Nurturing a fledgling market

When Bill Gates introduced the first prototype of a Tablet PC at Comdex 2001, he predicted it would become the most popular personal computer within five years. But since its November 2002 launch, these devices — notebooks or slates running Windows XP Tablet PC Edition — haven’t made much of an impact

on the overall PC market.

High cost, slow processors and short battery lives have all contributed to the slow uptake. So far, they’ve found a home in niche markets, such as health care, insurance and transportation.

Despite this slow start, many industry watchers expect the second half of 2004 to be a turning point for the format. Vendors are rolling out third-generation products, offering better performance and longer battery life. And Microsoft will release a new version of the operating system this spring, with improvements to the tablet input panel and the context sensitivity of handwriting recognition software.

Sumit Agnihotry, mobile product marketing manager with Acer America, says the Tablet PC market is quite small today — it will make up only two per cent of the North American market this year. But he sees the technology as having huge potential. In five years Acer expects that 25 per cent of its notebooks will be shipping with Tablet PC functionality.

While first- and second-generation Tablet PCs were geared toward vertical-specific applications, third-generation products are offering new form factors that have huge growth potential in horizontal markets. “”As products become available that have the performance of a notebook with tablet functionality — at a price point that is reasonable — users will be willing to take a look,”” he says. Several hardware manufacturers are now offering hybrid or convertible models that combine traditional notebooks with Tablet PC technology to appeal to the average user.

It’s a good time for resellers to get into this market, he says, as more SMBs and enterprises look to refresh their technology. And it’s also a way for VARs to differentiate themselves. “”It’s something the Dells of the world don’t have,”” he says.

In Canada, increased user acceptance of mobile computing is contributing to a rise in notebook activity, according to Michelle Warren, IT industry analyst with Evans Research Corp. While ERC didn’t track the Tablet PC market in 2003, it plans to do so this year. However, Warren says, the Canadian market is experiencing an overall increase in mobile technology.

“”As a quick example, notebook shipments rose steadily throughout 2003,”” she says. “”In the fourth quarter, notebook shipments represented 9.8 per cent of white box PC shipments, compared to just 2.9 per cent in the first quarter of 2003.”” An increasing interest in mobile computing technology, she adds, bodes well for Tablet PCs.

She expects to see moderate growth of Tablet PCs in the Canadian market. Many environments, such as corporate enterprises, look to either traditional desktops or notebooks as computing alternatives.

“”Consider that desktop prices have dropped dramatically in the past couple of years and are now attractive to many IT budgets,”” she says. “”Also, if users are solely looking for a notebook, then they pick up a notebook. But if they are looking for a total solution, something to bridge document or forms management with computers, then the Tablet PC is a perfect fit.””

The main disadvantage of the Tablet PC is its unit cost, which she says is higher than that of a traditional notebook. Depending on budgets, this might be a hindering factor.

She says the health-care and insurance industries will continue to support Tablet PCs, while education and SMB users will take a second look at the technology because it offers opportunities to improve productivity and customer service. But Warren also says vendors and resellers need to continue raising awareness of Tablet PC technology to increase sales opportunities.

Acer has boosted its advertising efforts lately, she observes, while Motion Computing has scored some major contracts in the health-care industry and Toshiba remains popular in the SMB space. HP offers the products as part of its total solution portfolio to enterprise clients.

Transitioning from a keyboard world to a pen-based one has been slow. But if Tablet PC users want to use a keyboard and mouse they now have options available to them. Hybrid or convertible models that combine traditional notebook and Tablet PC technologies offer the best of both worlds. Some examples include Electrovaya’s Scribbler SC-2010 and Gateway’s M275XL, both of which include Intel’s Centrino technology. Acer’s TravelMate C300 can be used as either a conventional notebook or, with the screen flipped over, a tablet.

Fujitsu has just rolled out a hybrid, the LifeBook T3000 Tablet PC series, which combines its LifeBook notebook and Stylistic Tablet PC product lines. Tamara Keserovic, Fujitsu Canada’s marketing manager for mobile computing products, says right now Tablet PCs are mainly being used for vertical project-based applications. Fujitsu’s hybrid model is designed as a “”bridge”” product between the notebook and Tablet PC worlds. “”The average user can adapt more to this type of product,”” she says, adding it’s starting to gain acceptance in the consumer market.

Tablet PCs make up about 10 per cent of the company’s overall mobile computing sales, and are slowly, but steadily, increasing. In February, the company started shipping its next-generation unit, the Slate Tablet Stylistic ST5000, targeted at health-care, insurance, consumer packaged goods and sales force automation applications.

“”Because it’s project-based, it’s hard to see fast returns like you’d see in consumer sales,”” says Keserovic. “”There’s not much education you need to provide for notebooks because people already know what they do — maybe that’s why margins are low.”” The sales cycle for Tablet PCs, however, is longer, so “”it’s taking a bit longer to take off than originally thought.””

The company is looking for VARs to penetrate specific vertical markets. “”We want them to do everything from quoting to evaluation to demonstrating the product,”” she says. “”If they’ve got a compelling software solution, we’d love to partner up with them.”” In many cases, she says, VARs are coming to them who have already identified a market and developed a solution but need the slate format to finish the equation.

She expects Tablet PCs will eventually eat up a bigger chunk of the overall PC market — particularly as price points come down and users become more educated about their uses. But more applications need to be made available on the slate format, she says, adding that currently there’s “”nothing out there driving people to use tablets.””

Acer’s Agnihotry agrees there’s a need for more applications – particularly from third parties. “”This is one segment that has not yet commoditized,”” he says. “”If you’re first to market, you can really make a name for yourself.”” In the next year or two, he expects more hardware manufacturers will jump into this market, which will drive down price points.

Microsoft, for its part, is making the Tablet PC platform specifications available to the development community so it can create applications that take advantage of the platform’s ink and speech capabilities. For example, Windows XP Tablet PC Edition has ink controls and APIs that allow software developers to extend existing applications and develop new ones with pen and ink functionality.

“”Our view on it,”” says Elliot Katz, Microsoft Canada’s senior product manager for Windows client, “”is within the next five years, all notebook PCs will ship as Tablet PCs.”” And as mobile units replace desktop PCs, he says, Tablet PCs will become more pervasive.

Meta Group recently predicted the demise of the

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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