[Music] I am here with Mike Crosby of cirana Mike thank you so much for joining me hi Jen how are you this is exciting because we're going to be talking a little bit today about the forecast which everyone wants to know predict the future we're going to be looking 24 all the way through 2026 so give me some of the highlights on kind of This research that you've done and and what you're looking at yeah part of what we're going to talk about today it's based on our future of B2B Tech it's an algorithm that we UTI pretty extensively we refresh it twice a year and we just just published this about uh few weeks earlier but it gives us visibility units dollar ASP uh by product category out through 2026 so we just published it and part of some of the high level kind of early findings that we're seeing is that uh as we've been predicting the expectation is we're going to start to see some improvement beginning to build in the second half and we're going to spend a little bit more time today talking on that in Greater detail that's probably what people want to hear about most so let's get started what are you seeing for the second half I know we've been talking over the last few months about that it was expected to be a little stronger in the second half now we're in that second half how's it looking yeah the good news is uh I think we're beginning to see again the early signs that uh that our predictions are accurate that we're seeing some momentum building and and it's built on really three things it's really kind of a a convergence of of three Tailwinds the first one is really around economic conditions uh one of the things that we watch very closely obviously is inflation unemployment and a number of other factors that get built into the algorithm and while it's still not where it needs to be ultimately for the FED at 2% we did see uh a decrease in interest rates certainly so we saw that dip slightly below 3% and the expectation is again the fed's trying to get to a 2% but one of the things that we saw at the same time inflation dropped just a little bit we also saw unemployment uptick just a little as well a little bit earlier it's running about 4.1% now and that's a little bit higher than where they had planned now while this on the surface doesn't appear to be great news it is economically because the FED is really looking for some some key indicators as to when they can start to move on interest rates and one of these things were tied to that inflation still trending downward and employment uptick and so likely now we believe that there's going to be at least a quarter point move probably in September potentially even one more in Q4 that's good for a a whole lot of reasons so one is the economic conditions are better the inflation rate but also that interest rate cut that we're anticipating is going to be beneficial and again why that's important for B2B not only interest rates in a general sense but also lowering the cost of capital that's really critical around midsize and Enterprise business looking to invest and refresh their devices heading into this year and then heading into next year so lowers that cost gets a better return overall which is also strong then the third thing is that we've already talked about for a while is Windows 10 sunsetting we've seen again we've talked about this for a while but again keep keep in mind there's still about 70% or so of the install base that's still operating Legacy OSS and so those really need to start to accelerate on that migration over and regardless of where interest rates are typically the larger the business the longer the runway is needed to manage that transition so we're starting to fall within those time frames now so regardless if we don't get the interest rate cut larger businesses have already started and we started to see Enterprise and midsize start to move in accelerating some of those things and the last part of it again that I'll wrap all of this together is as we know the peak volumes that we saw in 2020 and 21 for the most part Chrome and windows 22 or Mac those have all now started to near that end of life period roughly about a 4-year refresh and so we've already started to see those early signs and again mostly leading right now with Enterprise and midsize we are seeing small business tend to lag a little bit it's still cing down year-over-year one of the things that we're concerned about a little bit with small business because they rely very heavily on Regional Banks and Regional banks are still at this position a little bit overinvestment conditions as they change but that's what I would suggest are probably the big things that we're watching and again we feel like these converging Tailwinds are really going to be uh be helpful as we start to Round the Corner in the second half another potential big factor at least here in the United States would be the election coming this November what impact you expect to see from that yeah it's interesting because if you look at previous elections typically if there's an incumbent and things are doing reasonably well usually we see a little bit of a benefit we usually see has come down a little bit more and there's kind of a benefit heading into the election the challenge with I think where we see it today is there's just pretty significant opposing views relative to policy and some of them could be seen extremes on both sides and the challenge with that is it may ultimately impact some of these businesses in the way that they're looking to invest and it may require maybe a need to step back and pause a little bit just to understand the different Dynamics will tariffs be more involved will they be less involved will tax benefits be more involved less involved so there's some of those things I think there's a lot like a lot of people would suggest a lot of uncertainty and it may drive a few to pause a little bit and that would be the only kind of I think Wrinkle in this second half recovery is depending on how optimistic or pessimistic some of these businesses are in spending between now and the end of the year let's s go back a little bit to the Windows 10 sun setting so that we're still over a year away from when the end of support is scheduled that's supposed to be fall of of uh 2025 October 2025 70 to 75% of the businesses still haven't made the move when are they going to get going do you think that's where I think it's going to be really really critical and as I me suggested it's starting now and that's why we're seeing it already early with the larger of the businesses because as I was suggesting typically the larger business you need you know 9 to 12 months of a period of time to really manage through that transition efficiently and effectively without causing any challenge to the business operating day-to-day now as the companies are a little bit smaller they need less of a window but that's why you're already seeing larger businesses already begin to make these moves anded to not only upgrade the devices because in many cases these devices aren't Hardware compatible with 11 but also in managing through that process so that's why we were suggesting while large businesses are hopeful because of the amount of dollars and spend that has they get lower cost to Capital that's going to be a good thing but they also are reaching a point that they can't wait so regardless whether we see the interest rate improve or not you're going to see certainly larger more Enterprise and midsize businesses likely have to just get going because to your point we're going to run out a runway for not careful and that can create all kinds of other kind of unplanned consequences to that either additional extensions where there's additional cost any incompatibility lack of testing so it brings risk and I think that's these businesses are really trying to avoid is uh is any risk but you hearing from Partners or or what's the general expectation as to what percentage of customers just won't move anyway for the most part again on the larger side I think we're seeing it still midsize and Enterprise Partners seem very very I think optimistic there's a lot of activity and there's been a lot of effort on the part of both distribution large VAR DMR to do an education and a push that was going out and talking about what the whole value proposition is of migrating how you want to do it in a planful way so I think they've been really working and trying to be very proactive in educating larger customers relative to the value of it and what are some of the risks or challenges if you don't I think you're going to still see the lag typically on the smaller businesses as we see it normally again they don't typically refresh at the same rate that larger businesses do nor do they migrate over on the OS but it's going to come down to security and support because a big part of Windows 11 certainly is the is the ability to protect their their business their data uh and access and I think those are going to be critical things that one way or another they're going to need to make those decisions to uh to move forward primarily we're going to talk about the forward-looking forecast but we are now you know second half or sorry first half is in the book so what did we see there did we get what we expected you know what we did we actually came in you know reasonably well we're still flat but again what we're starting to see is we're seeing growth around PCS around some core areas which is good news because that's what we had suggested that it wasn't going to come come first of the year uh but we do believe we're going to see again reasonable growth as we climb out if you look at 2024 for the whole year now we're going to see this acceleration back half across all categories not just PCS we're saying about a 5% gain year-over-year but if you look at devices specifically around computers we're suggesting about a 7% gain similarly we're going to see a little bit of an acceleration as we move into 2025 because that's where we believe the bulk of these refresh devices are going to occur it's also where you've got now I think a broader assortment in AI PCS more competition I think you're likely to see maybe more aggressive pricing and you're going to see that become more of a factor as we move into 25 so we're suggesting again 2024 overall all categories plus 5 computers plus 7 2025 we're saying Plus 8 so we're going to see a little bit more acceleration in 25 computers up to plus 12 so we're going to be a double digit growth and then 2026 we're going to start to see it normalize so look about a about an 8% gain in 2026 and about 6% gain in computers so we're going to see that kind of wave that we're anticipating again based on the the peak volumes that we saw in 20 and 21 and uh with Mac in uh 2022 specific to 2025 and that 12% growth you're expecting to see in the computer piece where in the year is that going to really be at its peak it's going to be a little bit more balanced I think you're not going to see such concentration in the second half it's going to be a little bit moreal balance first and second half still probably a little bit stronger in the second half but think about it a little bit more linear a little bit more balanced because I think we're going to be in the position economically we believe the end of 2025 we're likely to be at that 2% fed target so we're going to still see inflation contina come down there's likely to be three four additional cuts that are going to occur maybe even as soon as the first half in 20125 and again those are all stimulants that are going to get this going we're also going to have a new admin ation in place one way or another and we'll have a little bit more certainty about where things are so yeah look for a little bit more balance in 25 not so much hockey stick around the second half of the year like in 24 think about it a little bit more balanced in 25 and likely similar again in 26 we're just going to start to Crest and begin to normalize a little bit back down to what would be a you know kind of a normal growth trajectory we are seeing a couple things that's interesting we are seeing um on the Chrome side Chromebook starting to show a little bit of a balance on a recovery but we still think Chrome is still going to fall significantly short relative to the 2021 kind of a numbers that were there part of it is we're just seeing different changes going on academically we're seeing a little bit more concentration on Chromebook for K through 8 and anything above 9 through 12 we're seeing a little bit of churn there where it's migrating a little bit more so to Windows we also saw last year with with apple specifically uh some pretty pretty significant changes relative to volume but looks like a lot of that is already starting to see recovery and seeing those asps drive more of the highend so 2023 was kind of a weird year we had a lot of different changes that were going on and a lot of pullback on devices and 24 is really starting to find that I don't want to call it a recovery but starting to see that business begin to come back to expansion and then we're going to start to ride this wave a little bit on the uh on the refresh so mix is going to be important but I do think there's going to some subtleties around change on that that we're going to need to pay attention to maybe we can focus a little more on the AI PC piece specifically um you know that's expected to be one of the big pieces that will drive growth as more and more customers migrate to these new systems what are we seeing right now and when will that start to pick up yeah it's uh it's interesting and we we've put together I think a pretty pretty extensive methodology around how do we track it because we're also not only looking at at npu and top scores which you'll hear a lot of the references around 40 tops and the npu that's being added to the overall mix but also we're looking at GPU and GPU performance that's also contributing in that so we Factor all that into our data and one of the things that we've seen early mainly because the assortment is fairly limited right now on the 40 plus tops you're seeing most of the qualified aips within those parameters we've defined qualifying because of the GPU performance not necessarily the volume that's in the the npu again all that stated it's still very very new on the npu with 40 tops and above and you're going to see more emerging products more emerging chips and Technology later on in the year and this year that'll now add some additional competition and likely downward pressure on pricing a little bit because today you're certainly paying premium on the AI mix as it goes you're also seeing a lot of businesses today take a little bit more planful approach to Ai and trying to understand and you know and making sure that they can validate three things one is is it worth the dollars so as they're deploying these piloted programs are they're able to to see the return on investment for that added cost of the device they're also looking to make sure that there's not any hidden incompatibilities they're not aware of because they they know it's new and so they're really trying to leverage that and the third thing is they're trying to understand and measure the talent that they have organizationally and do they have the skill set and knowledge and understanding to maximize these devices that are deployed so those are real key drivers right now in these pilots and it's reflected we're seeing and hearing from the channel there's a lot of evals being placed there's a lot of testing that's going on right now on devices but if you look at the overall performance of The Mix 2024 year to date only about 1% of the mix today is considered within that AI PC parameter 99 that are outside that parameter and we believe again it's still in the early phase but we would consider kind of the innovation phase of tech adoption and that typically runs you know 1 to 3% but as we lean into 2025 that's where you're going to see this become a little bit more mainstream and you're going to see that mix begin to spin up I think much more aggressively relative to what is an aipc and what is not and you're going to see that continued acceleration as we get into 26 so really from that standpoint I guess the big takeaway would be it's still early innovator early adopter kind of phasing on where we are but as these tests come back and the validation is coming back from larger companies that are piloting these I think that's where you're going to start to see that that really begin to accelerate leaning into 2025 how strong of a role do you expect the channel Partners to play in these aipc rollouts these pilot programs and kind of convincing and and helping these customers find where the aips will really be of use I'm glad you brought that up because one of the things that I've spoken to a number of Partners about is something called a Readiness assessment and looking at what do we need what are we trying to accomplish and is really getting clients and customers to really understand that at a most basic level and does our environment support the investment of these devices or do we have challenges do we not have Network capability where it needs to be it's going to be more data more bandwidth are we going to need and do we have appropriate infrastructure so one the role of the channel is playing that more advisory role relative to are you ready for AI and have you done the things that are required to be able to maximize the value of AI and if not they're also in a great position to identify where there's gaps in technology for incremental sales that could be be contributed to that so if networking isn't where it needs to be if security isn't where it needs to be if the devices certainly are not it's a nice value ad that the channel clearly brings and knowledge and understanding but also being able to give them a fresh set of eyes relative to the evaluation and say hey you're ready or you're not ready and here are the things that you really need to look to invest in to make sure that you can maximize the opportunity so I think as the channel does on a regular basis right they find ways to add value in those things and not only in the transaction of the hardware and the technology but also the advisory and the services and all the things that go with it so I think it's tailormade for really what the channel brings you touched a little bit earlier on this idea of increased competition among the the chip makers what are you expecting there it's really fairly isolated to one today that's now in production and actually has product in Market at that 40 tops performance for the npu very soon you're going to see at least two more maybe even a third that'll be coming out with 40 tops plus product and more expanded capability so one of the things that we're seeing is we're going to see a compressed I think Innovation cycle that's going to be going on especially this a little bit of Chip Wars right where we've got some firstto Market uh folks that are bringing products to Market but then you've got a lot of fast followers innovators that are looking to enhance that and de beat that and while that's a challenge when you're in that we're going to see likely a little bit of churn and very aggressive activity that's going on it's ultimately going to benefit the B2B customer where they're going to see fantastic technology First tomarket Technology and likely more aggressive pricing again as the competition heats up a little bit so I think well that can be a challenge for the OEM to be able to maximize that I think you're going to see that ultimately be a benefit for uh all businesses that are looking to invest that are looking to get the latest and greatest technology But ultimately finding it a an attractive price point that's Qualcomm being the one that's cly in the market and then Intel and AMD and AMD you also got You' still got also with apple that's still kind of in the wings with their discussions around what that next grev will be as they they announced their their strategy was just uh at the worldwide developer conference so you're going to see a lot of competition and I think that competition is good it's difficult but I think it can also bear bear some significant value for the the folks that are looking to invest in the technology so AI is exciting opportunity it's still very early but I would say you're going to see momentum continue to build and continue to accelerate and as end users businesses have a better understanding again on how to take advantage of the capability and the use cases as they continue to evolve you're just going to see that accelerate even more so I think it's going to be a great ride and I think it's going to be a great opportunity to see a a nice balance for for the channel I think you're going to see nice nice gains across the board not only Hardware but also in software and services let's touch a bit if we can on the security space and kind of what you're expecting to see there through 2026 and of course we are just coming off of a massive Global it disruption that uh came about from crowd strike disrupting Windows machines across the globe what are people thinking now about security is what kind of impact does that sort of large scale outage have on buying decisions I think unfortunately the impact of that certainly was was enlightening and was eye openening over where are their vulnerabilities and maybe being a little less aware of what some of those are and I think it really will do nothing but reinforce how critical security is not only today but even more so as we lean into the future but I think you're going to see people look at it a little bit more more multi-dimensionally and understand where the different maybe gaps were is there exposure and try and build in some additional reinforcement and protections to alleviate as much as they can the downside risk of this but I think again while it was unfortunate I think the visibility of it reinforces again just how critical security is and because of the just the vast amounts of data that's being utilized and being generated this has to be top of mind and it will continue to be we're still seeing security continue do very very well in the overall mix right now software if you look at collectively we're still seeing between a 6 or 8% gain year-over-year and then you're looking at Cloud specifically still up about 18% so if you look at on the three big buckets between it Hardware between software and between Cloud the only one that right now is a little bit underperforming is it Hardware but again as we see acceleration on the computer side on the device side that's likely to balance out because we're already firing in a reasonable way with with the other areas and again security is critical to that and it's a major part of what that is within uh within software well I think that we have touched on a few things that show a lot of potential reason for optimism for the channel and really uh hoping things to start to open up in 2024 and then clearly get going really well in 2025 again we're cautiously optimistic but I think this is just the beginning stages of where where we're going to start to see some light at the end of the tunnel so I think it's all uh all good stuff and all things that we're very excited to share and and talk about we like to hear thanks Mike really appreciate your time today great thank you talk to you soon [Music]
2024-08-24