Canadian firms show little interest in Verified by Intel program

SAN DIEGO – Shawn Wright likes building laptops now.

The general manager of Superior Computers in London, Ont., a system builder and VAR, “fought like crazy” against adding a white book offering to the company’s product lines until realizing the margins would be better than those on brand name laptops.

But Superior, which does some $28 million a year in sales, largely by building computers and servers, is not participating in the year-old Verified By Intel (VBI) program, under which Intel warranties laptops built around approved chassis and parts. Instead the company builds white books under a program set up by chassis manufacturer Compal – which, ironically, is part of the VBI program.

The problem, he explained here in an interview during Intel’s annual Solutions Summit, is that while the VBI program can ensure parts like batteries and hard drives are swappable, if an entire system needs to be repaired it has to be shipped to the U.S.

“I don’t want to get into sending stuff across the border and getting stuck there,” he said.

Superior isn’t alone. In random interviews with Canadian system builders here, none said they have joined the program, although Intel believes there are great opportunities for its channel partners.

“I’m not sold on it yet,” said Gil Guertin, president of Winnipeg-based Pro-Data Inc., a white box manufacturer that sells its systems to some 2,000 resellers in Western Canada.

“We did our best to support that,” he said, making some 1,000 VBI laptops. But competition from OEMs like Acer, Dell, and Hewlett-Packard made it unprofitable, a common complaint.

Doris Kiu, manager of Vancouver’s Varsity Computers, a $2 million a year VAR, said the company prefers to sell Toshiba or Lenovo laptops because customers want brand names.

However, Intel executives said here they’ll soon be announcing a number of steps which they hope will lure more VARs to the program, including a new aggregator to buy parts and therefore lower prices, a better supply line and a wider range of chassis with the May 9 launch of a new ‘Santa Rosa’ Core 2 Duo mobile processor.

Under VBI, Intel got chassis manufacturers Compal, Asus and Quanta to create shells powered by Intel Celeron, Core 2 Duo or Core Duo CPUs with 15.4- and 14.1-inch screens that partners can build systems around using optional parts such as hard drives, optical drives, memory and batteries. Some 15 suppliers are now listed in the catalogue.

In Canada, VBI distribution is handled through Tech Data Canada and ASI Canada.

The goal is to fight OEM laptop makers by lowering costs, allowing the channel to build systems with enough options to differentiate themselves from the brand names and make better margins.

It’s not the first time Intel has tried to push a white book model, and company execs admit the latest attempt has been shaky.

VBI “got off to a bumpy start the first half of last year,” Steve Dallman, general manager of Intel’s worldwide reseller channel organization, said in an interview Tuesday.

“It’s been slow,” agreed Justin Whitney, Intel’s North American business development manager for notebooks, who acknowledged the border problem is a big impediment.

For example, he said in an interview, one Montreal VAR came up with the idea of creating customized covers for the laptops, essentially printed sheets slipped into a plastic overlat that could be produced by Kinko’s. But a $14 prototype made in the U.S. would have cost $100 to be sent over the border.

“I don’t know how we didn’t realize that would happen,” said Whitney.

He also said that while OEMs can still undercut a VBI-assembled white book by $100 to $200.

On the other hand, he added, a promo last December which with rebates for some Intel CPUs that lowered the prices on some VBI models to US$699 sold out. So did models priced at US$899.

Of the 25 million notebooks sold in Canada and the U.S. last year, 80 per cent came from four OEMs, he said, while only two per cent were custom-built. If the VBI program can get economies of scale, the concept can be successful and profitable for the channel, he said.

The danger for channel partners selling only OEM laptops is the inability to differentiate themselves from other VARs, Whiteny said.

Partners have to realize that they can improve their margins through VBI-assembled white books by selling second batteries, backup and even their own extended warranties.

“We’re only a year into this,” Whitney said.

Intel also hopes to generate more interest in VBI with the release of systems around the ‘Santa Rosa’ CPU, which will promise up to five hours of battery life and an optional ‘Turbo memory’ module that will speed boot up and shut down.

VBI system sales did pick up in the second half of 2006, Dallman said, and more improvements are expected this year.

“We’re out looking for a different supply aggregator solution,” he said, “and hopefully by doing that we’ll be able to better manage bringing (VBI) into Canada. A couple of the companies we’re looking at are more sophisticated in handling international logistics than the solution we have (now). And I have to admit that what we have now is more U.S.-centric than what we’re doing now, especially now that we’re bringing Europe online.”

But Dallman also doesn’t expect resellers will give up OEM laptops. Instead, he predicts they’ll be carried along side VBI white books, perhaps with the channel partner’s brand on it and the VAR emphasizing the personal solutions that can be built on the platform.

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Howard Solomon
Howard Solomon
Currently a freelance writer. Former editor of and Computing Canada. An IT journalist since 1997, Howard has written for several of ITWC's sister publications, including Before arriving at ITWC he served as a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times.

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