How To Mind The Gap

And then a funny thing happened on the way to the customer: The vendor delayed shipment of the product at the last minute and left tens of thousands of channel partners--and their customers--in the lurch. Or, maybe the product was a monumental disappointment and VARs were left to do damage control with unhappy customers.

VARBusiness spoke with solution providers about these all-too-common scenarios in the wake of Sunnyvale, Calif.-based Advanced Micro Devices Inc.'s stumbling rollout of its first quad-core server processor, Barcelona. Some basic themes from successful, nimble VARs began to emerge, painting a picture of how they are able to avoid most supply-chain shortages and can even turn delays and disappointing product rollouts to their advantage. Here are four of their rules to live by:

Keep The Lines Of Communication Open
Sometimes a product comes along that's so highly anticipated and so integral to a VAR or custom system builder's planning that prerelease deals are struck with customers and any holdups could have a devastating effect on business. That was the case with Barcelona and AMD.

Already delayed by months before its much-heralded launch last September, Barcelona had even more difficulty in store. To the dismay of AMD partners with preorders lined up--not to mention the chagrin of the chip maker itself--the new quad-core Opterons had a glitch that made them effectively useless to all but a few very specialized system builders. And unlike other commodity components made by multiple vendors, quad-core Opteron CPUs are uniquely suited for specific server configurations such as memory-intensive data center workloads. High end stuff, in other words.

This meant that system builders like Arlington Heights, Ill.-based Ace Computers--which had extensive plans with customers for Barcelona installations--were essentially up the creek without a paddle for the last half of 2007 and into the new year. In that sort of situation, you just have to keep talking to both your customers and the vendor, said Ace Computers vice president John Samborski. Keep everybody informed on progress in getting the problem fixed and the product rolled out.

The silver lining in this case is that AMD is ahead of its initial late-first quarter 2008 projection for a fix of Barcelona, according to a source at the chip maker. Meanwhile, his dialogue with the vendor leads Samborski to believe that AMD will ease some of the pain felt by partners like Ace Computers due to the quad-core delays.

"They basically provided us with sample products and they will provide the corrected products for [our Barcelona] customers, so it's nice that we don't have to put out the money for that. They're doing a very good job of taking care of us in a bad situation," Samborski said. "They're doing exactly what Intel [Corp.] did with the Pentium. It was a major black eye for Intel originally, but everybody came to trust Intel after it was all said and done," he said, referring to the 1994 discovery of a major floating point division glitch on Intel's Pentium P5 family of processors.

Next: Turn Setbacks To Your Advantage Turn Setbacks To Your Advantage
When it became clear last year that businesses were less than enthusiastic about Redmond, Wash.-based Microsoft Corp.'s Windows Vista operating system, Microsoft foes, commentators and even some channel executives moved in with daggers drawn. Pessimism reigned, but in the meantime, some savvy solution providers quickly identified an opportunity.

Companies like Technology Specialists, Fort Wayne, Ind., and Smart Guys Computers, Winter Garden, Fla., became part of a tidy little cottage industry that did boffo business ripping out Vista and reinstalling Windows XP on client PCs.

"We are ripping it off systems 99 percent of the time," Jay Tipton, vice president of Technology Specialists, told VARBusiness last July. Wiping Vista off systems and replacing it with XP took about two-and-a-half hours for his technicians, said Tipton, whose company, a Microsoft Gold Partner, serves the medical industry.

By the middle of last year, the No. 1 service job at Smart Guys was ripping out Vista for XP, said Smart Guys president Glen Coffield. In just 90 days, Smart Guys had removed Vista from more than 1,000 systems and replaced it with Windows XP Professional, he said. For a rip-and-replace, Smart Guys charged between $150 and $250, and by last July, XP Pro was outselling Vista by a 20-to-1 margin at Coffield's stores.

When some big-box retailers finally caught on to the trend and started putting XP systems front and center again, the rip-and-replace market slowed down a bit for Smart Guys, Coffield admitted. But VARs like Smart Guys were the first to seize on the initial opportunity and fast movers were able to turn a debacle into a profit center before the Big Boys got hip to what was going on.

Milk the Supply Chain
System builders like Ace Computers depend heavily on a smooth supply chain of parts to turn around custom system orders quickly and consistently. That's why the company tries not to throw all its eggs in the basket of any one vendor.

"You try to put yourself in a situation where you're not so reliant on a single component," Samborski said.

Ace Computers is a lot smaller than Dell Inc., Round Rock, Texas, which is famous for having a massive list of far-flung suppliers throughout the world and also works with distributors. But Samborski said the same sourcing strategy is as operational for the bigger OEMs as it is for the smaller ones.

"If you try to plan and forecast where you want to be on the system builder side, you try to ally yourself with multiple vendors who have the same product. We generally don't have supply chain problems-- maybe a few glitches here and there," Samborski explained. "We probably see more problems with older SKUs because we do a lot of embedded work for the government and the military. If you do need to get some of these parts, you're not going to get them at the Synnexes, the Ingrams. When it comes to fall-off-the-road-map SKUs, guys like NewEgg.com, City of Industry, Calif., can fill some of those holes for us."

Get On With Your Life
Finally, if all else fails, you may have to just cut your losses, Samborski said, referring to what might have been a less positive outcome for Ace Computers with AMD's Barcelona efforts.

"If this were an ordinary shortage situation, you'd really try to find out ways to get the customer built up, maybe go Intel or see if AMD could get them installed on dual cores," he said. "I wouldn't know what else to do. You have to get inventive."