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SIC 7378 COMPUTER MAINTENANCE AND REPAIR

This category covers establishments primarily engaged in the maintenance and repair of computers and computer peripheral equipment.

NAICS C ODE(S)

443120 (Computer and Software Stores)

811212 (Computer and Offices Machine Repair and Maintenance)

Two main types of companies operated in the computer maintenance and repair industry: third-party maintenance (TPM) companies, which performed service contracts on equipment from various manufacturers; and original equipment manufacturers (OEM), which both manufactured and serviced computers and peripheral equipment. This distinction was less pronounced in reality, however, because OEMs often subcontracted their service agreements to either affiliated or unaffiliated TPM firms.

The computer maintenance and repair industry grew dramatically in the 1980s and 1990s as computer sales skyrocketed. From total shipments of less than 2,000 units and $600 million in 1960, the computer industry topped 900,000 units and $16 billion by 1980, and reached 7 million units and $44 billion by 1990. By 2003, this number was expected to double to more than 15 million units annually. This rapid growth, along with a shift from mainframes to PCs, introduced opportunities for small, independent TPM companies to compete against the large OEMs. Nonetheless, in the late 1990s, OEM companies were reported to hold as much as 80 percent of the maintenance and repair market in some categories, such as high-end system and mainframe services.

Leading OEM firms included many of the nation’s best-known technology companies, such as IBM Corp., Sun Microsystems, Compaq, Electronic Data Systems, and AT&T Corp. While the majority of TPM firms were smaller local and regional providers, several service firms operated on the national level, including the Cerplex Group, ENTEX Information Services Inc., and Inacom Corp.

The U.S. Census Bureau estimated revenues specific to this industry at $15.4 billion by the late 1990s, up more than 50 percent from $7 billion in 1990. The total U.S. market for services performed by this industry was estimated at much more—$62 billion for 1998. Less than one-quarter of this market, however, was served by firms primarily engaged in computer maintenance and repair. Instead, the bulk of maintenance and repair revenues were generated by larger, diversified companies like IBM and AT&T that had a presence in many industries. The New York Times reported that the lucrative PC segment of the computer repair market was worth $28 billion alone in 1995, based on a Dataquest study, and was expected to grow at 14 percent annually in the late 1990s. Within the PC segment, the home PC repair market was considered an emerging—but largely untapped, according to Dataquest—customer base for this traditionally business-focused service industry.

As demand for computer maintenance and repair surged in the 1980s and 1990s, TPM companies developed new strategies to address the lower cost and increased reliability of computer hardware. First, TPM firms reduced repair time by replacing components instead of repairing them. Next, they developed remote diagnostic software to minimize the need for costly on-site service. Finally, they expanded their services to include installation and software maintenance, including virus protection, Internet connectivity, and site-authoring services by the late 1990s.

OEMs also changed their strategies as computers became increasingly similar. They began to differentiate their products by enhancing their maintenance services. Many even started supporting competitors’ equipment. As the industry entered the late 1990s, several discount or “clone” manufacturers reduced their support and forced customers to handle their own maintenance. This provided a new opportunity for TPM firms, which offered disaster-recovery services and started supporting software and multimedia to satisfy more demanding customers. At the same time, corporate emphasis on outsourcing—the practice of hiring external firms to perform specialized functions formerly done in-house—translated into new business for TPM providers. Cerplex, for example, actively branded itself as an outsourcing solution.

“The increasing complexity of software and interactive multimedia made hardware troubleshooting a more complex task that required a different kind of TPM,” said David Glascock, president of the North American Computer Service Association (NACSA). As computer and communication technologies merged in the late 1990s, Glascock believed that TPM companies would expand their services to include supporting high-definition computer displays and wireless communication devices.

Growth in the industry is often dependent upon external trends and events, such as new software releases and technological change. The release of Microsoft’s Windows 95 operating system, for example, led to increased demand for system maintenance—particularly upgrades—as home and corporate users coped with new demands on memory and other system resources. Similarly, one-time events, such as converting older systems to process calendar dates past the year 1999, created new business for the short term.

Employees in the computer service industry generally possessed a high school degree and technical training in computer science, electronics, and circuitry. Training programs were offered by computer manufacturers, TPM companies, and vocational/technical schools. Some study programs took 3-6 months, but formal programs required 1-2 years. Continuous education was required to keep up with fast-paced technology improvements.

Job prospects for computer equipment servicers were excellent. According to the Bureau of Labor Statistics, in the late 1990s there were more than 80,000 workers in this industry. This number represented an increase of 67 percent since 1995 and was projected to increase steadily. Overall, the number of data-processing machine repairers was anticipated to rise another 36 percent by 2006. In the late 1990s, the median annual earnings for computer repairers was just over $32,000. The highest earners made $50,000 or more a year.

In the opening years of the new millennium, the mostly small firms in the computer repair business may be facing competition from a brand new quarter. Wal-Mart Stores, which has given mom-and-pop retailers around the country a real run for their money, in the fall of 1999, launched a test to see whether it could interest its customers in getting their computers repaired at the same place they shop for clothing and toiletries. The company contracted with Computer Doctor to open computer repair shops inside ten of the giant retailer’s Midwest Supercenters. Computer Doctor, headquartered in Aberdeen, South Dakota, opened its first Wal-Mart repair shop on Sept. 15, 1999, in Ankeny, Iowa. If the experiment proves successful, Wal-Mart is likely to expand the service to all of its Supercenters, which numbered more than 600 in late 1999.

Another novel experiment in computer repair was launched in the Cincinnati area in the latter half of the 1990s. Entrepreneur Steve Pollak’s mobile computer repair service, PC On Call, started with a single service van but by early 1999 had expanded to 16 vehicles and 30 employees. PC On Call had also set up shop in Columbus, Ohio, and had its sights on Dayton as well. According to Paul Cashen, the company’s chief executive, PC On Call was planning to expand into up to 10 new markets by the end of 2000 and hoped eventually to serve 40 cities nationwide. Cashen said the company usually responds within 24 hours to service calls, of which it receives between 100 and 150 daily.

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