David Versus Goliath

Despite the David and Goliath image of whitebox builders battling the global brands, multinationals such as Hewlett-Packard see local vendors as a serious force to be reckoned with. "Basically they own the market here in Australia -- not one of them but the group collectively," says Hewlett-Packard new channels manager Rosalie Boyd. "You can’t ignore the biggest player in the industry."

An industry veteran, Boyd denies the success of white-box is due to multinationals failing to focus on Australia.

"Look at pre-merger Compaq, look at IBM, they were always very strong players in the market and that hasn’t stopped the white-box market at all. It’s not as though Australia is left alone by the multinationals and just paid lip service, they push very hard," she says.

Last year Hewlett-Packard chose to embrace rather than fight the white-box market, signing a deal to provide Australian white-box builder Westan with unbranded computers, with Westan providing them to resellers under the Armapro brand or to brand as their own.

"The big mistake most vendors make is trying to compete against white-box -- you’re not going to win. What we’ve done with our approach is a partnering agreement, so we can bring value to the white-box guys so that they’ll be interested in playing with us," Boyd says.

"This is not a market share drive; it’s not competing with our brand. These are unconfigured, unbranded and have a completely different warranty. The consensus was that we were going to get flak from the channel; the reality was all I got was positive feedback and a snowball effect where some of the partners who are currently selling their own unbranded box are interested in taking this up with Westan."

HP's Boyd: Can't ignore biggest player in the industry

"Over the last couple of years I believe that multinationals have been taking white-box share through very aggressive pricing, in particular Acer and Dell and more recently Hewlett- Packard as well. The advantage that white-box used to have is narrowing.Whereas a few years ago you could have as much difference as $1000, today it’s a much narrower gap – possibly $100 or even less in some models," Aghtan says.

"When the multinationals decide to really get aggressive and dump stuff in the market you can see that white-box can’t even build them at that price. White-box is losing market share and the trend seems to be continuing, which is a bit of a worry for the channel."

Westan's Aghtan: White-box advangtage is narrowing

"The current products the white-box market is introducing have too many changes in them -- they swap and change components all the time."

After announcing the deal in October 2004 and delivering the first product to market in December, the program "ran into a lot of teething problems", Aghtan says. "I suppose you could say we have now taken a step back and reassessed the whole program and how to go forward again," Aghtan says."We are reassessing how we’re going to do it, not if we want to do it."

Boyd adds, "I’m not going to say to you that it’s a resounding success because we’re very much in the early stage of the program".