Builders must evolve of die

It has always struck me that the great advantage of working in this industry is also its biggest challenge. I'm talking about the rate of change. No matter how good you are at what you do, you better be prepared for somebody to try and pull the rug from under your feet at any given moment.

The decline of this country's whitebox industry is a classic example (see page 1 of the digital edition of ARN). To some extent, it was to be expected because we all know mature economies cannot compete effectively in commoditised markets. Building personal computers definitely falls into that bracket today. But the speed at which it has fallen away from a position of strength has been somewhat surprising.

Although still accounting for more than 40 per cent of the desktop market, less than one in four sales are whitebox if you add notebooks into the equation. Industry experts we spoke to suggest this decline will bottom out soon enough but you can be sure more players will go out of business before we get to that point.

The rapid growth in notebook adoption, largely at the expense of desktops, is one of the biggest factors behind the collapse of whitebox sales. Intel has tried to help local builders get a foot on the notebook ladder through a 'building block' initiative that standardised key components. More than a year later, it has failed to make any significant impact and whitebooks remain an extremely niche play. As much as Intel wants to sustain healthy local builder channels in all markets, it is fighting a losing battle.

Some traditional whitebox players have managed to make successful transitions into new areas. ASI Solutions is a notable example that now generates a lot of its revenues through a document management practice. Others are playing closer to home and joining the multinational reseller ranks instead of trying to battle against them.

For those who insist on sticking to their knitting, pundits suggest the best whitebox opportunities lie in gaming and industry-specific customisation in areas like design. That is a good idea for two reasons. Firstly, it has become nigh on impossible for them to differentiate against Acer and Dell in traditional heartland such as corporate, government and education. Secondly, plying your trade in gaming and customization means building higher value machines. As a result, margins should also be a little healthier.

The other suggestion is to try and find some space in the retail market but I doubt this will be a successful strategy. The PC market is already so commoditised that the vast majority of potential buyers will always go for a brand they know. When price differentials are so low (they are now largely non-existent in many cases) that is how consumers behave.

Whichever strategy local builders choose to employ, it is imperative that they pick one. The only certainty is that those who stand still are just waiting to die.