CIOs, analysts expect strong PC replacement cycle in '04

Computerworld - Ever since the economy began to stumble in mid-2000 and companies began trimming IT spending, industry watchers have wondered how long organizations would stretch the lives of their desktop hardware before beginning widescale upgrades.
That day may have come.

Based on recent semiconductor sales reports and anecdotal feedback from CIOs at several big companies, this may be the banner year for desktop refreshment. During the economic downturn, many companies stretched the active lives of their PCs and laptops from a historical three-year average to four or even five years. But as desktop maintenance and support costs for older machines rise, many firms are taking advantage of an improving economy to upgrade to lower-cost, more robust machines.
"This maps exactly with our planning," said Tom Flanagan, CIO at MCI in Ashburn, Va. The telecommunications company recently launched a yearlong plan to replace its roughly 55,000 laptops and desktops. Existing PCs were approaching five years old "and the cost to maintain them was becoming problematic," Flanagan said.
MCI isn't alone. Belgium-based DHL International Ltd. is planning to replace 5,000 desktops this year -- or just over half of its installed base, said Senior Vice President and CIO Steve J. Bandrowczak. Meanwhile, Hewitt Associates LLC, a Lincolnshire, Ill.-based human resources outsourcing and consulting firm, expects to replace as many as a third of its roughly 15,000 desktops this year as part of an upgrade to Windows XP, said CIO Perry Cliburn.
An industrywide PC replacement cycle "has already started, but the confirmation will come over the next 30 to 60 days," said Bill Zadrozny, CEO of Siemens Financial Services, a Bridgewater, N.J.-based unit of the Munich, Germany-based electronics giant. Siemens Financial provides financing for hardware and software products made by Siemens and other manufacturers.

"Once you get past February, you'll see a strong order flow," Zadrozny said.
The Semiconductor Industry Association, a trade group in San Jose, predicts that worldwide semiconductor shipments should rise 14% this year. While demand for chips for mobile phones and automobiles will help drive that growth, those sectors represent just 12% and 8% of worldwide semiconductor consumption, respectively, while desktops represent 30% of the worldwide market, said Doug Andrey, a principal analyst at SIA.
While some firms have stretched the lives of their PCs over the past few years, other organizations have continued to upgrade portions of their desktop environments under more manageable, phased-in approaches. "It's not like companies stopped buying [desktops altogether]; they just slowed their buying," says Steve Kleynhans, an analyst at Stamford, Conn.-based Meta Group