Computer Maintenance and Repair

SIC 7378

Companies in this industry

Industry report:

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

Industry Snapshot

Two main types of companies operated in the computer maintenance and repair industry in the early twenty-first century: 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 had doubled to more than 15 million units annually, and 2006 statistics indicated a healthy computer maintenance and repair industry, with $6.2 billion in revenue generated by the 13,300 mostly small establishments in business that year. In 2008, the industry had 14,735 firms, which generated $4.17 billion in revenues. By 2010, the latter figure had almost doubled yet again, with total revenues of $7.1 billion, according to U.S. Census Bureau statistics.

The rapid growth of computer sales introduced opportunities for small, independent TPM companies to compete against the large OEMs. Nonetheless, 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., Oracle Corp., and Hewlett-Packard Co. On the other hand, the majority of TPM firms were smaller local and regional providers. By the late years of the first decade of the 2000s, the few nationwide chain retail repair shops, such as Best Buy's Geek Squad and online-based Rescuecom, and a multiplicity of small one- to two-person operations, all expanded their services to include not just hardware repair and upgrades but also wireless and wired networking and maintenance.

Background

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. 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 that had a presence in many industries. Within the PC segment, the home PC repair market was considered an emerging customer base for this traditionally business-focused service industry, although according to Dataquest, it was largely untapped until the late 1990s and early 2000s.

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. In 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, which is 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. As software and multimedia became more complex, so did hardware troubleshooting.

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, NT, MX, 2000, XP, and Vista operating systems, for example, led to surges in demand for system maintenance, particularly upgrades, as home and corporate users coped with new demands on memory and other system resources.

In 2002, according to the U.S. Census Bureau, there were 5,857 computer and office machine repair and maintenance firms employing about 65,700 people and approximately 12,469 computer and software stores employing about 94,270 people. Then, in 2005, the total number of combined establishments fell to 14,575 with about 66,647 employees. Together, they generated an estimated $7.2 million in annual revenues. Computer maintenance and repair represented the largest sector within the industry with 13,213 repair shops, or more than 90 percent of the market. In 2006, Dun & Bradstreet reported $6.2 billion in combined revenue from the more than 13,300 establishments in the repair segment of the industry, nearly 90 percent of which were small shops employing five or fewer workers.

Based on downtime and the losses sustained by companies, networking created a niche market for computer equipment service. According to a study conducted by Infonetics Research, average network downtime costs companies 3.6 percent annually in lost revenue. The The Costs of Enterprise Downtime, North America 2004 study indicated that there were 501 hours of network downtime annually, which translated into millions of dollars. Application issues were the largest problematic area, with 30 percent annually in downtime hours. That translated into an average 32 percent downtime cost. Software failure represented 36 percent, while 22 percent was the result of human error. Other areas in need of service included network and security products, servers, service providers, cables and connectors, and e-commerce.

Computer repair service was even more competitive as electronic retailers, such as Circuit City and Best Buy, gained market share in what was by 2006 a $50 billion annual service industry. Best Buy entered into the computer house-call repair market in 2002, with the purchase of the 60-member Geek Squad computer service repair business. The Geek Squad has since been transformed into a computer repair service of 20,000 men and women throughout the U.S. and Canada, making house calls 24 hours per day. The year 2006 saw the creation of Geek Squad City, a repair site encompassing nearly four acres in Louisville, Kentucky. In the meantime, independent establishments, such as Rescuecom, which also offered services 24 hours a day, saw steady business increases. In 2008, Rescuecom reported nearly $25.6 million in revenue.

As the cost of computers plummeted, however, it was easier to purchase a new one than have the old one serviced, which put a strain on the computer repair and maintenance industry. Computers became known as "disposable technology." Many repair shops closed, while others altered their services to keep up with the changing times. While the traditional mom-and-pop shops were still around, they were more innovative and more web-focused.

In conjunction with the steep declines in computer prices since their introduction to mainstream America, the technology associated with computer hardware, software, and a growing number of peripherals became more and more complex. Home and office networking became the key to computer repair and maintenance in the first decade of the 2000s. Many computer service companies--both big and small--offered consumers support to set up and maintain the array of wired and wireless devices in both the home and office setting. In addition, with the saturation of the marketplace with cable, DSL, and satellite Internet connection services, which boasted vastly improved speeds over dial-up service, increasing numbers of people spent a dramatically increasing amount of time online. Without proper protection and near-constant vigilance, consumers were susceptible to the infiltration of viruses, adware, and spyware--all of which could slow computer processes or lead to outright system crashes.

Current Conditions

The computer maintenance and repair industry was one of the few in the United States that weathered the economic recession of the late 2000s fairly well. Because consumers were cutting back on spending, they were more likely to have their current computer repaired than to purchase a new one. However, constantly changing technology and the fact that electronic equipment became obsolete quickly worked against the industry somewhat into the early 2010s. Nevertheless, according to research firm IBISWorld, "High-end electronic items. . .will continue to generate demand for the industry, as these items generally cost less to repair than to replace."

By the early 2010s, the top retail computer repair outfit was Best Buy's Geek Squad. The Geek Squad offered its signature in-home service as well as providing technical support via phone and the Internet. In addition, consumers could take their hardware to any Best Buy store, where Geek Squad technicians were available to assess and repair a wide array of computer hardware and software problems. The Geek Squad also offered enhanced services such as online data backup.

Circuit City's repair arm Firedog became defunct when Circuit City filed for bankruptcy in November 2008. However, Flextronics bought Firedog in 2009 and relaunched it as an independent company, with a focus on helping small and medium-sized businesses.

Many markets continued to be saturated with small repair shops that offered repair, maintenance, and networking services. Approximately 73 percent of repair shops had fewer than five employees, and 93 percent had fewer than 20.

Employees in the computer service industry generally possessed a high school diploma 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 three to six months, but formal programs required one to two years. Continuous education was required to keep up with fast-paced technology improvements.

Job prospects for computer equipment services were excellent, with significant growth expected in areas outside the continental United States as well. The U.S. Bureau of Labor Statistics predicted that employment of computer support specialists would increase faster than average through 2018, at a rate of about 14 percent annually. According to 2010 statistics, almost 580,000 Americans earned an average of $24 an hour working as computer support specialists.

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