Rather than rest their fortunes on the favours of vendors, small-scale whitebox manufacturers around the country are carving out a niche with custom-built systems. And while they hardly rate a blip on analysts’ charts, many are building a healthy business based on upgrades, long warranties and excellent customer service.
After more than a decade in the business, managing director of Sydney-based Complus Computers, Tony Prince, decided he'd had enough of the mini-margins vendors granted and began to build his own systems.
“If an end-user more or less insists on a brand name I will pick one up from Tech Pacific. I don't mind provided I get the sale,” he said. “But I rarely recommend them because I think we build a better box.”
Selling mostly to home users and small business customers, Prince said the key to the market is good customer service.
“We started in the hey days of the computing market boom, so now we’ve got people coming back for their third, fourth and in some cases fifth computer,” he said. “I haven’t advertised in years, I tend to think that people who do a lot of advertising are having to replace customers who aren't coming back.”
Nonetheless, Prince didn't begin building his own systems until he managed to iron out supply and warranty issues with his suppliers.
“I needed a single supplier that could give me all the components,” he said. “If you’ve got six different suppliers providing components for the one box chasing up warranty can be a real headache.”
While Complus relies largely on return customers and showroom sales, general manager of Sydney-based TechBuy, Colin Mead has achieved a similar result offering custom-built machines through a virtual showroom.
Like Complus Computers, TechBuy has no advertising budget and relies principally on word of mouth, upgrades and return customers.
However, with its sales principally directed through the Internet, the company saves on renting a shop-floor.
“Around about 70 per cent of our customers come back,” he claimed. “We’re getting a brilliant response from the website, it accounts for about 95 per cent of our sales and we are growing 20 per cent per month.”
And while Complus spreads its earnings more or less evenly across showroom sales, upgrades and onsite network support, Mead said much of TechBuys business stems from regular SME upgrades.
“A lot of midrange companies put in clones and upgrade them every three years or so, because it gives them systems that function like new machines at about half the price,” he said.
While big businesses often opt for leasing arrangements which lock them into brands with high resale value, Mead said mid-sized companies and some government agencies have more flexibility, and will take the option to upgrade to keep their costs down.
That's not to say that custom-built whiteboxes need necessarily stay in the SME or market space long term.
Founder and CEO of Cougar Computer Systems, Richard Alexander, launched as an online custom-build computer retailer in 1996, but said online sales now represent only 20 per cent of his overall revenues.
“The biggest boom in online sales was in 2000-2001, but in the last two years there has been a surge of discounting and we are not in that market,” Alexander explained. “Like a lot of industries we follow a 12-18 month business cycle, and in order to keep growing apace we have to reinvent the business for every new cycle.”
Having kicked off the business offering a range of high-end workstations, Cougar has matured through a full range of business offerings supported by leasing arrangements, and is now pitching against the likes IBM to win a contract to build a new supercomputer for the Australian Partnership for Advanced Computing.
“We’ve had a great deal of success selling Linux cluster super computers into the tertiary education sector,” he said. “Now, when we do a big sale it’s in the hundreds of thousands, if not millions.”
And while the numbers seem to spiral ever skyward, Alexander said the principals behind his business are the same as those which underpin most custom-build outfits.
“Companies that really succeed get their service and support right, they are not selling based on cut prices,” he said.