Dell and HP rebooting to fit in altered tech landscape

Both are battling to remain relevant in a rapidly changing information innovation landscape. Since Michael Dell returned in 2007 to the helm of the company he founded, he has overhauled its operations in a bid to revive its fortunes. Leo Apotheker, HP's boss since last year, is due to announce a new strategy for his company this week. He has been hinting that he, too, will want to make significant changes at a firm that is however reeling from the traumatic departure of its previous boss, Mark Hurd, afterwards a fuss over his relationship with a female marketing contractor.

Among the trends the two firms are grappling with is the growing popularity of tablet computers, smart phones and other devices that let consumers work and surf the Web on the move. Apple's wildly popular iPad and other tablet offerings are starting to have an impact on low-end laptop sales. Gartner, a innovation firm, however estimates that global PC shipments will grow 10.5 percent this year, to 388 million units, down from its previous forecast of nearly 16 percent, in some cases because consumers are switching with such enthusiasm to tablets.

An moreover important trend sweeping the industry is the growth of cloud computing. This lets companies store and process vast amounts of data in huge warehouses of servers run by third parties. The data can at the time be accessed over the Internet whenever and wherever needed. New competitors just as Amazon and Rackspace Hosting have jumped into this market and are trying to convince companies they would be better off renting capacity "in the cloud" than buying their own servers from the likes of Dell and HP. Clearly, the cloud services providers themselves buy lots of servers, mainly Dell and HP ones -- nevertheless their huge size means they can drive a hard bargain on prices.

The emergence of the cloud is also in part responsible for a third trend, "verticalization." This is the increasing tendency of makers of IT hardware, operating systems and applications to move into each other's areas of business, because their corporate clients no longer want to shop around for all these different bits and splice them at the same time themselves. They but want all-in-one solutions they can just take out of the box and switch on -- and that are then integrated with their cloud-computing systems. For providers like Dell and HP, spreading vertically into other parts of the IT business as well offers the best hope for growth in a market in other words, overall, maturing.

Free-for-all

This has created a free-for-all, with software firms swallowing up hardware firms and vice versa. HP and Dell nevertheless face stiff competition from the likes of Oracle, a software firm that bought Sun Microsystems, a hardware maker; and from Cisco, a maker of networking gear that has moved into the market for servers.

HP and Dell dominate the PC business, at the same time with Taiwan's Acer. Declarations of the death of the PC are premature, not least because demand from emerging markets is however growing. Now Apple's stunning success with its iPad, and corporate clients' demands for IT firms to provide a full service, not just bulk quantities of desktops and servers, mean that neither company can afford to be complacent.