'White Box' Makers Take Up The Slack

n3hat writes: "This story in the business section of the Baltimore Sun points out that the 'pooter bidness isn't as bad as the publicly-traded companies report. Seems that as much as 45% of systems are assembled by screwdriver shops and other white-box makers, not the big guys." No huge surprises here.

Comments

Home built is still the best

[Anonymous Coward]

You control all your components and the way they're installed. I've seen too many of these boxen have loose ribbon cables impeding air flow, insufficient heat sinks, cheap PC Chips motherboards *shudder*, and any number of other problems. Even the good pre-built deals have a catch somewhere.

Build your own, learn something about hardware and software, and feel more confident to upgrade it. It's only slightly more difficult than putting together Ikea furniture.

Well then why are the CPU makers screwed?

[blair1q]

A part's a part. Intel should be overselling its predictable sales by 100% if half the computers are jobbed. AMD's doing no better (and may be losing market share, meaning it's losing unit sales even faster than Intel).

These guys have no real competition.

So if the market's still so healthy, why can't they sell parts?

Re:Well then why are the CPU makers screwed?

[dboyles]

So if the market's still so healthy, why can't they sell parts?

I'll tell you my theory, which is just that - a theory. I don't have numbers to back this up, it's just based on what I perceive.

Gone are the days that we drool over our friend's new rig with oodles of megahertz and megabytes. A 400 MHz machine with 128 MB of RAM and a 15 GB hard drive will run pretty much anything a consumer requires, save for games. Before everybody you know had a computer, the machine you bought two years ago isn't fast enough now (meaning 2 years after you bought it) to run those productivity apps that really would make a difference in the way you work.

Add to that the fact that the low-end PC market has become hugely competitive, with computers down into the sub-$400 range. Profit margins are lowered, and while methods of reducing costs have been introduced, they haven't kept pace with the dropping "going rate" for an entry-level computer.

It used to be that $3000 would buy you a nice machine that would be a top performer, even in terms of 3D graphics. The Dell sitting next to me was about $3300 back in April '98, and it was definitely one of the nicer desktops available at the time. But to get similar performance relative to current technology now, I'd only need to spend about $2000. And there are lots of ways (including lots of companies) to arrive at that price.

Re:Well then why are the CPU makers screwed?

[jedrek]

Gone are the days that we drool over our friend's new rig with oodles of megahertz and megabytes. A 400 MHz machine with 128 MB of RAM and a 15 GB hard drive will run pretty much anything a consumer requires, save for games. Before everybody you know had a computer, the machine you bought two years ago isn't fast enough now (meaning 2 years after you bought it) to run those productivity apps that really would make a difference in the way you work.

Exactly.

My mother's been using a dual celeron 366, a hand-me-down after I got my P3-866. It's enough for her to do everything she wants (MS Office, surfing, email, IM). It's a 3 or 4 year old machine hooked up to a 10 year old laser printer and a new monitor. She doesn't plan on upgrading it anytime soon, and neither do I.

I run a P3-866. I do web graphics, DTP, animations, NLE, etc. on it and find it only lags while working on full pal dv clips. I plan on upgrading it to a dual athlon setup sometime within the next 18 months.

Computers are powerful enough, really. Hell, I bought the P3 used, payed about 3/5ths of what I paid for the dual celeron 18 months earlier and it came with a larger HD, twice the ram, a better gfx card and so on. If I hadn't gotten into NLE I wouldn't even be thinking about an upgrade.

Games run fine, I can work. What more do I need? It's the same question everyone asks. And it's about time. Not many people switch up their car every 18 months because there's a newer, faster one out. Hell, almost nobody buys a new TV every year because of some new features. It shouldn't be that way with computers either.

Author is not very knowledgeable...

[Anonymous Coward]

From the article:

"Plexus built 20 machines, each with 2 gigabytes of processing speed and the ability to run the thousand-dollar video card needed for the engineering program"

I wonder if he put 900MHz or memory into the machine?

Speed!!

[jag164]

2 gigabytes of processing speed

This is not a typo. It's a new technology. Humans have had speed for a while. Take some and it's speeds up the heart rate and some other things.

CPU's are now taking advantage of digital speed. These new white boxes have 2 GB of processing speed. You just need to set up a cron job to realease a couple bytes of speed into the CPU every few hours. It'll give it a wonder boost in processing power. Be careful, give the CPU too much at once though and you'll fry it.

Re:Yes...

[brooks_talley]

Damn, most pierced, painted goths have better taste in beer. Pass me a bud, and I'll install Windows 2.0 on your system.

Or, did you mean the *other* kind of bud?

Cheers
-b

Screwdriver shops have LONG been underestimated...

[dpbsmith]

... well, maybe not always, and 45% is even higher than it used to be, but I remember in the early nineties a study showed that at that time screwdriver shops accounted for 30% of all PC's, making them collectively bigger than any single computer company.

This is a systemic problem with the trade press, which has blinkers in a number of ways. Some are related to who buys advertising (Dell was a slightly iffy outfit back in the days when they called themselves PCs Limited; they basically bought their way into respectibility via advertising). Some are related to the mystique of bigness (reporters would rather rub shoulders with a captain of industry than with a little storefront operator).

I live in a town of 40,000. It has about three screwdriver shops within the town itself. The closest other places where you can buy computers are: one Staples within the town; an OfficeMax nearby; and a number of electronics retailers nearby (Best Buy, Circuit City, some department stores).

ALL the screwdriver shops have been in business, same location, same management, for over ten years. Common sense says they must be reasonably successful, and a reasonable important element in local computer sales.

(And, no, I don't work for any of them--and, as a Mac user, I've never bought from any of them...)

It's the service, stupid

[Animats]

Many small business buy from those little shops because they'll come over, set up your LAN, wire everything up, install the software, and leave the customer with a working office system. If the stuff breaks, there's someone nearby who has the parts.

If you want five PCs for your plumbing supply company, that looks like a good deal. Buying your own machines at Costco means figuring out how PCs work, which is a distraction from plumbing.

Re:It's the service, stupid

[Roblimo]

Not only that, but the ability to run a broken box over to a local shop and have it fixed *while you wait* if it's an emergency is something only a local business can provide. It's also nice to deal with a human being instead of some crappy voice mail system that runs you through five layers of menus before you get to someone who can actually solve your problem.

There is a huge market for local systems integrators that serve other small local businesses. This is, BTW, the way Linux *should* be sold, but not many "Linux vendors" seem to have caught on to this.

If you had a small business, which would you rather do:

1) Call faceless operator at GiantComputerCo with a customer number.

2) Call your computer-hip Chamber of Commerce buddy Al at LocalCompouterCompany, who knows your name, your favorite brand of beer, and your opinion about the Orioles' chances in the playoffs this year?

I have more faith in Al, who I run into at the local bar all the time, than I will ever have in HPDellIBMGatewayCostcoBigCompany. I know where Al lives, he knows where I live. He is going to do his best to keep my computers working because I am important to him. Michael Dell and Carly Fiorina could care less about me. This makes a difference.

Maybe I'm just old-fashioned, but when I buy anything critical to my business, I like to deal with people I know, who know me too.

I'm a Slashdot editor and possibly one of the 10 or 20 most widely-read tech/IT journalists in the world, and emails I sent to several major laptop manufacturers over a week ago still have not been answered. But when I call my local buddies in the computer business, the Slashdot thing and all the tech journo hotshotness mean nothing. They respond to me quickly and politely, same as they respond to everyone else.

I am a major small business believer and booster because I have always gotten better and more reponsive server from local small businesses. Small businesses don't need to buy CRM [Customer Relationship Management] software. The good ones have CRM *wetware* and the bad ones go broke.

Not that I'm against big business or anything, or that I invented the OSDN self-serve ad system specifically to give small businesses a chance to compete head to head with big ones online or anything....

- Robin

Good for many reasons

[InodoroPereyra]

The is really good:

• It implies more competition, better wealth distribution, and less likelyhood of a vendor-level monopoly (than it would be in case big vendors dominated the market)
• M$ Tax: M$ bullies the big vendors, and forces them to sell Windows-only PCs. But they cannot go after the thousands of small, independent vendors. Half percent of the US market is out of their monopolic hands in this sense.
• I bet the numbers are even more favorable to white-box vendors in the rest of the world. At least my feeling is that in poorer countries most of the PC sells are white-box type.

Re:And ... So?

[marxmarv]

But I don't think anyone really ever disagreed with his final point: "The lesson: Publicly traded companies are not the whole computer industry, and the publicly traded stock market is not the whole economy." Was this ever a source of controversy?

This article wasn't published in a trade publication, but in a daily newspaper. Most often the business press wants to hide facts like this from the average Joe, and it's good to see reminders of that in print every now and again so I don't get the urge to fsck myself with another salaried job.

The reason Dell and Gateway and large manufacturers are so important have to do with the support contracts they offer,

White box firms can roll almost instantaneously and often have parts and systems in stock.

the shipping options,

See above.

the warranties,

See above.

the phone support,

Ah, here's a possible failing of the small retailer. The phone support is often relatively weak -- but phone support is pretty much a non-issue when you have minimally sharp desktop people of your own on hand (which you do, if you're a large company).

the willingness and ability to ship next-day in the event of component failure

White box companies can roll almost instantaneously and often have parts and systems in stock.

In short, the security blanket that makes department managers at large companies feel comfortable purchasing those systems.

Corporations are best known for swallowing their own bullshit. It's the same reason COTS software is so prevalent in large organizations, the same reason schmucks pay six and seven figures for crap like Vignette or BroadVision or Dynamo: they want someone they think they can blame, even if they can't.

But [the typical purchasing manager] doesn't know them and here enters the important issue of brand value, identity, and leverage.

Better the devil you do know than the devil that lives entirely in one's mind? It's just another excellent example of the corporation swallowing its own bullshit. I once had a manager describe in hushed tones the Aura of the Brand, of how a brand represents an experience, much like how an infant saying "ma-ma" /* FIXME needs localization */ results in the goddess figure of its life appearing.

Except when it doesn't.

Ladies and gentlemen, we have put the economy and our very lives in the hands of imaginary colossal infants, and THEY NEED SPANKED.

Not to mention that the Dells and Gateways can, in fact, ship in the hundreds of units per day, manufacture in the thousands per week and purchase components in the billions of dollars per year. That's why they're important and has that really ever been a mystery?

And this is important why? This is worth paying extra and getting depersonalized service to who? White-box builders are no less capable of shipping hundreds of barebones systems per day, to order. Dell and Compaq both OEM their finished notebooks from an outfit called Compal. They're not a contract manufacturer, but a turnkey solution for notebook design and manufacturing.

This is what several companies do for the white box market.

This reporter got a good story and then took the wrong angle.

For PHBs and others invested in the worldwide corporate circle-jerk, perhaps. As it is, it's a testament to partial decentralization.

-jhp

News from overseas

[atomico]

In my country (South-Western Europe), you will only find brand PCs in government or big corporation offices. At universities, schools, small businesses , homes, everywhere else you will just see white boxes, apart from the odd Macintosh. Even in the laptop segment unknown brands are quickly gaining marketshare.

The reason is quite clear: big brands use different pricing strategies outside the US, they usually are much more expensive, while 'white box' makers go shop their components directly from Taiwan and pass on the savings to the customers. I am pretty sure big names have given up the home and educational markets here.

So this 45% mentioned in the article seems quite believable from here, the figure seems to me even low!