Were netbooks the Model T or Leyland P-76 of the computer world?

Last week Taiwanese technology website Digitimes reported Asustek have shipped their last eeePC netbooks, bringing to an end a product that promised to change the computing world when they were first released in 2007.

At the time, the eeePC netbook picked up on a number of trends – cheap hardware, the maturity of the open source Linux operating system, affordable wireless access and, most importantly, the accessibility of cloud computing services.

There’d been a pent-up demand for usable portable computers for years but Microsoft and their hardware partners consistently released clunky, overpriced tablet computers that simply didn’t deliver on their promises.

For users wanting a cheap, fairly robust portable computer then netbooks were a good choice, at the price you could even risk having one eaten by big wildcats as an Asus advert at the time implied with a picture showing a user dangerously close to a pride of lions.

Unfortunately for the netbook a few things went against the idea.

Customers don’t like Linux

An early blow to the eeePC was that retail users don’t like Linux. Most computer users are happy with Windows and MacOS and weaning them off what they know is a very hard sell.

Sadly on this topic I have first-hand knowledge, having suffered the pain of co-founding a business in the mid-2000s that tried to sell Linux to small businesses.

Asustek discovered this when they found customers preferred the more expensive Windows XP version over the original Linux-equipped devices.

Unfortunately Microsoft’s licenses damaged the economics of the netbook and held the manufacturers hostage to Microsoft which, at the time, wasn’t particularly inclined to encourage customers to use cloud services.

Manufacturer resistance

Microsoft wasn’t the only supplier unhappy with netbooks. Harry McCracken at Time Tech describes how chip supplier Intel worked against the products.

For manufacturers, the netbooks were bad news as they crushed margins in an industry already struggling with tiny profits. However, all of them couldn’t ignore the sales volumes and released their own netbooks which cannibalised their own low-end laptop and desktop ranges.

In turn this irritated the army of PC resellers who found their commissions and margins were falling due to the lower ticket prices of netbooks.

The rise of the tablet

The one computer manufacturer who stayed aloof from the rush into low margin netbooks was Apple, which had no reason to rush down the commodity computing rabbit hole. It was Steve Jobs who launched the product that made netbooks irrelevant.

“Netbooks aren’t better at anything… they are just cheaper, they are just cheap laptops,” Jobs said at the iPad launch in January 2010.

Immediately, the iPad redefined the computer market; those who’d been waiting a decade for a decent tablet computer scooped the devices up.

Executives who wouldn’t have dreamt of replacing their Blackberries with an iPhone, let alone using an Apple computer, proudly showed off their shiny iPads.

The arrival of the iPad in boardrooms and executive suites also had the side-effect of kick starting the Bring Your Own Device movement as CIOs and IT managers found that their policy of Just Say No was a career limiting move when the managing director wanted to connect her iPad to the corporate network.

Rebuilding PC margins

Around the time of the iPad’s release the major PC manufacturers declared a detente over netbooks and joined Intel in developing the Ultrabook specification.

The aim of the Ultrabook was to de-commodify the PC laptop market by offering higher quality machines with better margins.

While the Ultrabook has worked to a point, competition from tablet computers and the demands of consumers who’ve been trained to look for sub $500 portables means the more expensive systems are gradually coming down to the netbook’s price points.

Today’s Ultrabook will be next month’s netbook.

For the PC manufacturers, the lesson is that computers have been a commodity item for nearly a decade and savvy marketing and product development – both of which have been Apple’s strengths – is the only way for long-term success in the marketplace.

Those US-based manufacturers who haven’t figured this out are only going to find that Chinese manufacturers – led by companies like Taiwan’s Asustek – will increasingly take the bottom end of the market from them.

The car industry is a good comparison to personal computers in commoditisation – with the passing of the netbook, the question is whether we’ll remember the eeePC as a Trabant, Model T Ford or a Leyland P-76.

Paul Wallbank speaks and writes on how industries and societies are changing in this connected, globalised era. When he isn’t explaining technology issues, he helps businesses and community organisations through his business Netsmarts.

eBusiness, Seven Steps to Online Success is Paul’s latest book which looks at how businesses can effectively use web services like social media and cloud computing. It is available at all good bookshops or through the publisher, John Wiley & Sons. Subscribe to the Business Tech Talk RSS.


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