A look at the IT industry in Japan and abroad
It's Morph or Die in Today's Computer Industry
by John Boyd
In a visit to Tokyo at the end of last year, Ben Rosin, chairman of Compaq Computer, announced that Compaq intends to become a computer company by the year 2000. Far from trying to be funny, Rosin was silicon-dry serious. What he meant is that the company no longer sees a future in remaining a PC vendor. Rather, Compaq intends to become a major player in all areas of computing, including the home and general business, but especially the enterprise, where the mainframe and IBM still maintain an unsteady reign.
Compaq's goal to morph itself is not only daring -- it is vital, given the unprecedented convergence now underway in the industry. If business history has taught anything, it is that convergence and consolidation, by nature, result in a shake-out of the rigid and less nimble players.
Partnerships for success
At the mid-range level, workstation manufacturers such as Sun Microsystems and Hewlett Packard are busy chipping the mainframe down to size with their competitive and flexible client/server technology. Yet, at the same time, PC vendors like Compaq are invading the turf of the workstation manufacturers, rolling in on inexpensive, though powerful, Intel Pentium Pro systems.Convergence is also occurring in the microprocessor industry, where Intel has teamed up with Hewlett Packard to create a hybrid "superchip" that will combine Intel's complex instruction-set computing (CISC) x86 technology and HP's reduced instruction-set computing (RISC) know-how. In other words, nothing less than a CRISP (complex reduced instruction-set processor) chip that has the potential to alter the entire computer industry.
Software is no exception, either. Not only is Microsoft dominating the PC applications market, but with its industry-strength Windows NT and 32-bit Windows 95 Office suite of programs, Microsoft is helping Compaq and others prepare a serious bid for the enterprise.
The forces of convergence even extend beyond the computer business to other industries. The growth of multimedia -- the PC's integration of sound, text, images, and video -- is opening up an expanding home PC market to new players from the electronics consumer industry, long dominated by Japanese corporations.
Coming in on a drive and a prayer
The world's largest consumer manufacturer, Osaka-based Matsushita Electric, is testing the water with its innovative Woody multimedia PC. The Woody incorporates Matsushita's new rewritable optical PD (phase drive) disk, which is CD-ROM compatible and lets you store 650MB of data on a removable disk. Matsushita has also led the way in cramming a CD-ROM drive into a notebook computer, though it now faces competition from Toshiba, IBM Japan, and others.This year will also see Matsushita's chief rival, Sony Corporation, enter the PC market. Sony made headlines last year with the announcement it was teaming up with Intel to launch a multimedia PC this fall. While Sony remains tight-lipped about its efforts, it's a good bet the new machine will combine some aspects of Sony's electronics consumer know-how and the experience it has picked up manufacturing the popular PlayStation game player -- perhaps in combination with the multimedia skills of Intel, including its Proshare personal conferencing technologies.
PC vendors, then, whose secret prayer it is just to maintain their current position in the rankings, will likely end up listening to their own funeral marches by the time 2000 arrives. With the exception of Intel, Microsoft, Compaq, Dell, and NEC, few PC-centric companies will be able to scrape together sufficient profits to sustain them through yet another round or two of price cutting. Margins are becoming so pointedly thin that some vendors will hurt themselves grievously if they stumble. Which all goes to explain why Compaq sees the need to put itself through another morph: in order to survive, it must expand its horizons.
The uncertain future
In Japan, all the major PC hardware manufacturers are merely divisions of integrated electronics behemoths. Most of these giants also make semiconductors, computer components and peripherals, and consumer products as well as workstations, midrange systems, mainframes, and supercomputers.In theory, this should mean they are already well down the road to becoming all-round integrated computer players. In practice, though, the very size of these giants, and the fact that they are burdened with legacy systems and divisional rivalries, creates hurdles that won't easily be overcome. Without the right leadership and vision, the inherent advantages of the Japanese giants could well turn into disadvantages. Their distractions in sorting out their troubles may well give a smaller, single-minded company like Compaq the space and time it needs to transform itself and reach its stated goal of becoming a $30 billion general computer company by the year 2000.
One thing is clear. In today's consolidating computer industry, where the players are speeding down converging paths, all companies will sooner or later face the same challenge: morph or die.
In addition to writing for Computing Japan, John Boyd is the Tokyo correspondent for InformationWeek and writes the weekly Computer Corner column in the Japan Times. He is otherwise available for hire, though, if the fee is fat. He detests e-mail, so you can bug him at 6840615@mcimail.com, but don't expect a reply!
