Has Becta presided over the collapse of the UK PC industry?

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Last summer the list of ‘thriving’ UK PC manufacturers contained a very familiar list of players. These were RM plc, Akhter plc, Evesham Computers Ltd and Viglen Ltd.

The industry collectively had concentrated on the public sector market, especially the education sector, since it was becoming clear that retail selling in an ultra cut-throat market was untenable.

The dangers of retail selling were graphically illustrated by the sudden collapse of much loved Evesham computers in late 2007 following Gordon Brown’s axing of the Home Computer Initiative. Their education public sector contracts, which we shall see were being squeezed too, were not sufficient to save them.

This is where it starts to get interesting.

Of the players left, for Viglen, Akhter and RM, times are getting very hard indeed.

RM’s woes are well known. They posted figures this Spring showing a minute profit-to-turnover ratio, which despite the successful launch of the Linux EeePC into the education market, is widely believed to have precipitated the leaving of their well respected CEO Tim Pearson this summer.

Akhter’s position in fact is very difficult to analyse as they are part of a very diverse engineering group and have strong trade in Pakistan, all of which are making sensible profits. They are ironically in a stronger position to weather any storm than their bigger rivals.

Viglen too currently seem OK due to a strong presence in the server market but they see problems ahead. Their CEO, Bordan Tkachuk of Alan Sugar’s ‘The Apprentice’ fame, sees ‘little appetite for major Vista deployments’ and thinks that for the education sector the future will lay in the Linux sub notebooks as espoused by RM.

It’s in Bordan’s ‘Vista’ comment that the original conjecture regarding the health of UK PC companies lays.

The trail leads straight back to Becta’s infamous procurement frameworks.

The ICT procurement frameworks are populated by a very select few which in addition to the above companies include the outsourcing specialists Capita and Serco.

Up to about 2005, being on the list was a licence to print money. Schools were very generously funded for ICT equipment and BECTA had signed its memorandum of understanding with Microsoft to ensure that schools used their products.

During these days many of the un-favoured went to the wall, Acorn computers being the most renowned supplier to the education sector.

After 2005 however the situation started to change for the UK PC manufacturers.

Firstly, the rise of cost-cutting outsourcers such as Capita pushed hardware procurement into generic commoditised products making it harder to sell desktop PCs at a profit when badged with RM or Viglen logos.

Secondly, subsidies for school software (the e-credit scheme) came to an end at the same time as did ring-fenced ICT funding for schools.

Thirdly, and this will prove to be the killer blow, BECTA advised schools in 2007 and 2008 not to upgrade to Vista or Office 2007.

The hand that fed the big companies had suddenly decided to throttle them.

A survey of the surviving manufacturer’s product list on their web sites for 2008-9 shows a hint of desperation. RM and Viglen are hovering over a decision to commit to Linux through the netbook market, Akther, RM and Viglen are dabbling with green computing. None show any confidence that they can see the way forward.

Without the upgrade cycle and the subsidised software that built these companies over the past 15 years the money will run out very fast. I expect to hear a few more hard luck stories in the coming year or two.

Once again, it will be hard luck on schools. The likes of Capita and Serco will soon dominate. They are however management companies not innovators. There are no (approved) companies that can take forward the coming Open Source revolution, so it looks like the taxpayer will be left in the hands of the big outsourcers.

Well done Becta in your time you may yet preside over the complete extinction of the UK PC business with one notable exception hitherto unmentioned, Elonex.

The British company Elonex are now shipping their Elonex One, the well-received ultra-low cost sub-notebook running on (of course) Open Source software.

Let’s wish them luck.