Weekly Review: Acer's Big Services Move Gets Little Notice

In a move that received little coverage last week, top ten PC manufacturer Acer announced a strategy that is set to transform the company into a services-led business by the middle of the decade.

The move is the culmination of a restructuring process that the Taiwanese giant began last year, and which has already seen its multi-billion dollar contract design and manufacturing business spun off as a separate entity under the new name of Wistron Corp.

Acer will continue to own and market the Acer computer brand, but will also invest $1 billion over the next three years on adding Internet-based services to its product portfolio. Those business lines will account for 40 percent of company revenues by 2004, according to company founder and chairman Stan Shih.

Where Were the Headlines?
Why would such a dramatic change of direction by one of the computer industry's leading names attract so little media attention? There are only two possible explanations. Either the whole thing is a load of meaningless vaporware that confirms how out of touch with reality Acer's top management has become, and therefore journalists are quite right to ignore it.

Alternatively, it's a plan devised with such foresight and wisdom that mere journalists are simply too ignorant to understand what on earth is going on. The mainstream media, remember, covers only material that's mainstream. That's why you never read about the next big new thing until it's already gotten so big that journalists have no choice but to sit up and take notice.

So is Acer's Stan Shih a spent force or a visionary genius? The company has had its woes over the past few years and, like many PC manufacturers, has not been making a profit this year. Adding services to bolster revenues and profitability is hardly a novel idea — much of IBM's revenue growth in the past few years has come from its services arm. Also, both HP and Compaq attempted and failed to buy services companies before deciding earlier this year that a merger would be the best way to resolve their respective business challenges.

At first sight, then, adding services to bolster flagging fortunes as a PC manufacturer hardly ranks as an act of genius. Nor does the name that Acer has chosen for its new strategy help bolster its credibility for mainstream (read U.S.) observers: MegaMicro e-Business has the kind of jaunty, sing-song alliteration that plays well in Asia while jarring on the ears of native English speakers.

Genius in the Details?
Reading the details of the strategy, however, yields a different analysis. Acer's $1 billion investment will go towards building an Internet-based infrastructure for delivering online services to small businesses, focusing initially on Greater China, and leveraging partnerships with telecoms carriers, software vendors and other technology providers. First-generation services will include mobile data services, remote server management and certificate authentication.

The aim is to create an end-to-end infrastructure for e-business — one that connects the 'Mega' components, such as network-based applications, Internet data centres and backbone connectivity, to the 'Micro' components, such as end-user devices and applications.

"Acer is proposing a new generation of e-business by building an e-Infrastructure that integrates IT equipment, network, management platforms, and application software to back up the various horizontal application e-services for business," Shih told delegates at the 2001 Taiwan e-Business Expo last Tuesday.

Summary of Services
Acer has outsourced its manufacturing operation by spinning it off into a separate company, and will transfer its brand values to an integrated portfolio of Internet-based services, targetting the world's most numerous and fastest-growing small business market.

At a time when all computer manufacturers are being encouraged to shift their business models to embrace services, none has done so as emphatically and dramatically as Acer revealed it will last week. In fact, most of Acer's competitors still think that embracing services means hiring more IT consultants. In contrast, it looks like Stan Shih is still a force to be reckoned with.

Marimba's Moment?
In the field of technology innovation, timing is everything. You can have the right technology, but if you arrive with it at the wrong moment, you can still lose out — a sentiment that Marimba understands better than most.

Back in 1996, at the height of "push" technology hype, Marimba was flavor of the month. Its technology for deploying and managing Internet applications seemed to be the hottest of the various tools around for relaying content to Internet users, while its flamboyant co-founder and CEO Kim Polese was a Silicon Valley celebrity.

But the push technology boom turned out to be damp squib, when people finally realized that users wanted to choose the information they received rather than being squirted whatever site owners wanted to fire at them. This left Marimba high and dry, regretting its complete identification with a trend that in truth was only peripheral to what it really offered. It was left waiting to catch the next wave of Internet technology.

The advent of ASPs in 1999 seemed to promise a new opporunity. Internet-based application delivery was what it was really made for, and here were providers that seemed to be doing just that. But the excitement proved short-lived. The ASPs of the time were not delivering true Internet applications. Marimba's time had not yet come.

Now at last, it seems that Internet-delivered applications and Web services have finally reached prime time. Last week, Marimba announced yet another relaunch (see Marimba's Embedded Makeover). Has its time come at last? It's been a long wait, but maybe now really is the moment for Marimba to finally ride the wave of Internet-delivered applications.

This review of the week's news highlights is by ASPnews.com founder and consulting analyst Phil Wainewright. A comprehensive news digest is published every month in the ASP News Review newsletter, available exclusively to subscribers.

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