White-box versus the brands

Consumers buy branded PC and notebook products because they trust them, but the white-box market will continue to stay strong regardless of the perception that brands are of better quality, according to CRN Roundtable attendees.

The personal service and low prices that white-box manufacturers provide will ensure this market remains buoyant. White-box sales make up 50 percent of all PC-related sales in Australia at any given time.

Kerstin Baxter, director of Microsoft Australia's partner group, says the white-box market is strong with its focus on small business and home users where it is the neighbourhood shop where you can walk in and take your computer. 'There's that whole promise of customer service, because it's people doing business not brands,' Baxter says.

LAN Systems' Nick Verykios says he is not concerned about a brand if it is a deskbound PC, but wants a branded notebook. 'If it [a PC] is sitting on my desk probably not, but I'm travelling so much that I want the damn thing to be robust and I can only rely on a brand,' he says.

The massive price disparity that once existed between the brands and clone manufacturers is closing. Express Data's Peter Masters says people still like to buy trusted brands. 'That bit of human psychology hasn't changed. I think the issue for white-box manufacturers in reverse is that as the prices come down, then the price of buying a brand is not that much different. If it's between $2,300 and $2,700 -- it might not matter, whereas if it's between $4,000 and $6,000, it might,' he says.

'Notebooks are getting down to $2,300 -- the trust doesn't matter as much. That's a big challenge for the vendors, a big challenge for the brands,' he adds.
However, Novell's Steve Martin still places more trust in brands. 'For the first time ever from a home PC point of view I'd consider putting a brand in because the price difference is negligible. From a work point of view, I wouldn't touch anything but a brand.'

IBM's Phil Cameron points out that in the notebook market, mobiles are increasingly being used by mission critical executives, therefore the quality of the data that is in there is so important. 'If you have a problem you want to be able to fix it quickly. It depends on the buying criteria,' he says.

Mobile computers take specialised engineers with the componentry skills to manufacture them, he continues. 'Just that miniaturisation and the sophistication that goes with that is one of the major reasons why brands are so strong in mobile computing.'

Cameron says traditionally, white-boxes have gone through retail channels. 'We're partnering with independent retailers now through distributors that are very strong in the OEM area of distributors where they're leading with our ThinkPad. We've actually now got independent retailers that never used to look at our ThinkPad and now they're selling it in volume,' he says.

Total Recall Solutions' Adam Connor, makes the point that Apple Computer 'doesn't manufacturer their own notebooks anymore -- they're made by Qanta in Taiwan who makes laptops for everybody'.

However, Apple's decision to outsource manufacturer had not changed the quality. 'I felt that the quality hadn't changed very much with all these things coming out of Taiwan. Looking back at desktops, Apple's now making their G5 machines in China and they are just stunningly made -- incredibly well built.'

Microsoft's Baxter says a strong focus on customer service will keep customers coming back to white-box suppliers. 'There [are] an awful lot of them out there that are having very successful businesses,' Baxter says.