Advice for the system builder

If system builders want to make it to the next step they’ll have to think outside of the box. The PC box that is.

That much became plainly evident to me while spending four days with them at the Systems Builder Breakaway at Mont Tremblant, Que.

The first clue came in an interview

with Greg Tobin, senior director of sales for the VAR division of Ingram Micro.

Contrary to popular belief, PCs are not a commodity business and need more support and training than ever. “”They need to start charging for what’s upstairs,”” said Tobin, while pointing at his head.

Tech Data was also trying to be helpful, with Ray Gonsalves, its director of the system builder unit, suggesting system builders may be overlooking the notebook product category.

Notebooks are as high volume as PCs but carry much better margins, he said. And, they are a very ripe opportunity for the SMB market.

How about storage? “”No reason this has to be just an enterprise sale,”” said Tom Kodet, channel sales manager of LSI Logic, which represents NetStor here.

Kodet boldly claimed that a system builder can create a high-end storage solution at 10 per cent the cost of an EMC or an H-P system which offers the same storage-area network capabilities of a corporate system.

Pushing harder than anyone was perhaps AMD, which flew in an entire team from Austin, Tex. to help spread the 64-bit processor message. Servers are the future of the system builder, the company said ad nauseum.

Let’s see, that’s storage, servers, notebooks and services. It could be argued there’s not a lot of new things to be said about any of the four. It begs a question: Why is taking it so long for system builders to exploit these markets?

System builders have so many things going for them in Canada. They’ve got good market presence, proportionately higher in Canada than elsewhere, and up to 50 per cent of the PC market by some estimates.

Further, they are being taken quite seriously by some well-known industry players: Altec Lansing, ATI, Celestica, Crucial Technologies, Cyber Acoustics, LG Electronics, NEC, Sony, Western Digital. I know: I talked to representatives of each of them at the conference.

Finally, systems builders have excellent penetration into certain regions and verticals, and loyal customer relationships that retailers or direct-selling vendors can only dream of.

So why aren’t they leveraging these advantages? I have a theory, sparked by a conversation with one of the distributors in a bar. It’s his view system builders are a lot better at thinking tactically than strategically. They tend to think in marginal terms when it comes to improving their bottom line – for example, maybe we can change one memory component with the other and decrease the cost of one system by three per cent.

What systems builders are less inclined to look at are whole new lines of business like storage, where enterprise vendors are making a killing and margins are way too high. (Come to think of it, that guy from LSI Logic might be on to something.)

In other words, systems builders don’t think strategically enough, and it comes at a time when they have never been better positioned.

Now only if they would sit back and think about it.

Martin Slofstra is the Editorial Director of ITBusiness Group.

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