Distributors Look To The White Box

Distributors are no stranger to building boxes. Years ago, channel assembly and white box initatives swept through the industry like wildfire. To meet reseller demand and not lose ground with competitors, many distributors eagerly built large-scale configuration centers or partnered with third-parties to build systems. But while channel assembly has since fallen to the wayside, distributors retained a lot of the infrastructure, operational expertise and knowledge needed to configure systems.

What's at stake today? A white box and configured systems market segment that could reel in extra dollars for distributors trying to endure a flat industry. A study done earlier this year by industry analyst IDC showed that shipments of non-branded PCs and PC servers equaled 13.7 million last year and were expected to climb to 15.7 million by 2005. Fueling some of that increase are lower IT spending budgets and businesses' desires to bring technology costs down while still purchasing quality systems.

For resellers, that could mean the availibility of custom-designed inexpensive systems and servers that are designed and built by trusted channel partners. That, say distribution exectives, is key because resellers want to be able to trust that unbranded systems have quality parts inside and will work to their customers' specifications.

Avnet Applied Computing (AAC), the PC distribution arm of electronics and components distributor Avnet, based here, wants to put more power in the hands of resellers and take some of the "fear of the unknown" out of buying white boxes. AAC recently created and launched Avnet FastBuild, an online configurator that enables resellers and system builders to configure and buy custom white boxes.

"We're tying to put names behind [white boxes that systems builders can rely on and trust," says Mike Romero, director of technical marketing at AAC. In some cases, systems builders and resellers have little to no control over the technology and components offered in white boxes. But AAC wants to change that. "System builders need a partner that can bring this technology to them," Romero adds.

The key to AAC's FastBuild is a selection of branded components from which customers can select to build their systems. Vendors include Fujitsu, IBM, Intel, Micron, Western Digital and others. There are no second-tier or no-name components inside systems created with FastBuild, says Romero.

"We wanted this configurator so that the customer could see the brand they are selecting, and not just the brand, but the actual part number," says Romero. In past custom-build efforts from distributors, constrained products from vendors were an issue and created order delays. But Romero insists that its vendor partners are committed to the Avnet FastBuild and AAC has taken steps to ensure product availability.

Also, if resellers don't want to spend the time developing a custom system, they can choose from more than 30 pre-configured and pre-tested systems that have been designed by AAC's certified engineers. Either way, AAC's engineers have eliminated the risk of buying a system with compatibility issues because all the component combinations have been designed to work together seamlessly.

With the FastBuild online configurator, resellers and systems builders can also set up multi-processor servers and complex RAID storage arrays, says Romero. And most FastBuild orders have a 72-hour turnaround, depending on complexity and design, he adds.

For system builders that maintain that their value is in building the box, AAC will also ship white box parts as a kit for those customers who choose to build it themselves. That way, system builders can still add in their own software and customize the box the way they choose.

If indeed AAC is first-to-market--as the company says it is--with the Avnet FastBuild online configurator, you can expect its competitors are close behind. Englewood, Colo.-based Arrow Electronics says its custom-built white box program is similar to Avnet's offering, except that Arrow doesn't offer an online configurator. Instead, the distributor developed a program last December called PlatformBuilder through which customers can order a variety of configured systems, servers and appliances.

Through PlatformBuilder, Arrow customers can design their own sysem or choose from 30 pre-configured and pre-tested systems featuring key vendors, such as Intel, Iomega, Maxtror, Micron, Microsoft and Sony. Customers quotes are answered within five to 30 minutes. Arrow executives believe customers today are looking for quality over price. PlatformBuilder has been "easily doubling" its sales volume quarter on quarter, said Arrow executives. The distributor hopes to have an online configurator by 2003.

Broadline distributors Santa Ana, Calif.-based Ingram Micro and Clearwater, Fla.-based Tech Data will also build single systems for customers, but most of their configuration business centers on large roll outs.

As broadline distributor, Ingram Micro says its model calls for a focus on solution configuration, such as a networked or wireless solution, rather than a product specfic build, such as a white box. Resellers and system builders can order single or multiple custom-configured boxes via its integration hotline or an electronic order sheet on the distributor's Web site. But it's not a configurator with a set list of choices and mapped compatibility, cautions Ingram Micro.

The "order sheet" functionality allows resellers to select parts, but orders are then sent to an Ingram Micro representative for review before moving on to the configuration facility. The reason there are not set components nor specific brands is because Ingram Micro wants its customers to remain open-minded about what products they might need to solve a business problem, executives said. Hence, it becomes a solution sell.

Ingram Micro also focuses heavily on re-configured systems for those customers that want to add value, such as adding more memory or a better CD-ROM drive. The distributor believes such a service leaves resellers to focus on driving the sale rather than re-building boxes.

"Early on, we focused on an actual configurator and channel assembly. Now we are focused on reconfiguration services," says Mayra Victoria, director of Integration Services at Ingram Micro. "Configuration is a necessity service (for us) to be viewed as a full service distributor. By offering integration services, we are building a stronger relationship with our VARs. There's a lot of cooperation between customers and Ingram Micro."

As of today, demand has "decreased a bit" for configured and re-configured systems, and the distributor expects volume to remain consistent into 2003, says Victoria. Overall, the program's viability down the road will depend on its vendor partners and any impact from their direct models, says Victoria.

As for an actual online cofigurator, neither Ingram Micro nor Tech Data have one. And both companies left open its possibility in the future, under the guise of a never-ending quest to create profitable programs and opportunities for their customers. Tech Data wouldn't elaborate further. "We're always looking at new opportunities--branded and unbranded -- to meet our customers needs," said Joe Serra, vice president of product marketing at Tech Data.