Mornin' Aitch,
Have seen some concurrence in the PW report on Y2K spending,
but have also seen indications that the reduction may not be
as severe as some state.
March 29, 1999, Issue: 835
Section: Service & Integration
Operation White Box -- Mission's Goal: To Effectively
Demonstrate The Value Of The White Box In Corporate
America.
David Jastrow
New York -- The channel has achieved some impressive wins for white-box
respectability in the enterprise, but the battle is just beginning.
While new divisions of major corporations such as Anheuser-Busch
Companies Inc. and MCI WorldCom Inc. have purchased white-box systems
through VARs, many big companies still are reluctant to buy anything but
brand-name systems, said industry executives.
"If the margin propo sition is reasonable then I would expect to see some
penetration, but I question how much," said Carol Miltner, co-founder of
Impact LLC, a Costa Mesa, Calif., consulting firm.
But the move by major distributors to configure white-box systems for
resellers may have started to ease enterprise customers' concerns. For
example, Pinacor Inc. amplified its efforts to deliver reliable, high-quality
white-box systems to resellers.
The Tempe, Ariz.-based distributor builds white-box systems with strongly
branded components such as Intel Corp. for processors and motherboards,
Quantum Corp. for hard drives and Diamond Multimedia Systems Inc. for
multimedia components.
"There is a lot of interest from large integrators when the quality and
consistency is there," said Anthony Cyplik, Pinacor's director of solutions
assembly. "The quality of white boxes varies quite a bit, and that is why
Pinacor has stepped up with higher quality systems."
But after a year of steady acceptance in the enterprise, some big businesses
are opting to buy customized systems directly from vendors. Programs such as
Houston-based Compaq Computer Corp.'s DirectPlus and Dallas-based Dell
Computer Corp.'s Be Direct initiative enable corporations to purchase
custom-configured systems online.
The number of large corporations using white-box systems slipped to 18
percent in February from 22 percent six months ago, according to a CRN
survey of MIS executives at companies with more than $500- million in
revenue. Only 2 percent of those that currently use brand-name systems said
they plan to buy white boxes within the next six months, the survey found.
However, Santa Clara, Calif.-based Intel's strong support of the white box
should help improve the quality consistency of white-box systems, and if larger
integrators such as EDS Corp. and GE Capital IT Solutions start to
private-label systems, more large corporations will feel comfortable, said
Marty Wolf, president of Martin Wolf Associates, a San Ramon, Calif.-based
investment banking firm. "Some large corporations may never endorse or
support unbranded systems," Wolf said. "But they are not necessary for this
market to succeed."
Indeed, 41 percent of small VARs cited white boxes as their best-selling
desktop PCs last month in the CRN/Answers Research Inc. poll, three times
as many as Dell and Compaq, the top-branded desktops. That was the
highest percentage selling unbranded systems in nearly a year, according to the
survey.
"I don't think that it's all about price," said Scott Hicks, owner of S & J
Computer, a Greenville, N.C.-based VAR. "People want specific features
and the branded systems just have too many proprietary parts."
Some larger integrators, such as Hartford Computer Group Inc., which
generated more than $400 million in sales last year, plan to deliver white
boxes as long as their end-customers request them over branded systems.
"We offer one, but most of our larger clients still prefer brand-names," said
Tony Graffia Jr., president of the Inverness, Ill.-based reseller. "We are
primarily in the white-box business because we don't [want to] miss handling
the services of a customer who is only looking to buy white boxes."
While quality and reliability remain high on the priority list, price also plays a
role. The average selling price of a desktop PC in January was $1,523,
according to the monthly CRN/Answers Research poll of small and midsize
VARs. Meanwhile, 63 percent said they were selling self-built systems for less
than $1,400.
The prospects for white-box systems are strong, according to industry
executives and analysts. Distributors, disappointed with the results of channel
assembly, plan to build white-box systems at their new assembly centers, said
Wolf.
They also expect to use online configuration tools such as several offered by
Austin, Texas-based pcOrder.com Inc. These tools provide a broad selection
of component choices for VARs that build their own systems, and include
detailed product descriptions and reviews.
---
Scoring Points?
- 41 percent of VARs said white boxes were top-selling desktops in past 30
days.
- 33 percent of VARs said white boxes were best-selling servers in past 30
days.
Losing Ground?
- 18 percent of corporations with $500- million+ in revenue are using white
boxes, down from 22 percent in October 1998.
- 72 percent of VARs' white-box desktops were sold to companies with
fewer than 100 employees. |
