Chris Blanc: Play and Projects: Blog

No one likes to exhibit schadenfreude at the misfortune of others, but in the case of Austin-based Dell Computers, it’s purely professional: they failed to fulfil the need they claimed to meet, and are a drag on the market until they do, so it’s good the market is kicking them out the door to make room for others, namely HP-Compaq which just surpassed IBM in sales.

Layoffs hit close to home Monday at Dell, which said it will close its Austin, Texas, desktop manufacturing facility as part of an effort to trim billions in costs.

The Austin facility, which replaced a smaller facility in Austin, is where Dell fine-tuned its “build-to-order” strategy that allowed it to vault ahead of Compaq for the top spot in PCs in the early part of the decade. By not building PCs until orders get placed, Dell minimizes the time it holds components in inventory, which in turn reduces costs.

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Dell also reaffirmed its plans to reduce employee headcount by at least 8,800. So far, it has eliminated 3,200 positions. Overall, the company hopes to reduce expenses by $3 billion a year on average over the next three years. ^{^}

Did that shadow passing over your face connote a sense of deja vu? Perhaps:

Dell released preliminary earnings Thursday showing positive signs in its servers unit, but announced it would lay off 10 percent of its workforce over the coming year.

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Dell has been attempting to turn itself around in the last year after losing its lead as the world’s largest PC maker to Hewlett-Packard in 2006. It’s seen heavy turnover in leadership, including the return of founder Michael Dell as chief executive, replacing Kevin Rollins. ^{^}

No word on whether this is the same 8800 but you can see how long this downward pattern has been working.

Dell was a one-shot wonder. Its concept was the build-to-order PC, based on a Burger King drive-through, and it came along just as most of the American public were buying PCs to experience that new intertubes thing. Now that people have computers, and older computers, and multiple computers, and we have computers coming out the wazoo, the fat margins are gone. So is the rising demand. And suddenly we see that Dell’s business model is flat.

As soon as this business was starting to wane, Dell introduced its $400 basic price point machines, a low cost unheard of before that time except in real junker white boxes. This was their solution to declining demand: downscale their market. In doing so, they handed the baton off to their competitors, because their $400 machines were highly unreliable.

As a consultant, I’ve heard many stories of how Windows “just crashes all the time.” In all but a handful of these, the answer to the question “where did you get your machine, and how much did you pay” has two parts: Dell or HP, and under $500. These machines are prone to lockups, overheating, erratic internal incompatibilities and so on because they are new spare parts grab bags. You don’t have the money to pay for engineers to ensure that a cheap box of parts has high degrees of internal compatibility or reliability. Instead, you make the worst sin a PC builder can do, which is to look at the packaging and say “well, it says it’s compatible and it’s cheap, so go with it!” You wouldn’t do that for your home machine, but because Dell is a giant brand, you would buy it from them. Silly you.

In pursuing the $400 market, Dell depleted itself of brand momentum and gravitas. Dells went from being seen as the Saabs of the PC world to its Hyundais or Ford Focuses. Even worse, they went from being seen as reliable to being seen as erratic junkers. The consumer may act dumb, but he or she may not be as dumb as they act, because when you see a $1500 box that runs Windows XP flawlessly and then come home to a $500 box with constant crashes, it’s a simple mental step to recognize the cheap box is a junker, especially when we’re in a society where the tendency of cheaper products to be junk is well-recognized. Otherwise, why have brands and brand value at all?

Dell attempted to patch the situation up by buying Alienware, a company that started as a specialized outfit making high-performance machines for gamers, but then found that its primary customers were businesspeople, artists and musicians who wanted laptops and desktops put together with a higher regard for part quality. Even so, Dell didn’t take the hint.

Many of us hoped that Dell would become the Apple of the PC world, selling nicer-looking machines and using its bulk purchasing power to sell nicer components at a lower cost, but even Apple doesn’t do that, and Dell didn’t come close. Instead, it sold us cheap machines loaded with adware, and almost no attention was spent on making the user experience simple, powerful, beautiful and effective, something that Apple does well. Building user experience builds brand. Dell build a brand befitting a manufacturer of microwaves for college dormitories.

Now we see Dell face the inevitable conclusion of its decline. A 10% drop in employees isn’t a death blow, but it’s far from a good sign. The worse sign is that Dell has no clue how to market itself and so stop the bleeding, which means a slow spiral into true irrelevance. HP has surged ahead by having a good-better-best product line, but this is success in a relative sense and still does not challenge the rising ideas of computer as luxury good (Apple) and computer as appliance (Asus). HP has the market — for now — but could learn a lot from deposed Dell and fading IBM.

I was an Apple and Mac zealot when there really was a significant difference in technology and user experience between Apple and Microsoft. That was when Windows was a poor substitute for the experience the Mac OS delivered. But around the time of Windows 95, things changed. The Mac became almost as unstable and complicated to run as Windows 95.

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My number one gripe, and still is today, is Apple’s attitude towards closed hardware. The PC has so many more options available, whether it be hardware, software or peripherals. The Macbook Air proved again Apple’s arrogance about closed hardware. Same with the iPhone. Who wants to be without their laptop or phone while their battery is being replaced.

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What’s ironic is now that I don’t wear my Apple fan boy glasses anymore, today Apple looks more like the company Apple fought against in the “1984 doesn’t have to be like 1984″ commercial. ^{^}

Apple, like many marketing efforts, is the anti-sell. Don’t be a stodgy old boring fuss, get a Mac, and be an artist. You keep using that boring corporate software, if you want to be like your dad. We’re young. We’re hip. We’re the counterculture. As if there are such clear divisions in life, and as if image made reality.

It’s an appealling message to their audience, most of whom are paid better than average but not enough to really make any kind of long-term difference in lifestyle. Upper-crust wage slave is still wage slave. Graphic designers, writers, programmers and others get paid a fraction of the value they generate for a company, but having an elite computer brand helps (they think).

As any experienced marketer will tell you, however, the problem is that marketing is just marketing. It aims to provide for you a picture of a brand, and in that picture, the product is made with one concept in mind. In reality, it’s a variation on other ideas, and is never as innovative or different as you think. Apple has become an entertainment industry version of the 1984 IBM they despised, complete with lawsuits against competitors and C&D letters to bloggers.

I once was an Apple believer as well. I put up with buying $2000 computers only to have Apple come out with a new model six months later that I could just about upgrade to for $1500. I put up with the defective motherboards whose status was never announced, leaving us to figure it out on our own and stagger into an overpriced Apple service bureau. I put up with the failure of backward compatibility, of the flaky marketing, and so on.

A brand is only so strong as the image on which it delivers, consistently.

But after years of seeing shoddy hardware hyped as “the next big thing,” and hearing about Apple innovations which are either bought from other companies or borrowed ideas made better, I’ve concluded that like most other people I don’t need overstyled hardware. What I need is solid technology that interoperates well, and doesn’t require my slavish devotion to a marketing meme.

There’s so much written about the possibilities of Linux that I’m almost afraid to clarified those polluted waters.

But since someone asked today, and I organized my thoughts for that, here’s the verdict. Linux will become adopted in niches, and this will make it important and rewarding for software packages to support both Windows and Linux.

Sadly, I don’t think BSD is going to be much of a contender, except in the areas it has already conquered. UNIX diehards and server heads will keep using it because, as I can attest, it will rock the world. The Mac hangs on as a luxury product for underpaid people who want to feel important enough to need special computers. The interface isn’t enough removed from Windows and KDE, and the machines are flaky and expensive. So BSD and OS X are out of the picture except as permanent niche computing.

Where Linux is making inroads is on the smaller, cheaper machines, in three big ways:

1. Sub-notebooks and portables.
2. Refurbishing old machines.
3. Home appliance-style computers.

Many of you will note that the first and third categories are the same, excepting portability. That’s because the computer as appliance will be a large theme in the coming years. People have now accepted the computer like TV, stereo, sink disposal, car, phone and food processor into their lives. They don’t see as much difference between machines, and operating systems, because 90% of the users need them for the same fixed set of functions: email, chat, word processing, media storage and playback, web surfing, office applications, telephony, and games.

Linux comes standard on a number of cheap machines, none of which have really gotten their act together. The missing piece is software. OpenOffice isn’t good enough to replace Microsoft Office. Firefox is still buggy. No games of note. Getting the right codecs for your media playback software requires time and effort to research, and most people don’t have that time.

At some point, a brave entrepreneur will fix this problem by creating a standard operating system installation that uses the best of all the software available from the Open Source movement, although some of it will need modification to work in a way end users recognize. They will then trot out a machine that’s smaller, lighter, more durable and cheaper than what’s commonly out there, and people rich and poor will buy it as their desktop appliance.

In the meantime, the convergence comes closer. Many offices now have Linux for server and desktop machines because it’s better for certain tasks, or they don’t want to pay for support licenses. As this niche expands, look for opportunities for software packages that are designed to have versions that work on both systems and interoperate transparently.

Let’s talk about hype and Windows Vista. No, I’m not talking about Microsoft hype. I’m talking about the people who hate it.

If you listen to the chatter on the Internet, Ron Paul won the presidency, Windows Vista has failed, everyone’s going to buy a Macintosh and it’s really important what happened last night on Lost. That’s only if you listen.

[D]uring my speech to the Association of PC User Groups, I asked how many of the 180 in attendance were using Windows Vista.

At least half of those in attendance raised their hands, probably more. Frankly, I was fairly surprised.

APCUG is a national affiliation of user groups around the country — organizations such as HAL-PC and the Houston Area Apple Users Group. Their members generally are older, many are retirees, and while they are enthusiastic about tech, they’re often cautious about adopting the latest and greatest. ^{^}

Writers spend a good deal of their lives trying to get to the real story. That means what’s actually happening, as opposed to some third-party rendering of it, whether in the form of media attention or anecdotes or rumors. When you get past all the chatter and misinformation (and, where corporations are concerned, outright disinformation) you’ll find the truth. You have to keep looking for it, foraging for it, digging for it. That’s why we like detective stories. The lone thinker rides into town, digs and gets laughed at for it, then solves the case and everyone else looks fat and stupid.

The blogosphere always puts a spin on things because it’s self-referential. You have all these bloggers writing about what the others have written. It’s a natural amplification effect like that of the media itself. If CNN writes an article about artichoke marmalade, you can bet that Fox news will as well. And journalists are far from impartial, since many of them have spouses and family members working at these companies. They form a natural amplification channel that will talk something to death once it becomes trendy in the media.

This is why blogs and media form an important future, and it’s not clear who is assimilating whom. Blogs usually take stories from the media and put them into the indie spin for which blogs are famous, but the large media outfits watch blogs for trends. Together, this is probably 2% of the population of North America and England dictating what the rest of us think is trendy.

While I am certainly not endorsing a candidate, going by traditional measuring, Ron Paul has about as much luck as an armadillo in a freeway during rush hour: i.e. No chance. However, when you go on the Internet, he’s been hailed as the man who can lead us all to the Promised Land.

I don’t begrudge his supporters one bit, I just don’t get the online/off-line disconnect. ^{^}

It’s important to remember when marketing your products that this is the case, and it’s one powerful reason that branding and brand identity are of paramount importance. You want to get people to have a vision of your brand, and to start repeating that in the small closed circles of bloggers, Hollywood, media workers and fashion designers. What these people speak others repeat, and so your brand identity becomes a meme of its own.

Another example of the hype working well is the Asus Eee minilaptop. As a recent article states, Asus and Intel are getting close because this new machine cuts out all the BS people don’t need with a laptop. They want to check email, surf the web, type documents and play minesweeper, and that’s it for 95% of laptop use.

The Eee is not only threatening hardware manufacturers by introducing a 95% solution at 35% of the going price, but is also redefining what people expect from a mobile operating system. A stripped down Linux as offered on the Eee by default lets you do all the tasks you need to for that 95% solution, but also gives you the ability to extend your operating system as you need with low-impact software. True, a lot of the open source offerings, like Open Office, really are inferior to the closed source software they are cloning. People will get around that given time.

Windows Vista is not yet the 95% solution. It requires too much hardware, and it’s a work in progress, but it’s moving slowly toward acceptance the same way Windows XP did (and I actually remember people saying they’d never give up Windows 98 because it was “the best so far”). Over time, Vista will get better and more people accept it.

In the meantime, I know more than a few people who are happily using it. Most of them aren’t technical gurus, but a few are. If you read the blogosphere, or the media, you wouldn’t know that to be true but it is. Between the hype and reality there’s opportunity for those who want to build brands and make ideas reach their audience.