The Computer Industry

Computing is not about computers any more. It is about living. - Nicholas Negroponte

Historical development, importance and growth of the industry under consideration
The birth of the computer 1642: The first adding machine, a precursor of the digital computer was devised in 1642 by the Blaise Pascal 1670s: Gottfried Wilhelm improved on this machine by devising one that could also multiply instead of just adding and subtracting 1801: Joseph-Marie invented the Jacquard weaving loom which is controlled by punch cards. In the operation of Jacquard’s loom, holes are strategically punched in cards and the cards are sequenced to indicate a particular weaving design 1821: The British mathematician and inventor Charles Babbage (the pioneer of digital computer ) worked out the principles of the modern digital computer. The Analytical Engine was designed to handle complicated mathematical problems. 1843: Lady Ada Augusta Lovelace suggested that cards could be prepared that would instruct Babbage’s analytical engine to repeat certain operations. Because of her suggestion, some people call Lady Lovelace the first programmer. 1880s: The American statistician Herman Hollerith conceived the idea of using perforated cards for processing data. Employing a system that passed punched cards over electrical contacts, he was able to compile statistical information for the 1890 U.S. census. He applied the Jacquard loom concept to computing 1940: Dr.John V. Atanasoff, a professor at Iowa State University, developed the first electronic digital computer. He called his invention the Atanasoff-Berry Computer or ABC. This is one of the most significant events in history 1964: A large-scale fully operational electronic computer called the ENIAC (Electronic Numerical Integrator and Computer) was born. The ENIAC was a major breakthrough in computer technology. It could do 5000 additions per minute and 500 multiplications per minute. It weighed 30 tons and occupied 1500 square feet of floor space Categorisation Broadly, computers are categorised as analog, digital and hybrid computers. Based on size, speed, processing capabilities and price computers have been categorised as: microcomputers(PC), minicomputers, mainframe computers and supercomputers. The performance growth rates for supercomputers, minicomputers and mainframes have been just

Technology and Trends Generations of computers have been made possible by the following technologies: 1950-1959: Vacuum tubes which led to electronic computers 1960-1968: Transistors which led to cheaper computers 1969-1977: Integrated which led to minicomputer 1978-1999: LSI and VLSI which led to personal computers and workstations 1999 onwards: Parallel processing which led to multiprocessors The IC permitted the miniaturisation of computer-memory circuits and the microprocessor reduced the size of a computer’s CPU to the size of a single silicon chip. Performance growth of PC has been the fastest.    Transistor count on a chip increases by about 25% every year. partly because these machines take the most direct advantage of improvements in IC technology. Access time has improved by 1/3rd in10 years Performance over the years . while about 35% for microcomputers. Both trends determined its performance and capability. Cycle time has improved very slowly. Trends of a PC are greatly influenced by the technology trends of both hardware and software. doubling in 3 years.under 20% per year. doubling in 3 years. decreasing by about 1/3rd in 10 years Density increases by about 25% every year. Device speed increases nearly as fast Density increases by just 60% every year. quadrupling in 3 years.

Tata info tech and Wipro.in). Some of them include-IT Task force led by prime Minister in 1999.PC sales by region The rise of the computer in India 1956: Bought its first computer called HEC-2M for a sum of Rs. 10 Lacs. 1995. Satyam.4 bn (2000) $35 bn (2006) $50 bn (2010) The growth of Indian Software Industry . Another interesting trend was the setting up of offshore development centres (ODC) by multi-national corporations. IT Ministry at the centre. the Department of Electronics (DOE) was formed under the Prime Minister 1978: The “Mini computer policy” opened up computer manufacturing to private sector. 1995. the 'TIFRAC' or Tata Institute of Fundamental Research 1970: Under the Homi Bhabha Committee. starting with Texas instruments in 1986. Patni. IT fairs (like IT.com and now IT . It was 10 ft in length. The national informatics centre (NIC) was set up in 1977 which played a major role in the later decades to become “decisive support system for the government” (both the central and state governments) 1986: Project IMPRESS (computerization of Railways ticketing) started in 1986 as a pilot project in Secunderabad ushered in the first application targeted at “aam admi” (common man) 1988: The formation of NASSCOM which sprang into action from 1990 gave a boost to the nascent software industry. Softek. The nineties also saw a direct “push” from the government through number of policy measures. launch of mobile telephony on august 23. including India's first indigenous computer. $200 mn (1990) $1 bn (1995) $8. Many software companies took birth in 80s like-Infosys. IT parks. launch of public internet access through VSNL in August 15. 7 ft in breadth and 6 ft in height 1962: Produced next generation of computers.

its concentration and other related figures Computers are used in cars to monitor fluid levels. load containerships and track railroads cars across the country Computers speed up record keeping and allow banks to offer same-day services. temperatures and electrical systems. These companies can figure out the site of a natural resource. debit cards and instantaneous credit checks by banks and retailers. Computers are helping immensely to monitor those extremely ill in the intensive care unit and provide cross-sectional views of the body . Computers have helped fuel the cashless economy.Total PC (desktops and notebooks) sales (2004-10) in India Sales of other peripherals Importance and application of computers in the contemporary world • • • • • • Computer systems has increasingly cut down the paperwork that is involved in millions of industries around the world Products from meats to magazines are packed with zebra-striped bar codes that can be read by computer scanners at supermarkets. It also helps to manage inventory Energy companies use computers to locate oil. coal. enabling the widespread use of credit cards. natural gas and uranium. Computers are also used to help run rapid transit systems.

making the production process faster and cheaper The computers are most popular for their uses to connect with others on the World Wide Web Type of market structure of the computer industry We believe after our research that the computer industry falls into the Oligopoly market. And it so happens that very often. which most likely increases sales. A firm in an oligopoly market faces a very complex market environment. the bigger players have power on pricing but always have to live with the fear of retaliation from competitors. Also.• • Computers are used to control the production of resources precisely. The entry barriers for this industry are high. oligopolists in an industry would have been competing with one another for a long time running into years. There are also benefits that companies gain out of mergers and acquisitions in this segment.Mutual Interdependence .Repeated Interaction Whenever the actions of a firm have a major impact on the other firm. Dell along with many small ones such as Intex etc. There are few dominant firms such as Apple. Few areas of non-price competition include patent wars and advertisements. The oligopoly dual demand curve shown below pertains to the example discussed. All robots and machinery are controlled by computers. there exists mutual interdependence. Also. This lays the ground for repeated interaction as either company remembers what happened in the past when the strategies were changed. Dell would sell 14. Repeated interaction doesn’t mean that the strategy of the rival is known with certainty. the extensive use of non-price competition because of the fear of price should be taken into account which considerably shoots up the barriers. but if say HP also decreases its price for this product. If dell reduces its price to sell more of its product. prices. The extent of sales depends on the price set by the other oligopolists in the industry. The oligopoly firm will affect the sales of other firms by changing its sales. The products manufactured by these biggies are either similar or differentiated. There are two unique aspects of oligopoly competition . There needs to be regular technological advances and hence R&D costs are high. There is also the possibility of behind the scenes cartels that could be formed to take undue advantage of the demand. Consider a situation where Dell is currently selling laptops worth $1000 numbering 10.000 units. Dell decreases the price by $100. But this factor of increase depends on the competitor’s new pricing. It shows the Dell demand curve for both factors. The rise in demand for Dell depends on both the price cut and the competitor’s price. then Dell’s sales would just be around 11.000 units. marketing strategies etc. .000 units. This is also a market with large economies of scale and a market which eliminates weak competitors in its business cycles. HP will notice that its sales have fallen and kick in counter measures. Dell and HP have competed within the same market for years together now.

but Dell does know that 80% of the time HP did not raise its prices in response. of units offered by Dell. A double line marks this demand curve (kinked demand curve) which is bent at the initial price and no. the other firm will stab it in the back by keeping its price low. Dell might not know with certainty what HP will do if Dell raises prices . Dell can now set their prices with reasonable assumptions. This means that Dell can make a good guess about the demand curve on which they will move along if at all they change their price. both firms will be better off. That is. it has also given rise to a business which generates money .Dell and HP have had repeated interaction over the years from which they would have noted patterns regarding the strategies. along with the rapid and uncontrolled growth of computers from being a bulky tool for calculating to being an integral part of our life permeating everything task that we do. Major Players and their Shares in the Market • Over the past half century. The problem is however that both firms fear that if they raise prices unilaterally. if both firms move up the solid demand curve in the above diagram. Dell also knows that 85% of the time HP matched a price reduction. A way to avoid this nasty competition and even to increase profits often exists for firms in an oligopoly are by explicit/overt/tacit collusions which are considered illegal in most of the markets.

HP. Linux are being used to a smaller extent among people. entrepreneurs and business houses who could envision this future and invested in it have become some of the most recognizable names in the world. Sony. Acer. Sony. The United States had received 38. thus trying to carve a monopoly for itself . compared with only 13 percent in 1985. Europe 25 percent and 11.• • • like no other giving rise to some of the richest men in the world. while the rest were sold for personal or home use. The Operation Systems Market The operation system or OS market is largely ruled by Microsoft’s hugely successful Windows which has a no. . There is intense competition among these companies and the rising and falling market share among them indicates the same. Panasonic. Still a number of other OS such as iOS and Mac OS X. More than 500 million personal computers were in use in 2002.7 percent had gone to the Asia-Pacific region. Dell. Apple. personal use etc. of versions of which the latest is Windows 7. from being a scientific and military tool.5 percent of personal computers shipped had been desktop computers. More than1 billion personal computers have been sold from the mid 70s upto this point. the fastest-growing market as of 2002. Microsoft. Microsoft’s policies of making it’s softwares exclusive to its OS and patenting discourage the use of other OSs. Ever since the inception of the idea that the computer could also become a tool to make business faster and smarter and also make easy the life of the common man.8 percent (394 million) of the computers shipped. • • • • The computer manufacturers market can also be divided along the lines of Stationary or Desktop Computers or Mobile computers (Laptops) which are further sub divided into subgroups like Business use. 125 million personal computers were shipped in comparison to 48 thousand in 1977.4 percent laptops and 2. Toshiba and others. The major players in this business are Dell. Samsung. 16. Lenovo.1 percent servers. The second billion was expected to be sold by 2008. In 2001. IBM were some of those who rode on this revolution to become leaders in their business areas. 75 percent were professional or work related. Almost half of all the households in Western Europe had a personal computer and a computer could be found in 40 percent of homes in United Kingdom. About 81.

The spurt in growth of the computer industry is because of the expansion in the definition of the Computer as a product. This major shift in Apple's market share has been primarily due to the introduction of the iPad and its unprecedented sales which has fuelled its rise to the third(3rd) position in the world rankings as a hardware manufacturer and is expected to rise to 2nd only behind HP by the end of the year.7 billion mark by the end of 2012. Laptops. microsoft based Servers have a share of 36.1% and other players including Linux. Global activities in the computer industry As the computer industry grows. characterised by rising volumes and falling market for most major players. Canalys has estimate that the industry has grown at approximately 19. Latin America and the Middle east. IBM System Z has a market share of 90-95% thus making it the largest player by a distance in this segment.• • • • Servers In the servers market.2% in 2010 over 2009 with Lenovo and Apple being the major gainers in market share. .9%. Tablets. the global personal computer(PC) installations keep rising and are poised to touch the 1. But looking carefully shows that the developing and developed Asian economies together are home to over 50 of the top 100 hardware companies in the world with Japan(21) and Taiwan(18) and this means that the growing markets are and will play a very important role in the years to come in the progress of these companies and the industry at large. The fastest growing computer economies are the countries from the Asia-pacific. Solaris have a share of 63. thus. The global computer scenario at present is. Apple registered a staggering 241% growth in the same period as above. central and eastern Europe. Mainframes In the mainframes market. BSD. Mini-notes and Notebook PC's are the different products in which the computer is perceived by the consumers today and these are products that are powering the strong growth of the industry. Shifting focus from the growth of the industry to that of the firms across the globe we see that of the top 100 hardware companies in the world 40 are still based out of United States of America(USA). develops and matures.

The impact of global changes in the industry can be seen in the Indian economy as well. An Intel study says that in India:     Smaller cities contribute heavily to the PC market growth Computers are a Youth driven category Buyers seek value and don't buy cheap Notebooks and other new computer items have become desirable and bring new users into the fold . even though mature and developed markets still contribute more than half of the global computers industry but this percentage is coming down and fast and currently stands around 58%.According to Gartner. The developing markets especially India and China are now major technological development as well as manufacturing hubs and are predicted to be the future leaders in the industry.

The mobile industry is empowered by portability. over the next five years. Lenovo must face off against a host of established Japanese names and Taiwanese rivals that are beginning to get dangerously global and expanding into North American. All this may pose even more serious competition to the computer industry in the future. In particular. Mergers and Acquisitions in the Computer Industry A firm seeking to capitalize on the sales growth benefit it derives from increasing its relative size or the profitability benefit it gains from introducing new products may find a merger or acquisition to be the optimal means of achieving its ends. Manufacturing of IBM-branded desktop and laptop products will continue. partnering with IBM to move overseas. . However. European and other markets. a given firm may find the time required to organically grow prohibitive and/or simply lack the expertise needed to organically grow . Lenovo and IBM Global perspective: With IBM taking an 18. However. More importantly. and may be especially attractive to both those firms which have reservations about their capacity to effectively integrate new businesses within their existing management structures and to those that are generally sceptical of structuring an M&A transaction. etc. rural penetration and ease of usage. in principle.The development and exponential rise in the sales of smart and intelligent phones is a major cause of concern for the computers industry. Mobile penetration has surged due to availability and interactive user interfaces. it has not tasted global success so far. With IBM's global presence. it has become its second largest shareholder. This Sino-American approach differs from the approaches taken by other companies. in which it is. And it will be a partnership – meaning that IBM will be the preferred services and customer financing provider to Lenovo. Motorola. it typically has features which some firms may find unattractive. China's branded product story may change on the global front.9% stake in Lenovo.000 IBM employees-about 40 per cent of whom are already in China. the brands on those products will be phased out in an orderly fashion. Lenovo has opted for an expansion strategy. Samsung. HTC. The deal is likely to quadruple Lenovo's personal computing business. With IBM's global name being tagged with Lenovo. especially in regions like Taiwan. on the branded side. Lenovo Group has already moved its PC business worldwide headquarters to New York and has added some 10. Handset makers like LG. and Hewlett-Packard as rivals. Although organic growth may also serve as a means of attaining these benefits. while the Chinese company will be the preferred supplier of PCs to IBM. With help of this multi-billion dollar deal – the erstwhile Chinese company has already catapulted itself into a cut-throat competitive world with Dell Inc. Apple. are the major players in this industry and these are giving strong competition at times to their own computer products as well as their competitor’s products. Nokia.

0 points to become the fourth Largest notebook PC company • Desktop – Shipments up 36% YTY. Sales up 50% YTY – Notebook market share gained 2. Sales up 35% YTY – Maintained solid performance through AIO and SMB targeted desktops • Mobiles – Shipments up 82% YTY. Sales up 74% Year To Year (YTY) – Launched first 3D multi-media notebook Y560d and Idea Centre A700 AIO • ThinkPads – Shipments up 29% YTY. Sales up 32% YTY – Launched L series and Think Center M90z AIO • Notebook – Shipments up 58% YTY. Sales up 89% YTY – Rapid and widespread customer acceptance and encouraging initial sales Different Notebooks and other Product Notebooks (as a whole) and other products .LENOVO 2010-11 Q1 Product Performance • Idea pads – Shipments up 74% YTY.

becomes a task of utmost importance.HP – COMPAQ (A Failed Merger) HP bought Compaq for US$ 24 billion in stock. Need for skilled manpower-> IT industry across the world is in a shortage of skilled IT graduates. the challenge of having the upgraded software at all times. HP was a market leader in the high margin printer’s business and Compaq. The deal meant combined operations in more than 160 countries and more than 145. Handling the e-waste-> There is a large amount of e-waste generated in the form of outdated computers and wires etc. software and cutting wave technology.000 employees. HP-Compaq would offer the most complete set of products and services in the computer industry. land and expenditure on technology-> our research suggests that the costs have increased manifolds. Dell and leading IT service consulting company like IBM would give fierce competition even if economies of scale were to be achieved. This was the largest ever deal in the history of the computer industry. Moreover. a low-margin personal computer (PC) manufacturer. Infringement of Intellectual property rights. Industry analysts failed to understand the benefits HP would derive by acquiring Compaq. • • • • • . Patent Wars-> Apple and Samsung fighting over smart phone patents. due to the increase in the prices of land. An estimated 13 billion dollars was lost (in terms of market capitalization) in this time frame. Source: http://www. Increase in competition and narrow profit margins-> The competition has brought down the prices of computers.com/hp-and-compaq-merger PROBLEMS FACED BY THE COMPUTER INDUSTRY:• Software Update and need for innovation-> With the competition in the field of technology and latest versions of software.casestudyinc. labor and technology. established players like direct marketer. • • Increasing costs due to expensive labor. Increase in the bargaining power of buyers and suppliers. The motivation behind a HP-Compaq merger (whether it made economic sense) and the problems encountered in merging operations is an interesting discussion as the stock prices of both HP and Compaq fell within two days of the merger announcement.

Stop sticking your foot in the door. as the various companies work in different countries and have to get the work done. and have them apply the “Ninja Technique (Problem 3)” so that they can stay on-site indefinitely. Don’t go anywhere near any standards. They will rely on you all the more for it — and it will be a relationship based on trust. Design a software that can do anything with “a little customization”. 3. Voilá! Now just wait for money to pour in from miserable customers. Make it hard to customize. Labor issues in the supply chain. Provide a horde of overpriced consultants to fix all of the above problems. 4. 2. and focus on creating something that makes your customers the stronger one. • • Problem 1. The Ninja Distraction Technique (using Tech Jargon) . Even better. Problem 2. Make every protocol and specification proprietary and hard to understand. Rising Attrition rate in IT industry-> The skilled manpower leaves the company after 2-3 years due to various reasons and the industry bears the loss of employing a new resource and training it again. due to different geographic locations with different cultural backgrounds-> With rapid globalization. Solution: Empower your customers through creating standards compliant API’s and plugin environments with open and commonly used technologies for which problem solvers can be found everywhere and anywhere. Foot-in-the-door Software The recipe for creating foot-in-the-door software is really quite simple: 1.• Software piracy-> Pirated version of all the latest software is easily available online and elsewhere. stop creating problems for your customers in the first place. the need to bridge the cultural gap is really important. not desperation or despair.

the industry seems to have distracted you from all that. The theory goes: Keep throwing words such as “Java. the customers will soon forget what they really were asking you for.97%? Will your software automatically restore upon any hardware problems? Can you upgrade our software frequently without involving our tech-department? What is your fix time for bugs? . It’s all a part of the ninja technique of distraction. but what’s even better. Caching layers. and you will not only sound very professional. It is. so there’s less of a chance chance you have to deliver. Solution: It’s about time the industry starts talking about the metrics that the customers can relate to and understand.The software industry has spent years (or maybe decades) educating their customers in tech jargon. And more notably. Really. Let’s talk about performance (can you handle 100 users registrations a second?). d) good stereo sound and a e) large trunk for all your groceries. or less?). you want to know if it will hold your coffee cup steady while playing your Mozart in a perfect pitch. the ones that they need. You don’t want to hear about that. Well. Let’s talk about reliability. Let’s talk about modifiability (can you deliver a medium sized product feature change in 1 week. Multi Tier Software Development Housing Fascilities Campus” at the customers. JBoss. and suddenly you had a car salesman giving you a primer in everything ranging from the new four layer varnish coating technology to the latest in air-pressured suspension theory and revolutions within the field of fuel injection and what not. Imagine being the customer in this scenario: Here you were looking for a a) safe car with b) comfy seats. c) low fuel consumption. Is your up-time average more than 99. Let’s talk about ease of use.

South Asian Countries. 990 crore (US$ 246 million). With the increasing usage of DVDs. DESTINATIONS OF COMPUTER HARDWARE EXPORTS. Export to EU Countries registered a growth of 61 percent (41 percent in US$ terms).90 percent in US$ terms) during the year 2009-10 over the year 2008-09. 747 crore (US$ 162. 13490 crore (US$ 2933 million) in the year 2009-10. Export of Computer Hardware to EU Countries. 1650 crore (US$ 359 million) up from Rs.38 percent (3.42 million) . Export to Africa and Far East countries registered decline during the year.67 percent (45. Parts of computers were mainly exported to USA and South Africa. 293 crore (US$ 73 million) estimated in the year 2008-09.6 percent in US$ terms) in the year 2009-10. Export of personal computers also registered a high growth of 68 percent (47 percent in US$ terms) during the year 2009-10 over the year 2008-09. 421 crores (US$ 105 million) estimated in 2008-09 to Rs.63 percent in US$ terms) during the year 2009-10 over the year 2009-10. Scanner and projectors. MAJOR ITEMS OF COMPUTER HARDWARE EXPORTS Various parts of Computers have emerged to be the top item of export during the year 2009-10. In value terms export of DVD drives increased from Rs. there has been a surge in demand for DVD drives. The other major items of export under Computer Hardware during 2009-10 are head stack. EU Countries have emerged to be the top destination for Indias Computer Hardware Exports during the year. Total value of export of parts of computers during the year 20009-10 is estimated to be Rs. EXPORT OF COMPUTER HARDWARE Export of Computer Hardware registered a growth of 66. Monitor. . 498 crores (US$ 108 million) in the year 2009-10 making it the top item of export under the Computer Hardware sector.In value terms. 472 crore (US$ 103 million) up from Rs. Ink-jet Printers. Mouse. Export of DVD drives from India registered a growth of 18. North America. export of computer hardware to EU Countries is estimated to be Rs. In value terms export of Computer Hardware is estimated to Rs. 15870 crore (US$ 3942 million) estimated in the year 2008-09to Rs. Middle East Countries and Latin America registered good growth during the year 2009-10.INDIA’S EXPORTS PRODUCTION OF COMPUTER HARDWARE Production of computer hardware increased from Rs. Production of computer hardware registered a decline of 15 percent (25.

many activities in the IT sector. Share of IT and HT exports in a country's total exports . The degree of export specialisation is a commonly used indicator of a revealed comparative advantage. while employing only 25% of its workforce. Two factors appear to have contributed to bias towards IT services: firstly. in particular those in the offshoring business.8% of all exports are classified as high-technology. By this account. 2007). are freed from such restrictions. Exports generated around 79% of software and services revenues. India is one of the strongest contenders: Around 16% of all Indian exports are IT services. Share of exports of computer and information services and other business services in a country's total exports India’s prominent position as an offshore hub for IT and IT-based business services does not translate into a general specialisation in sophisticated products. Technologically inclined services sector in India account for 40% of the country's GDP and 30% of export earnings.4 billion in FY07. The specialisation in IT services comes at least partly at the expense of other high-tech manufacturing exports. Yet. These exports are chiefly generated through IT offshoring. rising economies of scale. India’s share of high-technology manufacturing exports is markedly below that of other countries.(NASSCOM. a discriminating economic policy and. secondly. In fact. Trade barriers and red tape help to explain the somewhat low overall volume of trade in India. Indian IT and BPO export is likely to touch $60-62 billion by FY 2011 from $31. according to industry body Nasscom. Only 2.IT INDUSTRY India has emerged as one of the biggest IT capitals in the modern world.

.In the long run. wages tend to rise as countries climb up the development ladder. Indian IT industry may see a decline in growth as India develops. Yet. but this model draws on low wages in the first place. Offshoring allows a country to export more skill intensively at an early stage of development. Therefore. provided that transaction costs are sufficiently low. the level of development is the leading driver behind a comparative advantage in the production of skill-intensive products like IT.