Hello victor,
Winning The Small Business Race -- Challenges facing brand-name vendors
include higher pricing, customer satisfaction with no-name brands.
May. 07, 1999 (Computer Reseller News - CMP via COMTEX) -- PC server vendors struggling to compete
with the dominance of white-box servers in the small- and midsize-business market face a tough race, said
a number of resellers selling major-brand, second-tier and white-box servers.
Resellers said the biggest challenges facing the brand-name vendors are: higher prices, customers'
satisfaction with no-name brands, the increasing commoditization of PC servers, and clients becoming more
computer-savvy.
Still, brand-name vendors are hacking away slowly at the white-box market, mainly by touting the greater
reliability and manageability of their machines, adding more features, and promising better support than
second-tier or white-box vendors. And in the case of some vendors, notably Houston-based Compaq
Computer Corp., selling direct-to cut costs-has become another strategy.
According to a recent CRN poll, white boxes are the overall best-selling units in the small- and
midsize-business market, with Compaq entrenched as the leading major brand. White boxes hold 31
percent of this market, followed by Compaq with 22 percent; Hewlett-Packard Co., Palo Alto, Calif., with 11
percent; and IBM Corp., Armonk, N.Y., with 9.3 percent.
"For many smaller companies, the price of the [server] is the most decisive factor," said Paul Giovanni,
owner of Technical Support LLC, a Sedona, Ariz.-based VAR.
Brand-name servers can be a hard sell to companies that have spent a lot of money upgrading proprietary
servers in the past, said Paul Riedl, co-owner of River Run Computers, a Glendale, Wis.-based VAR. "White
boxes appeal to these companies because they see these machines as low-cost disposable items."
However, Riedl said he has noticed a trend among the brand-name manufacturers to put more functionality
into their hardware. "HP and Compaq now provide more software-based tools with their servers," said Riedl.
"They are also trying to add more capabilities to their servers such as dual processors and hot-swappable
drives, even for the low-end servers."
At the same time, the increasing computer sophistication of clients is causing more companies to buy less
expensive systems, Riedl said. "They are not willing to pay extra money for hot-swappable drives and other
features they know they will not use," he said.
Nor are too many smaller companies willing to pay extra for server-management software or high-availability
functionality, features that vendors tout as differentiators, said VARs.
"These are non-issues at the low-end of the market, where companies really can't afford to pay for extras,"
said William Stocking, president of First Business Systems Ltd., a Chicago-based VAR.
"Smaller businesses tend to be most interested in servers that don't require frequent service-so reliability is
important, more so than high-availability," he said.
So-called high availability servers are nice, but most smaller companies cannot afford them, said Gene
Mazurek, partner at Bancroft & Masters, a VAR in Palo Alto, Calif. "The bottom-line for smaller companies
is reliability. Most brand-name servers are so reliable now that customers are equally happy with IBM,
Compaq or HP."
Because most small- and midsize-business clients still do not see the server as a commodity box, the big
three server vendors maintain an advantage, said Riedl.
"Customers do not see a lot of difference between HP, Compaq and IBM, but they do see a lot of difference
between these vendors and everybody else. So they are willing to invest $1,000 to $1,500 in one of their
servers," he said.
Reliability is of utmost importance, said Clyde Shiigi, vice president at DataHouse Inc., a systems integrator
in Honolulu.
"We won't go down to CompUSA and buy any boxed PC and use it as a server, nor would we recommend
that our customers buy a server in that fashion," Shiigi said. "We only use and recommend what we know is
reliable. We are very comfortable with the reliability of IBM servers," he said.
Smaller companies will pay extra for a brand-name server if they think they are getting a better box or buying
reliability, said Stocking.
Superior long-term technical support is another reason why the companies will buy a top brand name
instead of a second-tier or white box. "The support of many name-brand vendors, compared to those of the
big three, is awful," he said.
"I usually choose a vendor that can provide 24x7 hardware support, which is definitely one thing that makes
a vendor stand out from the commodity class," said Brent Goodfellow, principal at Brent F. Goodfellow PC, a
Beaverton, Ore.-based VAR.
Still, brand-name vendors should not assume that resellers will continue to sell or recommend their servers
without ongoing incentives to do so, said Steve Allen, president at Integrated Technology Systems, a New
York-based VAR.
"Authorized VARs influence customers to buy brand-names," he said. "If we don't influence them, they will
buy on price, and we all know the negatives of doing that."
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