COMDEXvirtual: How To Stay Alive In The Custom System Market

How can a system builder survive in today's volatile economic environment of falling hardware prices and intense competition from OEMs?

That was the question that three system builders tackled today at a COMDEXvirtual session on component selection and system building for small, medium and large VARs. In a panel moderated by Shirley Turner, CEO and president at Black Lab Marketing, the three system builders discussed how they've evolved and stayed competitive in such a challenging market.

"The biggest thing with the custom systems market is the transformation from a purebred, if you will, to a hybrid," said Frank Raimondi, Executive Director at NASBA. "The focus of one type of business model really isn't there anymore."

This need for flexibility is partly a result of the proliferation of PCs among average customers. "The commoditization of the client has really changed everybody's business," said Todd Swank, vice president of marketing at Nor-Tech."Ten years ago we used to focus solely on selling PCs, that's where most of our revenue was derived from. Nowadays, because the price of PCs has dropped so much; it's a bloodbath for pricing."

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"So we made the decision to start offering Lenovo notebooks alongside our Voyager workstations and servers, and honestly today that's probably the highest-growing part of our business," said Swank. "We try to add value-added services around that"

In contrast Chris Morley, chief technology officer at MAINGEAR Computers, said his company had managed to stick with selling PCs by focusing on the quality of the product. "We've been able to keep selling boxes, and at higher ASPs," he said.

"We find that if we do prior proper testing of the configurations we sell and if we have the right OEM deployment, the right testing, our failure rates are negligible," Morley said. "Our costs have actually gone down as we ramp this stuff up. We can get better margins that way."

The panel largely rejected the notion that system builders could sacrifice customer service when faced with other challenges.

"Customer service is beyond a single transaction," Swank said, "We look at the relationship with the customer as a long term investment. We want to make sure that we're delivering the best service possible, so that they keep coming back to us."

"It really comes down to you, your product and that customer interface. That's the relationship that you're protecting," Turner said.

Morley said MAINGEAR still served the same market it served ten years ago, but the company moved away from being just a dedicated gaming company and made it services applicable to everyday computing.

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"We've really been able to reach the market that's out there that the tier 1s are already selling to," Morley said. "It’s a multi-billion dollar market. We're a multi-million dollar company. Honestly, if we're not growing, we're not doing something right."

Part of growing has meant moving from a peer-competitive environment to a more collaborative environment, Swank said, as Nor-Tech has begun selling products to resellers and treating vendors as customers.

"We work very closely with Intel, Nvidia, and AMD on major product launches," Morley said."They count on us to earn the editor's choice awards with their hardware."

As for the role of incremental services Raimondi spoke activation services for wireless as a natural extension of increasingly necessary wireless service.

For those who are in the business currently and may be frustrated, Rainaldi said it was important to step out of their comfort zone.

"Everybody's got to adjust and find different thinks that make sense," he said.

Register now to attend COMDEXvirtual or to access on-demand sessions.