In Tough Times, Services Add Value
Not long ago, at the height of the dot-com boom, a few market-share-oriented Internet service providers hit on a new strategy: Give away PC hardware, and charge for Net access.Not long ago, at the height of the dot-com boom, a few market-share-oriented Internet service providers hit on a new strategy: Give away PC hardware, and charge for Net access. It turned out, of course, to be a going-out-of-business strategy, mainly because the numbers just couldnt be made to work. But beneath the debris of that failed strategy was a nugget of wisdom that enterprise IT vendors should heed as they struggle to cope with todays slumping market: Hardware is a commodity. If vendors try to pump up hardware demand merely by lowering prices, they might find that they literally have to pay IT buyers to take the stuff off their hands. Thats because its simply impossible for enterprises to meet return- on-investment targets unless hardware comes hand in hand with a substantial value-add of business-process-oriented services.
Some may point to Dell as an exception. The No. 1 PC vendor recently reported better-than-expected earnings as well as market share gains in both desktops and servers. Encouraged, founder Michael Dell vowed to continue his companys aggressive pricing strategy, particularly in enterprise markets. But in time, even Dell may become merely the least unaffordable hardware maker in the market and may find that its own appointment with destiny is just a few steps further down the path to marketplace saturation.