In the PC world, smaller is getting better

NEWS A significant development in the history of small form-factor PCs took place at the end of October 2002: Dell launched its entry into this arena, the OptiPlex SX260. While the idea of smaller, stripped-down, easier-to-manage PCs has been around for several years, Dell is known for entering a market when it is about to become mainstream, so the introduction of the new OptiPlex was seen as something of a validation for the small-form factor concept. Since manufacturers such as HP and Compaq began selling smaller PCs in early 2000, the machines have become a fixture in the PC landscape. While they may not be about to replace the typical beige box any time soon, PC makers say that many large businesses are eager to snap up computers that take up less space and can inexpensively integrate with the rest of their IT infrastructure. PCs with unusual designs are also becoming a significant force in the consumer market, with the impact of Apple's iMac and a new generation of build-your-own PCs made from customisable components. In the business market, computer makers say that a big factor driving new PC styles is that business computers are becoming increasingly hard to tell apart. "When Compaq introduced the original iPaq desktop, it looked radically different," said Steve Torbe, group product manager with HP. "We are still continuing with that. As PCs become more commoditised, we differentiate based on industrial design." He said that some buyers want a computer that will look good on display, for example in a design agency or an office reception area. With IT budgets unlikely to see much growth any time soon, PC makers also say they are using the small form factor to tap into niche markets in order to expand their sales. In Japan and in industries such as stock trading, for example, companies may be willing to give up expandability in order to save space. "The economic climate is one of the reasons why we're moving to (small form factor)," said Rik Thwaites, Optiplex Precision manager for Europe. "There are and will be customers who require the maximum of expandability, but we haven't taken advantage of the market that is there, where buyers demand the ultimate small package. We will expand our market share by taking share away from our competitors in existing markets, as well as by growing or developing new market spaces." Dell is taking a different pricing approach from other small-form-factor vendors, such as HP, which have tried to appeal to buyers partly on price. Dell is pricing its sx260 roughly on par with larger desktops. "Smaller doesn't necessarily mean cheaper," Thwaites said. "The customer is gaining in some ways with the smaller size. It gains you space, and control over your (disk) image. But you lose expandability and flexibility. The balance is there." Some analysts are sceptical, however, that smaller PCs have much to offer businesses aside from space considerations. PCs have continued to drop in price, a trend that small form-factor PCs cannot always duplicate, since they often use pricier custom or laptop components. "What they're trying to do is provide a different type of PC from what we have at the moment, in the hope that this will generate interest and spur the replacement cycle," said Gartner analyst Ranjit Atwal. "We traditionally had a replacement cycle based around technology, but the PC is now pretty much a commodity. They're trying to differentiate the market a bit more." The mission is urgent for PC makers because, according to Gartner's estimates, fully half of PC sales will be based on the replacement cycle by 2006. "Dell, HP and the others are pushing small form factor as the prime replacement PC," Atwal said. This may yet prove a success. But most corporate buyers do not appear to have been convinced by the original pitch that less expandable, more manageable PCs could save them money in the long run -- the much-vaunted concept of "total cost of ownership" (TCO). "The idea was that going forward, when a PC reaches the end of its life cycle, you put a new one in its place, and that this would be cheaper than upgrading the machine," Atwal said. "Now there is a tendency to want to keep a machine longer and expand it over time. Small form factor and the economy maybe don't quite go together." On the consumer side, it seems that small, cheap PCs have found a growing niche, particularly among tech enthusiasts. One success has been Via's Mini-ITX motherboard. Because of its comparatively small size, the Mini-ITX -- a circuitboard complete with the processor and many of the other components necessary to build a PC -- is altering what desktops look like. Smaller PC manufacturers in Europe and Asia are putting the board into desktops clad with aluminium cases, so they look more like stereo equipment. Universities are using it in class projects, where students have to incorporate PCs into electronics systems inside cars. And do-it-yourself types are also getting into the act, building Mini ITX-based PCs inside shells such as a desk drawer, a cigar humidor and an old ET doll, as well as in lunch boxes and briefcases. Although manufacturers have tried, and mostly failed, to turn computers into fashion statements for years, the tide may be changing, say Brown and others in the PC industry. The catalyst for change looks likely to be the popularity of digital music, digital video recorders and DVD movies, which has carved out a place for the PC in the home entertainment pantheon as a vault for pictures and other media. Via has also come out with a reference design using Mini-ITX, called the Hi-Fi PC, which allows consumers to play CDs and DVDs without booting up the operating system, putting it more squarely into the consumer electronics arena. PC makers such as Shuttle have found an avid market for their stripped-down PCs, machines with attractive, low-profile shapes that sell for a low price. Users can just add components such as hard drive, Intel or AMD processor and memory to create a full-fledged PC. Richard Brown, vice president of marketing for Taiwan-based Via, said that the popularity of flat-panel monitors and the increasingly low cost of parts has contributed to the success of consumer small form-factor devices. But there is more to it than just low cost, he argued. "We are seeing a huge change in consumer tastes, as they get tired of large noisy boxes and want something that looks smaller and more attractive -- particularly if they want to put their device into the living room or kitchen," Brown said. "Even gamers are looking for small form-factor boxes that they can carry around easily to LAN events. So this trend covers all segments." Gamers often gather at events with a local-area network (LAN) where they can join in a network gaming session. "As performance requirements reach a plateau, consumers are looking for something different," Brown said.

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