Servers, Notebooks Drive Growth For Custom Systems Builders

Corn said notebooks have been tough for system builders because volumes were too low to entice ODMs to work with the channel. But now he thinks Intel's program is working, at least, for larger builders. "Anytime you get somebody like Intel—or AMD—to stand behind the [Return Merchandise Authorization] process, you've got to take advantage of that."

That could bring others back into the market. "We really quit manufacturing notebooks and started moving more tier one," said Todd Swank, director of marketing at Nor-tech, Burnsville, Minn. "It's something I've kicked myself with. Now with the VBI initiative, it looks like something we should be experimenting with."

The real driver of growth and profitability for the custom-system channel, though, was servers. For the 36 leading system builders, servers rose to 15 percent of total volume in 2006 and unit sales grew 23 percent.

While system builders were finding that margins were compressing toward the lower end of the server market, where Hewlett-Packard was aggressively taking on Dell, there was no shortage of customers for servers of all types. AMAX, the server volume leader, was building a lot of appliances for small startups and ISVs, ranging from network and security appliances to Windows accelerators. "We're going deeper and deeper into appliances, and we see a lot of opportunity," Shih said.

Several builders cited high-performance computing as another hot area—and not only in the supercomputer arena. Nor-tech is marketing a Nor-tech Portable Cluster, priced at roughly $45,000, that can be moved and plugged into a regular wall socket. "We really feel like we might be on the edge of a tidal wave on this one," Swank said.

Storage remained a small category, comprising only 2 percent of total units, but volume was up 55 percent, carried along by server sales. Proactive Technologies, Carrollton, Texas, which builds servers for ISVs in the printing industry, grew storage unit sales 500 percent.

Other builders, such as Comprehensive Computer Solutions, Christianburg, Va., which builds systems that provide the human interface for industrial machines, are exploring the category. "Some of our customers have a lot of intensive data that they're processing and collecting, so they're asking for different storage solutions and redundancy around those solutions," said Gary Overstreet, vice president of sales and marketing.

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