Are computers following the cellphone “replace every two years” model?

February 20th, 2012

Apple’s OS X 10.8 announcement to “end-of-life” not very old computers caught myself and others by surprise. When we bought Apple products, we had expectation of a product longevity that exceeds Apple’s expectations for product longevity (3 to 5 years) which creates a disconnect for customer expectations.

As I looked at the expense over the years and set out a product life of about 4-5 years, converted to a monthly expense, buying a high end Apple product is sort of like buying an expensive smart phone on a two year contract where you pay by the month. Laying out the monthly costs made this obvious.

Perhaps the future is that computer products will be “leased to own”. After 3 to 5 years, you own a boat anchor and its time to repeat the “lease to own” cycle.

The Cellular Service Model

As Apple migrates their smart phone iOS operating system features into Mac OS X (in fact, they are dropping the name “Mac” and it becomes just OS X) they are migrating a lot of iOS features (and some drawbacks) into the Mac hardware platform. It is as if they would like to see the notebook (its not clear they will continue making desktop computers) hardware, software and services sold as a multi-year deal. Once locked in to their ecosystem, it will be hard to not upgrade every few years and you might even be pushed into upgrades you did not plan on making.

Also see Apple Mac App store apps get “sandboxed” starting in March. Apple is migrating the closed iPhone model in to the Mac platform as well.

The business model is becoming that a computer “purchase” is not a purchase but more like monthly “rental”, except you get to dispose of the boat anchor after a few years. The average physical life of computer hardware is about 9 years (IEEE Spectrum article from early last decade), and software itself does not wear out. Many users never use more than fraction of the software features and have little meaningful reason to upgrade.

Worse for the hardware business is that by adding software apps, new features can be added to old hardware, extending the useful life of the hardware even longer.

Emotional Versus Pragmatic Marketing Appeals

Ostensibly, new products emerge that do add value and consumers voluntarily upgrade. (By consumer I mean individuals and not business customers who usually measure value in terms of $.) Consumers choose new products for many reasons – some times because they add $ value, some times because they add coolness and some consumers want to be seen as “hip”, some times because they want to keep up with their peer group. There are many reasons consumers choose to buy products and they often (usually, actually) have little to do with $ value – instead, products often add fun, hip or cool values. In other words, consumer products are marketed to the emotions.

Apple has mastered the latter and appeals strongly to the consumer-oriented purchaser that assigns value based on things like coolness. Apple successfully appeals to “emotional” values as we would expect for a consumer product. Consumers do not usually make “rational” decisions which is why much market efforts are steered towards the emotions.

Windows, on the other hand, is pragmatic – the business mind-set, I think – where value is measured in terms of $s and productivity; hence, boring.

Apple is primarily a consumer products company and Microsoft has become primarily a business products company, if you think about it. While Microsoft has products in the consumer space (Windows Phone, for example), they have not mastered the marketing message for the consumer. Google seems to be straddling both emotional (different than Apple and Microsoft) and pragmatic demographics. Amazon is an interesting player too that should not be dismissed and has a powerful consumer brand.

How the Cloud Can Accelerate Product Replacement

Obviously computer hardware and software makers would prefer that you replace your systems – the more frequently the better!  Rapid evolution of product features and consumer-oriented emotional marketing campaigns are used to encourage rapid product turnover.

The cloud will be a central piece to drive rapid product turnover.

Each of the major players is working to migrate their customers to their own cloud:

  • Google and Android OS – in fact, they’ve always been a cloud company
  • Apple and iOS/OS X – migrating rapidly to the cloud
  • Microsoft and Windows 8 – migrating to the cloud
  • Amazon, yes Amazon – they operate a huge cloud service and are doing very interesting things with the Kindle Fire tablet.

Once consumers are tightly coupled to “cloud” solutions, switching to another product becomes difficult. They learned that trick from the cellular phone companies too!

Migrating your life to the cloud means that switching to another provider will be difficult. This is known as an exit barrier. Cellphone contracts are an exit barrier, as are “family plans” (since its hard to migrate everyone all at once).

But the cloud is potentially more than that.

By tying hardware and software products closely to the cloud, manufacturers can gradually add features (whether you need to use many of them or not) that will require you to upgrade your hardware and software systems. For example some users of recent Mac computers are using Apple’s MobileMe; however, Apple is replacing Mobile me with iCloud and some of these users will not be able to migrate their hardware to OS X 10.8. In effect, they are forced to upgrade to replace the disappearing MobileMe feature.

In other words, the computer industry may be moving to the “upgrade your cell phone every two years” business model. May be not 2 years, but perhaps 3 to 4 years.

Will consumers be happy to spend money, frequently, to update hardware and software? Time will tell.

I would guess that the big players are segmenting the market as:

  • Apple is after the affluent “Mercedes Benz” customer that pays premium prices. Money is not much of an objection to upgrading and Apple is very successful in this consumer space.
  • Google is after the lower tier with Android, where consumers pay attention to pricing, and “choice” where there are fewer restrictions on apps or even migrating your data out of their cloud.
  • Microsoft is likely going to go after the pragmatic consumer which is likely to be both an overlap with Google/Android and the business market where Microsoft is very successful.

Which kind of consumer demographic are you?

What are your consumer-oriented values and hot buttons?

Do your values match with your choice of consumer products, computer products and future cloud solutions?

Environmental Effects

A side effect of rapid product obsolescence and the perceived need to rapidly replace millions of perfectly usable systems is negative environmental impacts. First, manufacturing all the pieces of an electronics devices has a number of environmental impacts.  Second, when products are moved into end of life quickly (every few years), they may be recycled, they might not. And recycling does not recapture all of the resources that went into manufacturing the device. Extremely rapid product obsolescence – to fulfill consumer emotional needs – is not good for the environment.

A related view comes from Stephen Colbert, an obvious authority

The Colbert Report Mon – Thurs 11:30pm / 10:30c
Annie Leonard
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Wikipedia on planned obsolescence.

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Categories: Business, Management, Marketing, Smart Phones, Software, Tablet | Tags: , , , , , , ,