Building a new niche

recently the NSW Department of Education and Training took away a tender from two local system builders, ASI and Optima, handing over the tender to Lenovo.

Maree Lowe, director at ASI said it came as a shock, but the company has gotten over it because the shrinking white-box was something ASI has seen coming for a while.

“We have seen this coming for years as products become more of a commodity and are not surprised by the shrinking market. There are various streams within the server market that we have been investing in,” Lowe said. “Notebooks and PCs are still part of what we do, but we have been offering everything from server out to storage.”

ASI product manager Craig Quinn said the change was necessary for the company because it can’t compete with the bigger guys unless they “don’t pay our own staff”.

He said competing with these offshore companies means you have to take the wages side out of the equation.

“If you talk about a situation where there needs to be volume purchasing, you have to let the big guys slug it out because the further you move up the food chain, the less you are going to be able to compete,” Quinn said. “The reality is you can’t compete on massive deals, because big-name vendors sell the equipment at low cost. In the end you just give it away because you don’t want to work in that area.”

Quinn said the upside of building products is the ability to configure customer requirements and it may be small things such as floating assets, configuration to products and just a reworking product — which happens overseas.

“There’s nothing we can do about the particular trend (handing tenders to big name vendors) but there are other things we can do and it’s just a matter of moving onwards and upwards,” said Lowe.

Kee Ong, chief executive officer at Synnex also believes there’s nothing white-box players can do in this area.

“The top players have deep pockets and are going to be able to compete easily for government products. It’s not surprising that at the next level down, consumers don’t want customised products,” he said.

According to Ong, Synnex started as a major component distributor, however now that area is just one part of the business.

“Technology is becoming more plug-and-play, survival will all depend on how you can become value-added service provider in this tough competitive market,” said Ong.

Becoming a chameleon
After 22 years in the business, ASI has become like a chameleon and changed with the times. For the local system builder there is plenty of value in delivering services in high-end systems. ASI is looking for customers who need services and functions, it’s taken on another perspective and is looking at more agencies which offer more value, with more project-based work.

“The secret is to work towards network infrastructure-based products working with groups with high-end applications. Parts of the company are now only looking at managed services,” said Lowe.

At the other end of the spectrum is the reseller PC market,
which has also diversified from building machines to selling notebook products.

Ming Wei, director at PC Market said the reseller was still building some white-box computer systems and servers for the medium/high-end gaming market.

“We are still doing white-box-like computer systems and servers, but a lot of our systems are medium, high-end.

“There is still a market in gaming because Dell and HP don’t have gaming computers and it’s still a local niche market but it’s not very big,” said Wei. “We started to see the tightening in the whitebox market at the beginning of last year and the gaming market was also getting a bit quiet because customers wanted to wait for a new operating system and everyone was scared of upgrading computers and were holding it off until Vista came out.”

Wei said more customers have been picking up because of all the new video cards and motherboards.

PC Market is continually looking at ways to sustain the business.For Wei and his business partners, concentrating small/medium business with higher-end computers and gamers are just some of the areas where it has been making money for the past few years.

But the biggest change for the reseller has been the switch to selling more notebook products.

Although margins in the notebook market have also shrunk due to the launch of machines such as the sub-$1000 notebook, Wei said more high-end notebook machines are becoming popular.

“We find we can make money if we stock of a lot of notebook brands. People want to buy a notebook as soon as they come into your shop, if you don’t have stock in the shop then they will walk away,” he said. “Volume is the only thing that will cover the margin back.”

Although Wei is continually looking at ways to sustain the business, he is disappointed with the government for not supporting Australian-owned businesses with local tenders.

While PC Market doesn’t compete in this arena, he said it would be better for system builders if tenders were fulfilled locally.

“At the end of the day I guess when it comes to price competitiveness local builders just can’t beat those (big name) guys,” he said.