) has a Deskpro EXS Intel Pentium
III Minitower (Millennium Edition) for a similar price.
That
means you can replace your 10 computer office network with all new machines and
a new server for a hardware lease cost of less than $500 a month. Of course you
will have other expenses. You may want to replace your network cabling and hubs
or upgrade to 21-inch monitors. There are lots of ways you can spend lots of
money but you don’t really need to. If you are on a tight budget this is a time
to run the numbers and see where they go. I think you will be very pleased with
the outcome.