VARs Look To Others To Build Systems

The July CRN Monthly Solution Provider poll found record numbers of solution providers selling custom systems, but the number building their own systems fell to 32 percent in July from 45 percent in February.

Meanwhile, 51 percent of VARs said they buy pre-assembled custom systems, up from 34 percent in February.

Many VARs attributed the drop to low margins.

Rick Stace, president of Paradise Technology, a small white-box solution provider based in Redondo Beach, Calif., said price competition from custom-system offerings from Dell and Toshiba means he seldom assembles his own systems.

"My customers are effectively getting a name-brand box without the name brand," he said.

However, Stace said Paradise Technology will still build a system from scratch for customers looking for a high-performance machine with a large hard drive or a specific motherboard.

"Prebuilt systems tend to be lower-end models," he said. "Now I can get a 250-Gbyte OEM version of a hard drive for about $150 with a three-year warranty. With OEM system builders, you typically [only] get a 40-Gbyte hard drive which can be upgraded to 80 Gbytes."

Kirk Sipes, vice president of marketing and business development at AOpen Center Dallas, a Dallas-based distributor and system builder with financial ties to AOpen America, said about 60 percent of his company's servers, desktops and workstations are built for other solution providers, up from 30 percent two years ago.

AOpen Center charges resellers a fixed assembly fee of $25 on top of the cost of components and a small profit to build a system, Sipes said.

"Smaller resellers look at the bottom line of having someone on staff to assemble and [do quality control on] five to eight machines per day, vs. paying $25 to someone else," he said. "By the time a smaller guy repairs a system that was built without proper quality control, they can look at that $25 cost, and it's not so much."

However, Dave Nielsen, owner of Albuquerque, N.M.-based I-40 Computers, said he still builds his own systems, even at a higher cost, because larger system builders he has used in the past cut corners by using low-quality components.

"Our lawyer customers that charge $250 per hour don't want their computer to go down," he said.