Custom Systems Hold Their Own In Education

David Bollig, president of Reason Computer, sat in on the meeting as bids were opened on a public school contract in Idaho for 4,500 desktops and servers. The room also included representatives of Dell, Gateway, Hewlett-Packard and Micron, which is based in Idaho.

All were veterans of the bidding process in that region, but none seemed to recognize the name of Bollig's company, which is a sister company to Nor-Tech, the Burnsville, Minn.-based system builder. Heads turned when the deal went to Reason, which provided thousands of slim-line PCs under the contract.

"They didn't know who Reason Computer was at first, and then they figured it out," Bollig said. "We came in under their price."

They know Reason's name now. Custom-system builders like Reason report that the education market has gotten off to a solid start and they are well-positioned to go up against tier-one competitors.

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One factor may be Dell's problems. A number of system builders that have competed with Dell for contracts over the past several months have seen the one-time fierce competitor in the education space going through a period of confusion and inability to match lower pricing by system builders as it attempts to strengthen its own operating margins.

But there are also other factors that are converging to create different opportunities this year for custom systems in the K-12 space.

Bollig cited Reason's ability to be flexible on pricing and configurations, as well as its ability to turn the order around quickly, as critical to fend off his larger competitors. Many school districts also seem to have healthy budgets and a desire to spend on technology. And even the shaky rollout of Microsoft's Vista operating system is boosting the cause, system builders say.

While school districts tend to be among the last to transition to new technology, districts are ordering systems that are Vista-ready, which adds to hardware sales. Other districts are buying Vista with a downgrade option—paying for Vista, which will ultimately be installed, but having PCs set up with XP so all their existing applications can run.

Next: Other factors driving white-box sales in education

Doug Falso, vice president of contract sales at Seneca Data, a North Syracuse, N.Y.-based company, said he is seeing school districts just begin the process of upgrading from Windows 2000. Still, he said the Windows Vista downgrade option is popular. The downgrade option provides school districts the opportunity to dip a toe in the water while keeping the day-to-day operations and student technology programs running without disruption.

John Samborski, vice president of ACE Computers, Arlington Heights, Ill., agreed, saying it allows those districts—which have budgets that vary from year to year—to pay for a Vista upgrade now when they have the money and take their time deciding when to implement it. He added: "Most of the schools are going to be buying XP Pro."

Microsoft is also taking the opportunity to provide some extra incentives for system builders during the back-to-school season, including a "Buy Local" program that provides system builders with peripherals like routers and 2-Gbyte USB drives as a bonus to education customers. "They are providing some awfully nice incentives," Samborski said.

And for whatever reason, school districts seem to have money this year. Samborski said districts are engaging IT solution providers and system builders after sitting on the sidelines for several years. "We're just seeing a lot of refreshes from school districts who haven't had the money," he said. "A lot of these school districts have been impoverished for years because the states were hurting. It seems as if the states are finally getting their houses in order."

While different states have different funding mechanisms for technology in education, many are now outlining goals for increased technology spending. Falso said that is the case in New York, where a new governor has pledged to support technology spending for education. "There's more money this year," he said.

Still, K-12 school districts continue to lag business technology purchasers in the adoption of new technology and that is likely to continue. While some system builders reported having success with Linux last year, that has not been the case this year. Schools are more focused on refreshing Windows-based desktops.

In Indiana, for example, where a state grant last year led to the migration of more than 20,000 students to Linux-based desktops, state and local officials and integrators found many school districts reluctant to make the switch because legacy applications ran only on Windows or Macintosh operating systems.

"I always see those guys lagging in technology because they don't need it," Falso said. "They need access to the Web. They have some canned application that they use."