White Boxes Drive Profit

That was the message Sunday night during "The State of the White Box Market," the lead seminar at CMP Media's Tech Builder XChange, held this week at Loews Coronado Bay Resort, San Diego.

White-box systems today account for 21 percent of the total PC market, according to RoperNOP Research, New York. Despite some small gains in the enterprise, the SMB is still the sweet spot for white-box solutions, said Monty Cornell, director of research for CMP's Technology Solutions Group.

For example, very small businesses, those with one to 20 employees, bought 42 percent of white boxes in 2001; small businesses, those with 21 to 99 employees, bought 18 percent; consumers and home office workers bought 17 percent; and small- to mid-size companies, those with 100 to 500 employees, bought five percent, Cornell said, citing RoperNOP research.

Solution providers also said they sold four white boxes for every branded system in 2001, compared with three to one the year before, according to Roper.

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The reasons for choosing white boxes over branded systems are varied, but several solution providers at the seminar agreed on a driving factor: services.

"Customers realize they're going to get more for their money with a white box," said Steve Plotz, owner of Computer Systems of Tampa, a solution provider in Gibsonton, Fla. "Our boxes might be more expensive than some branded systems but our customers know they're getting all our services wrapped into that box."

More solution providers realize that those services, not the name on the box, drive profit. In CRN's monthly solution provider poll, 66 percent of the respondents said they build their own desktops compared to 61 percent last year. Sixty-two percent of those polled said they build their own servers, compared to 51 percent last year.

Mark Bose, president of Bose and Associates, Tampa, Fla., was one of several solution providers who said he makes at least 25 percent margin on an average white-box system. Bose and others said they have shied away from branded systems because the low margins aren't worth the hassle of dealing with vendors that compete against them and the services offered by those vendors are often sub-standard.

"All the customer cares about is that we'll take care of them. They know we'll give them whatever they need," Bose said. "Customers come to me and say, 'Here is my problem, solve it.' And that's what we do."