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As PC sales plunge, hardware firms eye software turf to stay profitable

Tuesday, 4 February 2014 - 10:16am IST | Place: Mumbai | Agency: DNA
Likes of IBM and HP set for a fight with majors such as TCS and Infy.

With PC sales in a free fall, IT hardware firms like HP are looking at various avenues to stay profitable, including striking innovative partnerships, even with rivals, and entering the software realm.

This is pitting them against Indian software biggies such as Infosys and TCS, experts said.

Worldwide PC shipments saw biggest decline in their history in 2013, raising pressure on predominantly hardware firms like IBM, which recently reported fourth straight quarter revenue drop, except for its software unit that posted profits.

Naveen Mishra, research director – data centre convergence technology and service provider research at Gartner, said, “HP and IBM have been trying to focus on software and services for a while and other companies are also trying to replicate similar business models.”

He said going forward, there will be a lot of shift in the business model and go-to-market strategy. “Traditional hardware OEMs are aiming at 8-10% revenues from software in the next two years. May be in five years, when their hardware revenue would decline, these companies may transform into something else rather than being a pure hardware players.”

Pradeep Udhas, IT & BPO head, KPMG, concurred.

“For hardware companies, server business won’t come down in the short run, because tablets and phones also require heavy duty machines and storage devices to process big data, analytics, etc.

However, in the long run, one will see more mid-sized business move to cloud, so the demand for their own machines will go down, but that is a 5-10 year horizon.”

Companies like HP and IBM are already on that path, but will have to reinvent themselves, in terms of expanding services like cloud infrastructure and consulting, he said.

Mishra said, “Not every hardware company will become a TCS or Infy overnight, but we expect hardware companies to leverage with these software companies, in certain areas there will intense competition and pricing pressure – but that’s where existing client relationships and value additions will stand the test.”

Meanwhile, software companies, too, are trying to enter the hardware business.

Also, an emerging trend is of cooperative competition as seen by recent slew of deals.

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