The Impact of Upgrade
I believe that post-Y2K there is a significant latent demand to upgrade PCs and software that could have a dramatic impact on the economy as a whole. If consumers and businesses upgrade it could drive Intel and others to raise capital expenditures. The US consumer has saved the economy so far, but capital spending has been the lagging indicator. If it increases the market may rapidly move from backwardation to contango.
Upgrade will happen for 3 reasons:
- Latent demand: 1/3 of PCs are more than 4 years old
- Office 11: Jon Udell writes that: Now Office 11 wants to erase the differences between XML documents written and read by people using desktop applications, and XML documents produced and consumed by databases and Web services. Phil Windley, someone that fits the buyer profile, writes that "The fact is, Microsoft may have finally seceded in doing with product development what they couldn't do with oppressive licensing and software audits: given us a reason to buy their stuff (I hope someone in Redmond is paying attention)." Also see Phil's recent post on Office 11 & Unstructured Data.
- New Apps: A reason that is usually obvious, but the economic downturn has held back innovation. What is encouraging are the exceptionally great products like Groove and smaller startups leveraging other platforms like Office, Outlook, Radio and Groove. I recently began demoing Groove and while its too MS specific and closed for me, its a fantastic product. The funny thing about it is that its prompting me to upgrade Office because of configuration errors between Groove and my older version of Word. Now Im not the average user, but I have found that recently Im multitasking at a new level: with Outlook, Explorer, Radio and Groove constantly running regardless of other productivity apps Im working in. This is beginning to strain my aging PC.
There might be better reasons as well, but when an en-mass upgrade cycle happens, the diffusion of capital spending that ensues would be the penultimate spark for recovery.