Distribution Sparks White-Box Innovation

CRN: Where do you see innovation happening in the custom systems market?

Schwab: We really break it down into the desktops, the mobile and server platforms in the custom systems environment.

The strongest growth today is coming from the server platform, although it's coming off a smaller base of sales. The desktop business continues to be innovative and seems to be holding its relative market share in the channel today, even though it's dropped from years prior. I think today it's probably gone down to maybe 20 percent market share in the white-box world. Mobile solutions are in their infancy. They probably represent less than 5 percent of notebook sales today, but there's good growth opportunity there as well.

If you look at this past year, the white-box business has been conditioned that it's losing market share. While that might be the case year-over-year, I think there's still a lot of new innovation and technology coming forth that allow the reseller to add value.

On the mobile side, there's certainly innovation coming that allows a reseller to look at whitebook solutions more strongly than they have in the past. It revolves around Intel's VBI—Verified by Intel—program, which involves having common building blocks [of custom systems] be interoperable. It creates a good opportunity for resellers to stock parts and service products from a variety of manufacturers. That allows the reseller to be much more consistent in his offerings of whitebooks.

The innovations that I see that are compelling in the marketplace for custom systems builders are coming as they continue to differentiate their products from the Tier 1 OEM products.

CRN: How do you think custom systems builders can distinguish themselves from the Tier 1 manufacturers?

Schwab: First is, they can leverage the best-in-class new technology into the market at a much quicker pace than the Tier 1 OEMs. I say that because through both Intel and AMD there are verification programs that allow you to take their most innovative new processor technology, identify which motherboard is compatible and pick the right chassis and power supply, and go to market with an innovative product that the multinational companies haven't brought to market yet.

For example, when Barcelona [was launched], AMD's quad-core server product, or when Intel launched its V-Pro series of products, they allowed the custom systems builder to take advantage of that time-to-market advantage they have.

I also see that they have a great ability to get technologies and solutions that will differentiate and bring value to their customers. For example, Western Digital has introduced a green drive, meaning that it uses less power and is more energy-efficient. If they can put their products in their systems, they can bring more value to their end users. They can choose from best-in-class memory.

There's opportunity for innovation in every aspect of the product. When you look at cooling solutions for very high-end systems that demand more reliable cooling instead of using a fan, they can use products such as liquid cooling systems, which use a whole different technology to keep the system running.

CRN: Where do you see opportunities for systems builders to be more environmentally friendly?

Schwab: There is a need to recycle components. Over time, I think the reseller will have to participate in a way that makes sure that when they're replacing systems, they're taking away the old systems. They'll have to have the ability and the know-how to make sure the products are recycled in an efficient manner.

Particularly as you look at server technology, they're going to have to understand that [with] best-in-class solutions—starting with the processor and including every piece that ends up in the machine—people are trying to put more technology into a smaller footprint and do so with less heat generated and more efficient use of electricity.

It's not that people have unlimited space that they can keep putting in more servers and use up more power; people are trying to figure out how to create more useability and be more efficient at the same time. I think that's why you see a trend toward products like VMware and blade servers, which use a smaller footprint and more processing power with less use of power.

CRN: Do you see innovation being driven more by the consumer or by business demand?

Schwab: You see consumer demand driving innovation when you look at very high-end systems, particularly in the gaming segment.

In the business environment, I see the manufacturers driving the technology into the channel.

I think there is a need at the end-user level, but the innovations are coming from the manufacturers themselves—for example, remote network monitoring and management of PCs, improving security, the ability to use virtualization technology and data protection software—those things which are being incorporated into technology, and are coming from the manufacturers.

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