Are the continously dropping PC hardware prices killing the PC Tech market?

[vi edit]

This is psuedo related to the Home Built Pride(subscriber),
Home Built Pride(non-subscriber) topic posted a while back.

5 years ago, a top of the line computer would run you nearly 3-4 grand or more if you wanted all the bells and whistles and gadgets and gizmos. I remember interning at a John Deere Plant during a huge upgrade rollout. We were dropping in 32 meg sticks of EDO ram, valued at well over $150 a piece. I had nearly 150 sticks of ram in a box that I carried around from workstation to workstation as I upgraded each machine. I was entrusted with nearly $23,000 worth of memory sticks, in a box that I could easily have just walked out of the building with.

I remember the days of $1000 CPU's and $700 19" monitors. Modems would run you $100 for a decent one. Hard drives were $150 for a 4 gig drive. A 2x2x6 CD-RW drive was $350, and that's because you were "cheap", and went with an IDE drive.

I won't even go into 10-15 years ago when an IBM PC was rivaling the price of a quality used car! :Q

Anywhoo...my point is this - Relatively speaking, computers, and their parts, are getting cheap, dirt cheap. You can buy a *nearly* top of the line machine for a fraction of what a *nearly* top of the line machine used to cost. People can go out to Best buy and get a modem for $25. They can get half a gig of RAM for $60. A nice CD Burner can be found for $50 bucks after rebates.

It's to the point where the skills of a PC Tech are becoming endangered. If you wanted to upgrade your CPU in the past, you were dancing with the danger of killing a $500+ piece of hardware if you installed it properly. Now somebody can buy a really good CPU for $110 and roll their chances on the install. If they mess it up, their out $110, but it's not like toasting the equivilent of a mortgage payment like it used to be. Same thing goes for Memory and other parts. Why pay somebody $50 an hour to put in a $30 part that you could put in yourself with a couple minutes of instruction reading?

The parts keep dropping in prices, but the prices we charge have to go up to keep with the increasing prices that we have to pay for everything else(Food, cars, houses, clothes, gas, ect). At what point will our market be seriously in danger? Yes, I know that there will always be people out there who will never have the confidence, or initiative, to do it theirselves, so those opportunities will still exist. But, those people are going to slowly be dwindling in numbers. As prices keep dropping, entire systems keep getting cheaper and cheaper. It's almost to the point where computers are disposable. What used to pay for an upgrade 3-4 years ago, will buy a whole new machine now.

In college, I paid for my pizza and beer by doing upgrades and tech work for home users in my area. That market has really dried up. I have since made the move to service and support to small business and have found a much better market. Many small business are taking advantage of the cheap prices and are doing upgrades that they have have put off for several years because of high prices. They get more bang for their buck now. But, the number of small business clients is no where near as high as the home user market that I had 2 or 3 years ago.

Any takes on this?

 

[hoihtah]

the way i see it, hardware market is pretty dead for small business owners.

it's like any other business...
when it first comes out... you can charge the premium.
but that stage is over for computers.

supply and demand.

it's a sad thing for us computer builders...
but i suppose a good thing for the rest of the people out there.

 

[LaBang]

I agree, low hardware costs are not only ruining the tech help market but also the big tech companies themselves. Take a look. The only company that is doing well is Dell and Apple. Dell wins because they get volume on low prices. Apple gets profits from low volume (like the rest of the industry used to be). Other companies are hurting because they can't go low on price and don't have the capability of charging more. Low prices are bad. It stagnates innovation.

 

[jfall]

I don't really agree with this... because I have bought three computers within the last 6 years.. every time I buy a computer I try to get the best stuff that is out at the time.. my first computer I bought 6 years ago cost me $3,000.. the computer I bought 2 years after that cost me around $3,000, and the computer I just bought about a year ago cost me around $3,500. Canadian funds that is.

 

[The Stigenator]

I agree with you Vi.. The market is killing itself at the moment, unless we have some innovation the market will dry up. Capitalism runs best when innovation runs high. With companies dropping prices to grab the market with little or no innovation (execpt for apple which seems to be the leader in innovation) the PC market will eventually dry up. But since innovation is a variable and something new might come out to spark the market I cant make a comment on it drying up. However if it continues this way that will be the outcome.

 

[StageLeft]

I agree. Unlike automobiles basic computer work is very easy. You can teach anybody with a brain how to build a computer from scratch in an evening. Sure they will miss some subtle parts or not have the troubleshooting experience but compare it to a car - you can't teach somebody how to build a car from scratch in an evening.

More and more people know how to either do their own work on the computer or they know somebody else who can.

More to the point is your point about costs. A few years back you needed about $2k to build a solid computer. $1k would get you an incompetent junker.

You can still spend $2k on a machine, or even $20k - but unlike in the past you can get a very competent gaming rig for $1k. Having an "up to date" fully usable computer costs less of a percentage of one's income than it did before. What do mom and pop stores really have going for them? I have no plans to buy a brand name in my future and I still upgrade but most people when they think of a computer they think of dell or compaq.

Then for me personally is the fact that I've not bought anything from a local mom & pop in over a year. I buy everything over the net from a few select big ticket retailers like newegg.

 

[StageLeft]

<< I don't really agree with this... because I have bought three computers within the last 6 years.. every time I buy a computer I try to get the best stuff that is out at the time.. my first computer I bought 6 years ago cost me $3,000.. the computer I bought 2 years after that cost me around $3,000, and the computer I just bought about a year ago cost me around $3,500. Canadian funds that is. >>

If you buy "nearly the best" that is currently out that is right you can spend about as much as before. However 5 years ago you needed nearly the best so that you could still be feasible 6 months down the road. Now it's simply wasted bragging rights if you look at it from a functional point of view. Hardware price and performance has overtaken what we really need to run the software.

 

[cipher00]

Markets evolve. Commoditization takes over. People adapt. Anybody really lament that there's really few good buggy-whip makers out there anymore? No. Commodity prives have been falling since the paleolithic era. We adapt. One market matures and dies off, and another one takes its place. No regret. We just have to see how things work out. The sheer explosive growth of computing has been a good thing, IMO. Stagnation would be far worse.

My 2¢.

 

[Mday]

I would not that the dropping prices is what is killing the market.

I would say that the lack of a reason to upgrade is killing the market. Sure prices have dropped, but if the demand for new pcs still existed, some say that there is a 3 year cycle in the corporate world (nothing said about the consumer market), there would not be that much of a problem.

Software makers are weary of making titles that require more beefy systems. Games are starting to become beefier. MS has always increased bloat requiring more beefy machines. But for the ppl that have what they want, do not have a real need for more, there is no reason to upgrade.

Think of this as the automobile industry. You own a car, and the car runs fine, and you see no real need to get a new one. So you are not exactly "helping" the automobile industry. Sure you can argue parts and gas, but that exists for PCs with new software titles, minor upgrades, replacement parts, and electricity.

The power user % of the overall consumer computer market is very small.

The automobile industry has advertised themselves to death, telling Americans why they need new cars. The PC industry needs to do the same. Furthermore, there is a certain pride in owning a new car. A car gets paraded around town... the PC just sits near some desk indoors. How often have you boasted that you have a new computer, and invited your neighbors in to see it?

 

[Tripleshot]

Many people are buying their first computer this year,and many more are upgrading from theitr '95 purchase to a more modern system now. Unfortunately, level 3 buyers sush as the mom and pop beige box builder cannot compete with the online purchases from Dell,Gateway,HOP,and Compaq when their prices are so low and they can afford to operate on a much smaller margin. But the truth is, they probably aren't making that much profit on initial sale,and make up the loss on peripherals and a captured customer base. Once you buy a propritary system, it is that company you call for service. I refuse t owork on an IBM machine because of how rediculously they have propritized their systems.

I don't appprove of the strategy,but that doesn't mean anything. I now will only build fro select clients who want the best bang for the buck, and I am lucky if I make $25 off the system in profit. That is how tight margins are when you compare similar offerings by the big level 2 and level 1 providers.

For that reason, I now do consulting. I can charge a reasonable fee for those services,and not worry about the miniscule profit potential of a mom and pop sole propetership. If you don't have a gimmick,or a rock solid customer base,you can barely make a living doing computer building nowadays. Even the hobbiest is buying on line now instead of visiting the local shop.

 

[vi edit]

<< I would say that the lack of a reason to upgrade is killing the market. Sure prices have dropped, but if the demand for new pcs still existed, some say that there is a 3 year cycle in the corporate world (nothing said about the consumer market), there would not be that much of a problem. >>



I think their's a couple factors involved in the 3 year cycle in business. 1 is that *most* PC's carry a 3 year warranty on parts. Once the three years is up, it's cheaper to buy a new machine than it is to keep staff on hand to buy parts and troubleshoot the PC when it goes bad. Companies just donate the PC to charity and write off the donation against their taxes.

The second is that most companies run a 3 year or 5 year depreciation schedule on their computers. They depreciate the cost of the machine over a three year schedule and eventually write off the costs of it.

Home users only have the advantage of a three year warranty under their belt, but that's almost unheard of now. Many companies are moving over to 1 year warranties with the option of paying upwards of $150 to take that up to 3 years of warranty.

 

[Instan00dles]

I can kinda understand where everyone is comming from, I remember picking up my commadore 64 from Canadian Tire (if memory serves me will, I was like 5 years old) and it was like $4000 dollars. Now everything is dirt cheap but there are still millions of people who still dont know how to open the case of their computers.. I live in a small town I am also 17 years old. My job is at the local library teaching people how to use computer, you would be surpries how many people want to use email but dont know how tp use a mouse and stuff like that. My latest project was to run a 1 hours semanair about what the insides of computers look like and how all the parts fir together, the look on peoples faces when they realized how easy it was but most were still way to intimidated to put one together them self, and if they did what next? how many normal people know how to install an OS? to mae sure the computer boots from the cd if installed win2k/xp? install drivers? there is still alot of work of computer tech people and most of the tech s moving to fast for most people to catch up? serial ATA, raid stuff like. nothing big but it is more time people must take to learn the stuff. running a comp store in a small town when everyone is starting to get into computers would make a fortune

 

[Red Dawn]

Ehh.. Building a system is easy for us but not for the average person. In addition the real money has always been in service. Even with the simplificatrion of networking by OSes like W2K and Win XP most people haven't a clue how to set up a basic Peer to Peer network, let alone anything more elaborate.




<< I am lucky if I make $25 off the system in profit >>

Ah spec'ing out systems had become non profitable a long time ago. I use to be able to buy parts slightly used parts, build systems and sell them as used and make $100.00 profit fairly easy but that's even become a daunting task. I still do it it buts it's because I like building them, playing with them for awhile and then selling them for money to buy more parts to build something else. I have one main system that I upgrade between 2 to 3 times a year and I have a secondary one that I seem to upgrade on a monthly basis.

 

[kamiam]

its just the way of the electronics industry...10-20 years ago you could make lots of $$$ selling and servicing consumer electronics (TV's stereos m/w ovens ect) but the price, over the last 10 years has dropped steadily to the point now where most mom&pop stores are now out of business, servicing these items is practically non-existant (except for the hi-priced items.big screens and such) ...its become a "throwaway" market... I forsee the comp industry (at least on the individual consumer level) going the same route right now

 

[Geekbabe]

I'm no longer taking orders for new builds because as soon as I finish MCSE I want out of here and
want to leave as few systems as possible with my outstanding warranty on them. All that aside, I make more money in simple networking, application support and data related issues than I was making on new builds anyway. I can make more on one onsite call that's totally software/end user issue related. I love building systems but I'll be dammed if I'm going to do it and take a loss on it