Posted by: theovalich | December 31, 2008

Message to The Industry: We live in a different world…

Last night, I was preparing myself for departure into the world of dreams for couple of hours, when I got the nod that good friend Rahul Sood of Voodoo HP fame posted something interesting on his blog. I ventured to his site and read a good written article that delivers a fine and solid message. Wrong one, I am afraid.

Based on his article, which speaks about the death of high-end PC computers (neatly, some years after Rahul sold his own boutique PC manufacturer to HP for a large sum of dead presidents), the world is going to evolve into small and neat things. And that is a nice pitch to launch a product like the upcoming Blackbird 003, as insinuated in a follow-up post.

And this is where it hit me. The perception of human species is that we’re an exclusive kind. One cannot co-exist with another, starting in kindergartens, throughout school, rivalry between brothers/sisters in a family or nations – does not matter, we all think of ourselves as God/Allah/Manitou-given right to exterminate the opponent because “we’re better”. However, when we look at the world in general, we see that everything is inclusive, even our position in the food chain. We cannot be different, because we would belong to a different position in the food chain, not on top of it. We are predators (Orca the killer whale is also a mammal, so don’t pull that argument that we’re cute as dolphins), we take all the best qualities, them being good or bad, and use them for our own interests. However, we do not cancel each other out. It is the competition that drives us to the best or worst of our potentials, and it does not matter who comes second, it is the matter of who makes the best product, that being your performance in a family, or a company.

The IT industry – error in global economy DNA
Factor of inclusiveness comes to life the moment you walk into the world of IT industry. This industry is best described as “disruptive”, because it continuously shakes up the world order, like it or not. We change the level playing field in every industry that we touch, that being weapons of our own destruction, or tools of our own creation. Now, why all of a sudden this industry is turning into an exclusive one, or just keeps talking about exclusiveness?

For starters, a lot of my mainstream colleagues are now writing about Apple products like nothing else exists in the world. For starters, Apple did not invent multi-touch nor does it own the technology. But, Apple is the first company that took the existing technology and did a brilliant job to create currently the best interface between humans and machines.

Tomorrow brings a whole another ballgame of alternative interfaces that will change the way how we communicate with the digital world. Perceptive Pixel, Dragon Systems/Nuance, Google Voice-activated search, and E-Plus Speech-to-Text (SMS) technologies – all of these companies are bringing technologies that are utterly brilliant, but in the end, they will be adopted by other companies. Following exclusive logic, all of these companies will keep technologies to themselves, regardless of Google being an American company, E-Plus a German mobile operator, Dragon a small UK company that exchanged more hands (corporations) than Microsoft has employees… but all of these companies bring stuff that will be adopted by other companies and they will deliver their stuff.

At the end of the day, we all will benefit – smaller and big companies, but only those that think outside the box.

What a Ferrari F1 car has to do with my car?
In order to be able to draw parallels with current situation, let’s compare computers to cars, since both share emotional similarities. There is a world crisis in car sales, as a consequence of recession. But, let’s take a deeper look into numbers, shall we? Big Three in US are in trouble, because they have millions (sadly, not exaggerating) of unsold cars. Why? Because people don’t want to buy them. Car industry missed the way what car drivers’ desire and that was punished with a dramatic decrease in sales… from makers of bog standard automobiles.

No wonder, you might add – because these cars don’t give us that buzz, that emotion. Now, let’s take a look into the world of supercars… are the sales down? Judging by the appearance of numerous supercars manufacturers, the answer is a very loud – NO. Ferrari increased its production from 4999 cars/annum in 2005 to 6700 cars in 2008, followed by 7500 cars in 2009. Current leadership of the company told yours truly that they won’t increase production for more than 10,000 cars a year, because they want to keep the exclusivity. Then again, they told me the same thing back in 2005, so don’t hold your breath. Porsche makes 80,000 cars/year, and they plan to pass the 100,000 mark with the introduction of baby SUV and a four-door limo. Crisis? What crisis?

I won’t even explain how start-ups companies like Tesla, Carbon Motors and many others are preparing the stage for either a takeover, or big ones “stealing” a lot of ideas from their 2010 cars. Let’s move forward. In the past five years, more supercar manufacturers appeared than in 10 years between 1990 and 2000. Whoever heard about companies such as British Atom or German Gumpert? Yet, these manufacturers are finding their customers than GM or Ford. Different volume? Certainly. Profitability? Well… if GM was any smart and produced real sport versions of their cars, they would not be in such a doodle. Honda Type-R was a stuff legends were made from, yet their current Civic Type-R is a heavy and non-responsive PoS of a car. What happened to sales? You’ve guessed it. In today’s world, we’re pampered by dream visions wherever we go. These marketing visions make our emotions work and make us want things. In all honesty, can a Chevy Tahoe make us drool? Hardly. It’s a workhorse, regardless how you like present it. Range Rover Sport or chrome alloys on Tahoe are nothing else but “pig with a lipstick”.

Getting back to the world of computers, did Dell, IBM, HP, Gateway and others really thought they could continue to sell beige boxes forever? The answer is very simple – NO.

HP had to buy VoodooPC, Dell had to buy Alienware, and Acer had to buy Gateway, eMachines. Why? Because all of these companies need to generate buzz around their products. Raise hands who want to buy “beige or maybe grey” PC with “ultra-interesting” 19″ LCD display (connecting to PC with analog D-SUB connector, DVI cable is more expensive) and a beige PS/2 keyboard (still have on stock) that will change color the moment you touch it?

What happened after these acquisitions? HP launched all-carbon fiber Envy 133 and more importantly, All-in-One PC with a massive 22″ or 25.5″ touchscreen. Dell implemented Alienware DNA in its XPS series while keeping the company intact (and learned to live with the fact that there are tens of thousands of people want to buy their screens, but not interested in their computers). Gateway launched a sold out notebook which specs are now emulated by ASUS, Toshiba and others. The list goes on.

How to create an industry – sandboxes anyone?
At the dying years of 20th century, the need for better coolers created a whole new industry – premium cooling that became premium cases. Could you imagine Antec Skeleton, Cooler Master Stacker, Cosmos Black Edition, and Blackbird 002 – or imagine that a Ferrari-designer Pininfarina worked with Spire to create a design case for 70 greenbacks. And all of that happened because a small group of people went nuts and overclocked Celeron 300A to 450 MHz and Duron 650 to 1.1 GHz and started to build systems around it (sorry, omitted Athlon 550 and 650 to 950 courtesy of legendary “Gold Finger” device).

This grassroots movement turned into an industry of premium components, yielding companies such as Corsair, OCZ, Mushkin from the world of system memory, BFG, Diamond, EVGA, XFX, Sapphire in the world of graphics cards, Extreme Edition and FX processors from Intel and AMD and completely changed the way how Dell, HP, Acer, ASUS and others market their computers.

Tesla Supercomputer is the latest example of taking an underground movement and creating an industry. Five years from now, every scientist will have a minimum of 100 TFLOPS on his desktop, and supercomputers will become 10-20-40 PFLOPS machines capable of solving world’s greatest problems. Because of who? Because a group of young doctors of science took four gaming cards and turned a gaming machine into a processing monster for computational topography http://fastra.ua.ac.be/en/specs.html and inspired Nvidia to launch an ecosystem around Tesla cards for aspiring scientists.

Would that ever happened if there weren’t for gamers who demanded more and more realistic graphics in computer games, forcing companies to turn regular video processing chips with some texturing power into TFLOPS monsters that eat CPUs for breakfast in any stream-like application?

The answer is very simple. NO. Liked it or not, it all started with bilinear filtering of textures. 3Dfx had it, S3 and Matrox didn’t. Games looked awesome even on Pentium 100 machine, looked like crap on Matrox and Pentium 233 MMX. ATI and Nvidia came later and with wiser moves, moved ahead. End of story.

Personally, I consider that the most important product that HP has in its complete PC lineup is its TouchSmart series. Yet, I don’t see HP advertising this system wherever you go, I don’t see discussions about how controlling the computer by our own fingers is changing the world. No, that’s left to Apple and be honest; iMac does not come close to level of interactivity offered by HP’s system. Apple’s buyers used to be consisted out of dreamers, visionaries and people that don’t want to live in bog standard world. Judging by the rate of market share growth, people want to dream, live the vision and they don’t want to live in a bog standard world. That’s why Apple stuff sells like hotcakes – not to enthusiasts, but to grandmas and grandpas that want to own something beautiful. This is the place where CE industry missed the boat completely and it will get eaten by IT industry (not getting “destroyed”, but adopting IT technology to a point where you can’t tell a difference). Your telly in the living room will have a complete computer inside, or just connect to a home server that will become more important than ever. Is it a Sony TV or Sony Vaio with a larger screen? Wait and see.

High end PC – what can we make of it?
Here comes the ultimate failure of PC industry as such – it lacks people that will spark that creativity, all in the name of cutting costs, even if $2 means the difference between PoS product that nobody wants to buy or will buy only when forced (enterprises tied into their own cycles).

The problem of high-end PCs does not lie in the fact that there is no market between ultra-high end PCs and mainstream crowd. The problem, as some like to see it – actually does not exist. There will always be a market for those 300.000 people (Steam Hardware survey November 2008). That number accounts to 300 million greenbacks of revenue for graphics subsystem alone. Even in five years spread, that’s a hefty number to overlook for anyone, and this exlcuded rest of components that also belong to premium world. Most of motherboard manufacturers now focus on catering overclockers, spend hundreds of thousand of dollars on organizing overclocking competitions… all in the name of better products.

Is this market something that is going to disappear? Nope and yes, I will shave my head if I am wrong. This industry also has its heroes, like Shamino who came from overclocking world to help EVGA design ultimate motherboards, Macci who helped AMD to create an attack on Intel and change the way company markets its CPUs… examples are numerous. And no, these people will not go away, they will actually – get company.

Conclusion
In conclusion, boutique vendors like Biohazard Computers, HyperSonic-PC, SolidWavePC, Smooth Creations, YOYOTech and others will not just continue to exist, but expand their line-ups and put their DNA into more volume products. I won’t make a distinction between Biohazard and McLaren Group, or stop to mention similarities between VoodooPC/HP, Alienware/Dell and AMG/Mercedes relationship.
This industry is huge, there is more than enough room for everybody and guess what? AMD, Intel and Nvidia are not making enough chips to satisfy world’s need for computing. Once that this trio starts making 3-5 billion chips a year, we can start saying that the industry is saturated.

Then, we can start talking about exclusiveness – until then, whenever you hear an industry leader saying that users “don’t need that”, with “that” being TV-out on 3dfx Voodoo cards (Alex Leupp, 3dfx CEO), “that” being 64-bit instruction set (Patrick Pat Gelsinger, Intel’s CTO at time)… is setting its company for the fall or a hefty portion of humble pie.

The new site will have open discussions with the industry leaders outside of this industry, and then it will be interesting to see what IT industry leaders will say. Bear in mind that everybody is talking about netbooks today. First netbook in present form was a computer that a lot of industry executives and journalists claimed that it is impossible to make. Nicholas Negroponte, AMD and Quanta created netbook; ASUS came with Intel platform and created EEE. The rest is history.

And again, this would not happen if there wasn’t for Ferraris and Lambos of this industry. The future is bright for high-end PC manufacturers, but not just that. The future is bright only for open minded manufacturers that will push the envelope in their respective market.
Slow giants will be overrun, regardless of how you look at it. It is the real evolution and exclusiveness in the all-inclusive world.

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Responses

  1. Well elaborated… Seems to me, it’s all about the balance at the end of the day. You just have to identify the weights on each side of the scale.

  2. Theo, I never thought IT could be so philosophical. After I read this 8 more times, I may have something more thoughtful to say. In the mean time, here was my response to Rahul’s post:

    http://www.edbordenblog.com/2008/12/most-hypocritical-smoke-blowing-of-2008.html

  3. Well, IT is more than philosophical. I’ve cut the article by half ;)

    We can discuss the impact of IT on a lot of things, but one thing that Bright Side is not going to tolerate is marketing spin.
    And when it comes to Blackbird 003, I don’t see a reason why they didn’t refresh the 002 and kept in sales for 2000 USD and went to hit 1000 or 1500 with the new one.

    All that I see here is opposite of their stance with Envy 133. And that’s a shame. But when it comes to looking at a bigger picture, saying “customers don’t want and don’t need 5.000 or 10.000 systems” is equal to Rick Wagoner stating that “customers didn’t want our pickups”. Customers will pay for good product, that’s it.

    Price is not all that important, but whoever sings the price song alone is obviously in the wrong business. You have to have a price-aware product range, but if you are a car manufacturer that does not offer street versions of racing cars, if you’re cellphone manufacturer that only manufactures cheap schyte, well, your days are over when Apple shows up.

    Personally, I am surprised at shortsightedness in this industry, because I saw a lot of individuals at very high places showing lack of understanding for way how we humans work. We want better, faster, stronger… and after you buy your first product in the particular industry, you want the second product to be better, more comfortable, etc etc… some companies in this industry are obviously coping with that concept.

    When it comes to companies to watch, wait and see what will Acer and ASUS do with One and EEE. Perfect deployment of future buyers of their own notebooks and desktops.

  4. […] Voodos upcoming Blackbird 003 which is a small and neat little device. Read Theos article here. Read Soods Blog entry here Source __________________ Push the limit one more time… […]

  5. People can talk about all the ‘shrinkage’ they link, but when you need ‘raw processing power’ – then you need space.

    That space means a sizeable chassis.

    Maybe not ‘Stacker-city’, but something where the air can flow, components can be easily accessed/upgraded, noise is minimised and the PC ‘does the job’.

    Sure, the mass market will always be sad, middle-aged men hanging on in quiet desperation as Mr P. Floyd said, but Theo is right that your nads only tighten when a serious muscle machine fires up – be that car or PC.

    For years, ATI focused on the ‘nice & safe mass market’ – while nVidia ‘lived the dream’ with SLi etc – even when these technologies were in their infancy and not working 100%.

    Result? Mass-market movement to nVidia – with turnover touching $4Bn.

    Intel spent years focusing on the nice and safe Pentium 4 technology while AMD produce Hot Rod FX chips etc.

    Result? Massive market increase for AMD.

    Intel launched their own $1,000 hot rods and what happened ?

    Small, neat and safe is always going to be appealing to middle aged guys with bicycles…

    …but somewhere inside all of us, there’s a horned monster that feels most alive next to death – when the boundries are being pushed – and we can ‘do stuff our neighbours cannot’.

    I reckon the high end is safe ;~)


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