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Who Wants to be the Next Dell?
cybercomm writes "Tom's Hardware has a very interesting column regarding the future of beige-box manufacturers, such as Dell, gateway, Compaq, et all. I found this article really thought provoking, since the author has raised some really interesting issues, especially concerning the fact that the writer of the column compares reviewers to the lowest ring of the ladder, and asks one simple question: Instead of whining, why not do it? Why should you learn all the specs on the latest processor and slam the competition just because you may happen to own a P4? Why not start the same way that the Dell, Apple, Gateway, and other founders took by forming your own store, getting in touch with Asian suppliers who "are more than willing" to give you discounts, just so that they can get their foot in the lucrative N. American and European markets. Very interesting reading, that raises another what-if scenario (what if you succed and your business is based on Chinas' dragon CPU, XGI card, open-source OS...)."
Can you still GET a beige box from dell these days?
i have seen some of these white box laptop systems. all you have to do is put in a hard drive, ram and os. some come with CPUs already. if you did something like this and sold it cheap enough, you could get your foot in the student laptop market. same with pcs them selfs. interesting idea. now for a business plan......
Lotas T Smartman www.lotas-smartman.net
You see the problem with hardware is all about margin. Unless you are moving a huge amount of goods you will loose your ass. Software on the other hand is all margin, big profit ratio's. Why do you think so many restarants go out of business? Small margins, same goes for grocery stores.
Got Code?
Enthusiast sites helped to widen up the market for Asian suppliers, of which there are many, many more waiting in the wings to get into the lucrative North American and European markets. These supplies are hungry. They can feed hungry White Box vendors, but I grant that White Box vendors have to contend with the general ignorance of the people.
The people like Gateway, and the sound of those Intel chimes. They fear computers and the big Tier One OEMs feed on that fear.
You sold me there on that story. Obviously I'm passing this on to all of those Berkeley, MIT, Carnegie, Harvard, Yale grad CTO's and marketers who work at places like Alienware, Sager, Toshiba, and other smaller comp makers who spend the big bucks. This guy is definitely on to something, and I'm glad Slashdot didn't waste my time posting garbage. Oh yea, that guy's good.
MoFscker
Personally, I think the days of selling general-purpose computers to home users are coming to a close. Within a few years, real computers will be limited to businesses and hobbyists (those who use computers for their hobbies, and those for whom computers *are* a hobby).
"Joe Sixpack" will surf the net on an "Internet Center", listen to MP3s (or whatever DRM-crippled crap has replaced it) on "Media Center", etc. Regular people will stop thinking of these things as computers, and they'll just be happy that they work. To be honest, I don't know what to think of this. If Apple has survived in its niche, I'll still be able to get the stuff I need (heck, *somebody* will make sure that Linux can still run on these devices), but it's a little sad to think that this era might come to an end.
The thing that this jounalist is writing about (very well, I might add) occurs in every industry/walk of life. There are the whiners, and there are the doers. What he doesn't realize is that doers just do it, and ignore these whiners. He ends the article well... "get a grip". Personally, I don't give people like this even that much attention.
...and while it is tempting to get into the whitebox market, it requires a significant amount of capital. Why? Bulk purchasing (ie for processors) is only really worth it pricewise if you do it in the thousands. Dell et al. do that easily now, but for "the next Dell", unless he/she/them are able to take advantage of those discounts by purchasing parts in huge multiples, it will always be cheaper for the end user to buy from current whitebox manufacturers, even if "the next Dell" provides better quality. The vast majority of people are willing to save a buck, and unless "the next Dell" can compete on price as well as everything else, it is unlikely that there would be "another Dell".
libertarianswag.com
Apparently Slashdot does, or is this a funny attempt at turning his servers into a crater one at a time and remove his sold out ass from the world?
There is nothing wrong with being gay. It's getting caught where the trouble lies.
..has the author of that column started? His beef is people who complain about hardware rather than building, but he just complains about people who complain. Where's that in the food chain?
The two biggest obstacles I can see are name recognition and the Microsoft tax. If someone were selling a computer with similar specs to a Dell machine, most people are going to go with the Dell just because it's a company they've heard of before (and therefore one they can "trust"). The other problem is Microsoft: if you are going to install Windows on the computer (and possibily Office), you will have to sell your machines at a loss to compete. This is to compensate for the fact that Microsoft gives big name vendors like Dell and HP discounts on their software. I think the best way to overcome these two obstacles is to invent a product truly unique, so that people actually WANT to pay more for your system. Look at Apple. Innovation is what helped Apple rise from their own ashes, first with the iMac and now with the iPod and OS X. Jump a feature that you think will be big in the next few years, and then have the guts to use it as the cornerstone for your business.
The World is Yours.
...that the market for commodity systems is already saturated.
Trying to compete with companies like Dell only makes sense if you're the star of Brewster's Millions.
There is certainly money to be made in the computer industry. But the days when hardware firms could be started out of someone's garage are long, long gone.
Of course I'm sure there will be a whole army of dreamers and wet-behind-the-ears schmucks lined up to argue with me about this for the simple reason that the truth I speak is a threat to their pipe dream. Well I say they need to put that crack pipe down and start looking for sectors and markets that don't already have dozens of 800 pound gorillas stomping about. Just because you have a love for something doesn't mean you can turn it into a successful business, especially when that business would be servicing a competitive market with razor-thin margins.
The most anyone could hope for would to eek out a marginal existance selling highly customized systems built from hand-picked components for gamers and similar enthusiasts. (Most of whom can do it themselves, or at least think they can)
Lee
Muslim community leaders warn of backlash from tomorrow morning's terrorist attack.
They DO have stores (They've got Dell Direct sales kiosks in the mall- where you get to see something of what you're ordering through the system) and the online sales system for Dell (Whether it be by phone or by web) is also a store.
It's just that they didn't have brick and mortar storefronts until very recently- and these don't keep inventory, they're solely there to show off the wares so people can see what they're buying.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
Make sure to get enough venture capital, when you start you new hardware store, that you can hire somebody else to take care of customer-support.
But seriously, it's all about volumn. You have to buy a lot of parts to be able to compete - the margin on hardware is small. Your fortune isn't made just because you can sell a thousand boxes and make 10 or 20 bucks each. Now you have to be read, when half of them calls you and tell you that they can't figure how to connect that 56k modem to their adsl line or that the cup holder is broken.
Good luck...
TC - My Photos..
This is nothing new. I have funded my drinking habbit for years by making people computers. There is no need to have a store to do it. Most people don't realise how easy it is and they usually want something special. This is how the Dell bloke goty started anyway. For the office I make all the machnes now, we wouldn't even consider buying machines ready made (unfortunately except for Sun machiness)
The dragon CPU is not supported very well (or at all) currently and does not bring a huge advantage yet. Its hard enough to convince someone to use a non windows/x86 machine when you are a huge company nevermind when you are a singly guy knocking them out of your garage.
Mouse powered Chips, Open source Processors and Lego
Dell works to hollow out their suppliers, leaving behind dead and worthless companies. We don't need them, just like we don't need Wal-mart.
The Dell model, such as it is, is already dead. It may have worked for Mikey, but it won't work if cookie-cutter'd. There won't be another Dell, thank god.
Why not start the same way that the Dell, Apple, Gateway, and other founders took by forming your own store, getting in touch with Asian suppliers who "are more than willing" to give you discounts
Um, I wouldn't put Apple in the same group as Gateway or Dell.
Gateway and Dell did start by piecing together PCs... not much innovation there, just source some parts, stick 'em together, bundle it with an OS, and then you've got yourself a PC business! With good marketing and by learning from mistakes, you could have a billion dollar business!
In contrast, Apple was a manufacturer first. Basically, Apple designed a computer, made boards, designed a custom power supply, had a custom case designed, wrote software, wrote some technical manuals, etc etc.
That's pretty much how Apple does it today, with the exception that Apple has been taking more advantage of some commodity components like drives (they always have) and highly integrated ICs.
Admittedly, Apple has become quiet adept at marketing - and that's a good thing, because Apple has a niche business that requires both innovation (both in marketing and technology) to stay relevant.
It's only recently that Apple started to get into the retail business.
and I've got plenty of advice for those who might want to try it.
1. Don't take on any partners. My company had 3 owners. If it had had one owner and 2 employee's I'd still be in business. Multiple owners means that profit is divided. While you're getting started, you have to live off of whatever miniscule profit you generate. If you have to divide those profits three ways, you're going to have to learn to love Top Ramen.
2. Dealing with local distributors is a great way to get parts quickly, but their prices are awful. Get contacts overseas, and import your own parts, or work with national distributors such as Tech Data or Merisel. Just be aware that their prices will be awful too until your volume comes up.
3. If you're selling computers via mail, etc, be careful with credit cards. Chargebacks come right out of your bank account. Visa/Mastercard/etc. do a great job of protecting the customer because they can steal from the merchants. If you're hit with a chargeback, it doesn't matter that you've been victimized, too. We once had three high-end PCs (marked for signature delivery) "stolen" from a customer's doorstep. Then, when the customer decided he didn't want us to ship replacements and hit us with the chargeback, we were out nearly $10,000. I still believe the customer saw an opening and stole those PCs, but I'll never know for sure.
4. Control support costs. Many small "white-box" PC makers provide top-notch support, but customers will eat you alive if you let them. I realized that when I went over to a good customer's house to help them with a PC problem and ended up looking at a laptop we didn't even sell them. A corollary to this is that if you're going to be providing "personal touch" service, make sure that your pricing reflects it. You can't visit people's houses if you're selling a $500 PC @ 5% margins.
5. Watch inventory. Keep as low a supply on hand as possible, because when component prices drop, customers expect assembled PC prices to drop accordingly, and immediately. Your competitors watch their inventory, too.
6. If you're planning to offer services and support in addition to hardware, consider becoming a VAR instead of a system builder. You can benefit from the marketing opportunities that the Compaqs/IBMs/etc offer, and you don't have to deal with warranty support of your own boxes. If you have a service department, the companies you deal with will pay you to do warranty work.
All in all, I can't say I recommend starting a PC company. Because you're selling what is essentially a commodity, your margins are constantly being squeezed. And that sucks! But, if you have access to Asian manufacturing and can control your costs, you just might prove me wrong. Good luck to all the future captains of industry out there!
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So, where are the horizntal bar graphs comparing Dell, Gateway, HP, Compaq & Packard Hell? Why aren't there 30+ advertisements for whoever gave Tommy the most dough? Why isn't there a seperate section in the article with benchmarks on a bunch of those brand-name PCs? I want to know how Quake 3 will run at 1600x1200! How good are these babies in overclocking? This isn't Tom's Hardware! Someone messed with my DNS settings!
Untill I see at least 20 useless horizontal bar graphs with various benchmarks that mean nothing, at best, I refuse to believe we're talking about Tom's Hardware.
Hate me!
That's almost like saying "You don't like Chevrolet? Make your own car and compete!"
You have to look at it realistically. As a national manufacturer / re-seller the road will be very tough. Hardware isn't profitable to begin with (margin-wise) and there's not much room in the market. Only company I can think of that "came in" was eMachines, but I don't know anything about them, I just know I didn't see them 10 years ago. But for example, what happenned to Packard Bell?
I think where a lot of value and opportunity lie would be any niche market... Take for example, AlienWare, who makes specific game-oriented PCs. IIRC they will even install games for you and tweak them for your hardware configuration (at no extra cost). Dell doesn't do that, so they're not in direct competition.
So where are there niches? Could someone compete with AlienWare? What about a super high-performance company that sells already-cooled OCd systems? Or an anti-Wintel company that is setting itself up correctly so that, no, you won't be clogged by DRM in a few years? I could imagine a company setting up computers for very cheap that, say, boot up in 10 seconds or less. Sort of internet or email machines for other parts of the home. Or extremely sleek looking systems -- hire a good designer and make stuff that looks better than Apple's, but is a PC inside.
There's lots of room for interesting business models. But why would you need another Dell?
Small potatoes make the steak look bigger.
...getting in touch with Asian suppliers who "are more than willing" to give you discounts, just so that they can get their foot in the lucrative N. American and European markets.
So much wrong with this kind of statement. China doesn't need those markets. It does need the western style of pragmatic project management, etc, but the market is now inside China/Asia, and much larger than Europe and North America. This statement only serves to show why the west is being left further and further behind.
Although we may all rant and rave about the wasted resources in big companies, scale does matter in the PC industry.
1. Amortizing R&D: It costs money to develop and document a new PC (learning the vagaries of drivers, interactions with myriad software packages, and cranky connections to all the possible peripherals that customers might have). The more PCs you sell, the more you get to spread this fixed cost over the customer base. (Even if you, Mr.NewPC Inc., wants to ignore this, the vendors that must supply you with engineering data and support won't).
2. Uncertainty of Sales: If you expect to sell 10,000 PCs tommorow, then the basic statistics of random arrivals of orders means that there is a 95% chance of recieving betwen 9,800 and 10,200 orders. So, you order parts for 200 extra systems (2%) provides cover in case of high demand. If demand is low, you can sell the extra 400 systems in the first few minutes of the following day. On the other hand, if you expect to only sell 25 PCs tomorrow, then these same statistical issues mean that there is a 95% chance of recieving between 15 and 35 orders. To cover the same range, you need to order 40% more parts than the average expected sales and a low demand day leaves you with 20 extra systems (almosty a full day's sales) sitting in inventory.
3. Marketing Costs: If you want to be the next Dell, you need to tell people about you. A nationally broadcast ad costs the same regardless of whether you sell millions of PCs per year or only a few PCs per year. Maybe you can find more targetted ad outlets. Maybe you can rely on word of month (although given that most dissatisfied customers are more vocal than satisfied one, word of mouth is a dicy strategy). EVen if the ad is targetted, the creation of the ad is stil a fixed cost that gets divided by the number of PCs you sell.
I'm not saying that small Mon&Pop PC companies don't have a niche (some customers will always be willing to pay more in order to buy face to face from someone they know locally). I'm only saying that big PC makers have advantages in scale.
Two wrongs don't make a right, but three lefts do.
Audrey. The eVilla. The list goes on.
Internet appliances came and went. All in the blink of an eye. What you're talking about has happened. And failed.
Because it's far, far cheaper and less work to bitch then it is to start a company :P
autopr0n is like, down and stuff.
That a TiVo is a general purpose computer running Linux. It's not hard to make a general purpose machine 'just work' for what you buy it for. The problem comes when people add in new software and drivers. If you buy a new dell, it'll 'just work' as long as you like as long as you never upgrade the hardware or software (assuming you don't connect it to the internet, or that no security patches break the system... )
autopr0n is like, down and stuff.
...if you pay for it. I believe you can literally get a white-colored case under this program (I've seen photos elsewhere of the cases.)
Dell's white box program
(Read the whole thing and you'll see this is constructive criticism and not just a rant.)
Not only a spell-checker, but a nice proof-read for clarity would help too. I, for one, had no clue what the article was actually about other than that the article was "thought provoking" and "interesting" reading. For example, where did this sentence come from and what does it mean?
"Why should you learn all the specs on the latest processor and slam the competition just because you may happen to own a P4?"
Huh? This relates to building and selling your own computers how, exactly? The entire paragraph is incoherent. I'm sorry to rant about this, but I get very frustrated when I have no idea what the article is about from the submission. Why would i even want to RTFA if I have no clue what it's about. In cases like this, the Slashdot editors should quote or summarize to clarify exactly what's going on.
Dell uses just-in-time inventory and has the component makers store the parts until Dell needs them. Basically the parts aren't Dell's until they are in the system.
"Karma can only be portioned out by the cosmos." -Homer Simpson
Economies of Scale require any competitors to Dell to have massive amounts of venture capital, which prohibits what you suggest. Also Dell has had years to develop appropriate automation, quality control procedures, and customer support systems which would require a great deal of work to be able to compete with a 500$/computer. Of Course, I don't touch on all of the issues involved in a business or even this idea but these are a few of the things that would stop me from even spending time(=money) researching the possibility.
If you want to start a business, identify a real problem or need, and develop a product or service to address it. If you want to build computers, don't try to copy Intel and Microsoft. Design a computer that does something new and unique, or does it significantly better than existing systems.
Mea navis aericumbens anguillis abundat
Consider this: Design a Linux-based home PC targeted at Wal-Mart customers and their kids. The "no nonsense, no excuses" PC for America.
If you are looking to sell expensive boxes, don't forget businesses. Build sharp, top-of-the-line boxes into shiny piano-black cases, then offer to setup their office network if they buy 3 or more of the things. Want 802.11g wireless and a 5 year warranty on that? Insurance against fire, flood, acts of god? I can keep that printer of yours topped off for just $50 a month. Know moore's law? For $100 per month I'll keep your system up-to-date (every 1.5 years).
There are a lot of niches to be filled while working with businesses. They're focused upon doing something other than computing, and could really care less about what WEP encryption is. Outsourcing that to someone else makes a lot of sense, and being the guys who sold them the hardware is a good way to get into their offices... and vice versa.
The ______ Agenda
Unless you want to go after a niche market (witness Alienware's success with PC gamers), taking on established vendors in what is now in many ways a commodity market is a very dangerous proposition.
Low margins, relentless competition, and an undifferentiated product aren't exactly the factors that would lead an experienced entrepreneur to want to enter a market.
Read the EFF's Fair Use FAQ
The posts so far are about Dell's business model, but the article is asking techies to ignore Dell and build their own PCs, then build a business and negotiate for better prices. Why isn't anybody discussing building PCs?
I build PCs for myself, my friends, and my family. Most of them have custom "Solprovider" machines. I pick the parts; I build it; I install the software; I support them. PCs I build remain usable for over 5 years, and I average about 1 support call per machine per year. (If you are interested in what I build, see my October recommendations from the last time I built a PC.)
I am not attempting to turn this into a business. I have a very successful career, and the effort is too high and the margin is too low for this business to be worth my time. I refuse any money, although I expect a home-cooked dinner for my trouble, but then I only build PCs for people I care about. The other side is that these people know that I will never interrupt my paying work to help them, so sometimes their problems can take over a month to solve.
But why aren't you trying to sell PCs? You are already technical. You probably understand what the hardware does. You can learn how to use a screwdriver. You already know how to install software. The bad side is that you might have to install MSWindows if the buyer insists, but you could install grub for dual-booting, so every time the buyers watch it boot there is a chance they may choose Linux.
(Use the Maxtor 160GB drive. Use only 10GB for Linux and they will not complain. Tell them it is there so you can troubleshoot easier, but they can try it if they want. I am actually installing a new hard drive this way this week.)
I usually spend several days to research my recommendations. One day is spent researching the new technologies; one day is spent researching the various products; and a few hours are spent checking prices. Someone who builds more than one PC every 6 months would spend much less time per PC because their knowledge would remain current.
I spend my life entertaining my brain.
From the article:
Actually I prefer Glowing Box vendor, but what the hell. With WindowsXP and a bunch of free and open source programs (Fire/Thunderbird, etc) a small time vendor can do alot more than any time in the past ten years to provide a safe and good user experience to the massses. And I'm too busy trying to be a small time vendor working from home while my wife works outside the home, keep the two tech savvy friends who work as my full time road techs working (and one more part-timer/trainee), and get my new 2004 website online to actually sit down and write something about it.
HighSchool Startups building basic companies for dummies
Tech from home Part 1 and Part 2 A must read from someone who has "done it"
Incorporate or LLC Online One stop business creation for any state
U.S. Business Advisor sponsored by the SBA and a great resource.
Jonah Hex
Horror & SciFi Erotic Nudes
For those that didn't RTFA, including the mods, Omid is the guy who wrote the article.
You need to restart your computer. Hold down the Power button for several seconds or press the Restart button.
I've worked at a lot of companies big and small (120,000 employess down to 20 employess)
I've learned that big companies are doomed to becomming appalingly inefficient. I mean, words just can't describe how inefficient they are. The worst part is, most people at big companies started there, and have always worked there, or at another big company so they have no idea what the other world is like.
Honestly there are things that take a month at a big company that take 5 minutes at a small one. (Not because of cutting corners on needed process, but just plain inefficent stupidity).
So how do big companies survive? Just what eveyone's been posting, margin and big-company bullying. This is what balances things out.
But don't assume you can't beat Dell because you don't have their margins. You also don't have their inertia.
Incidentally, one exception is Microsoft (yah I worked there too, probalby should post AC). MS operates like a small company with 20,000 employees. My group consisted of 31 people: 30 engineers, and 1 admin. That would be unheard of at any other big company. They feel much better with like 5 working engineers, 5 people with engineer titles that do nothing, and 20 people that make spreadsheets that track what day today is, and what day tomorrow will be etc...
So we've focused on a different market. There is no "Dell or Compaq" in the server market - sure they sell rackmount machines, but they can't get the same discounts on them as they do on desktop hardware, so small companies like us can compete with the "big guys" (and we usually come out below their prices). We also offer better quality workmanship and customized modifications (something that can't always be said of our competitors) - the case manufacturers don't always understand that 1/16 of an inch tall or wide can make a difference between "fits" and "doesn't fit" in a rack, or that certain pieces of metal sticking up might short out certain motherboards.
Do you really need reason for beer? Wingman Brewers
Dell is who they are because no one else can duplicate their business model.
Sure, you can say you line up Asian manufacturers, blah blah blah blah blah.
Do you think that IBM or HP/Compaq or Gateway haven't tried that?
Dell's business model is a one-of-a-kind distribution/supply chain mechanism that no one has been able to duplicate. They have such incredibly tight controls over inventory and they have pounded their suppliers into giving them everything that they want in terms of how their parts are delivered, when, at great prices.
The PC hardware business has a razor-sharp margin, and this this situation, the only way you can make big money is by volume. They have such great control over prices, they actually make money on the depreciation your computer undergoes by the time you place your order and by the time they ship your CPU.
I have built every single computer I've owned since 1988. My latest computer, Intel 2.4 GHz 800 FSB was a Dell for $412. How the hell can anyone compete against that? For $412, I'm getting a 40 GB hard drive 128 MB ram, 2.4 GHz CPU with a motherboard that supports AGP 8x, SATA, etc. And best of all, Dell's CPU cases are awesome! Not one single screw I need to use, everything is snap on. The case alone is worth $100+. So instead of building and making my computer, I went with Dell.
This is why you can't compete against them.
Just-in-time assembly. I imagine they're not stocking parts in a just-in-time fashion, at least not all of them.
In a purely JIT shop, everything would be obtained as it is needed (purely pull, no forecasts, no stock in principle). The primary downside is lag - you can't deliver until the slowest part has arrived/been produced and assembled.
The point is to use JIT where it's needed, on parts that drop fast in value / become obsolete very quick.. I'm sure they have lots of stock in Dell casings, ATA cables and Dell stickers (or companies which are basicly Dell inventory holders, if not), and very little of *the* fastest CPU/GFX card at any given moment.
JIT isn't a wonder cure, it needs to be applied with some sense. Computer assembly is a something of a star example though - well defined interfaces (PCI, AGP, CPU sockets) and modularity. It's no doubt it's the most important factor in Dell's success.
Kjella
Live today, because you never know what tomorrow brings
Here's to Slashdot and all the armchair geeks!
Manipulate the moderator system! Mod someone as "overrated" today.