As Australians continue to take a shine to build-to-order PCs (with whitebooks the current flavour of the month), resellers can look to the no-name, unbranded camp for some good coin. But before the local market takes off and resellers get savvy with configuring their own notebooks, there are some major considerations for partners jumping into the game.
And it goes beyond higher percentage points. While the promise of meatier margins might entice resellers initially, other top considerations include inventory and logistic, service and support, technical training, demand creation, as well as sales and marketing support, according to Todaytech marketing manager, Jennifer Hsieh.
Whitebox benefits include a greater range of customised solutions, flexibility, simplicity and proximity to customers. And while the whitebook space is still finding its feet, quick time to market and agility in configurations are other overall strengths.
With eight offices around Australia, Todaytech offers 12 barebone notebooks. The whitebook segment accounts for six per cent of Todaytech's business. Service and spare parts are also a big considering factor for resellers, Hsieh said.
"We carry spare parts for every model of barebones - from LCD panels to the smallest screw," she said.
"It's an extra assurance to our resellers that parts are always available for them to provide services to their customers."
And while there's a lack of reseller experience and market know-how, already there's no shortage of players or product catering to the whitebook market.
"There's increased interest for whitebooks in the channel and we're expecting this number to grow exponentially this year," Hsieh said.
The company has started to heavily tout the whitebook concept in the past year.
Hsieh said there was a huge opportunity for reseller profitability.
"To start off, having their own brand [private labelling] can help maintain and grow their established business, extend product portfolio and protect themselves from big industry shifts," she said.
Value-add and service were other areas where resellers could make additional margin, Hsieh said.
"Opportunities exist for resellers to customise their service and support offerings, providing the end-user with added value and greater flexibility as well as increased customer loyalty," she said.
What is more, the convergence of IT and consumer electronic products is also having an impact on the local whitebook market as players jockey for a position in the emerging digital home market.
As such, industry proponents say the whitebook is tipped as the likely home gateway solution for the consumer.
Intel Australia's channel marketing manager, Andrew McLean, said the local whitebook market was growing by leaps and bounds in Australia.
He expects it to account for 50 per cent of his time this year.
There was huge growth in the number of mobile CPUs sold to local system builders last year, McLean said.
"The desktop market is still growing, but the mobile market is growing faster," McLean said. "And system builders need to get into this market."
Revving up the market, Intel has entered relationships with several original design manufacturers (ODMs) in Taiwan, as well as local distributors to improve the accessibility of notebook platforms.
The recent launch of Sonoma (the second generation of its Centrino mobile processor platform) would also have a positive impact on the whitebook market, McLean said. Sonoma would offer a new version of Intel's M mobile processor, a new wireless chip and a new chipset. The technology, which features a new front-side bus and larger on-chip cache, will give graphics performance a boost.
The overall strategy involved continuing to drive the Centrino brand throughout Australia, he said.
"We will give the channel the latest products: new models with a whole new chipset to support new processors," McLean said.
But IDC PC analyst, Michael Sager, warned that the market shouldn't get too excited. Despite all of the white hot hoopla, Sager expects slow but steady growth this year.
The top three players in the Australian market are Optima, Twinhead and Pioneer, he said.
Currently, whitebooks make up seven per cent of all notebooks sold in Australia, Sager said.
According to Gartner, the local whitebox market (desktops and mobile PCs) captures about 45 per cent of the overall Australian PC market.
"Putting aside the Northern Territory education win by Optima, the local manufacturer market has yet to truly blossom despite growth in the overall notebook market," Sager said. "This should continue into the foreseeable future despite the efforts from Intel and AMD."
And while the whitebook market was poised for growth, stiff competition in the overall Australian notebook space was having an impact - essentially there was one new competitor every eight weeks, Sager said.
"The past four quarters have seen an unprecedented growth of new vendors in the local notebook market," Sager said.
"Asus, BenQ, LG Electronics, Medion and Samsung have all invested in local operations and have dramatically increased the competition for incumbent vendors.
This meant it would take longer for the local whitebook manufacturer to get a following, Sager said.
Given the landscape, where should resellers look for some whitebook action?
Intel's McLean said whitebook manufacturers need to hone in on particular market segments (including government, education and SMB) and consider customer requirements.
For example, partners can look at hard drive or memory configurations for a competitive advantage.
"Customers are going to start asking for configurations, and this provides great opportunities for resellers," he said.
Pushing past a barebone system (with a screen, keyboard and motherboard), system builders can add the processor, memory and hard drives.
"Over time we'll see more and more flexibility," McLean said.
Expect to see snapping screens down the line, he said.
Business development manager for QDI Technology, Eric Chan, said Intel's mission to rev up the whitebook market was good for the whitebox industry - and would make a difference for QDI, which has been pumping out gear for more than 10 years. The company is peddling 40 to 50 units of one model per month, but plans to crank up the heat this year.
Consumers wanted access to a gamut of different styles, as well as access to low and high-end equipment, he said.
Look and performance were top considerations - particularly widescreens, graphics cards and longer-generation machines, Chan said.
Indeed, system builders could configure notebooks to end-user requirements, which remains a difficult endeavour, Chan said.
"It is still difficult to actually start building systems, and the reseller needs a lot of education," he said.
But Intel's initiatives (including funding/seminars and financial incentives) would help, Chan said.
In concert with Intel, Todaytech is also touting the importance of reseller education and rolling out build-your-own seminars that provide the latest technology information and technical hands-on skills in helping partners configure notebooks. "One of the foremost goals for us this year is to build knowledge and confidence around whitebooks," Hsieh said. "We see this as one of the most important steps in involving resellers' in whitebooks."
Over the next three months, Todaytech's whitebook team will take to the road (sessions have been confirmed at Newcastle, Canberra and Adelaide).
The tour will involve educating resellers about Sonoma technology and the required technical skills.
System builders might be proficient at integrating desktops and servers, but not notebooks, Intel's McLean said.
"Partners may be good at working with desktops, but need help transitioning to mobile solutions," he said.
And since partners need periodical training and updates on technology and methods, Todaytech's Hsieh said resellers should consider getting access to this type of training as part of a package when developing a relationship with a distributor.
"Todaytech's care package also includes sales and marketing support to resellers," she said. "We're interested in helping them develop demand generation programs/campaigns and other programs to assist resellers in promoting whitebooks."
A value-added distributor such as Todaytech (which consolidates multiple ODM relationships) can also help resellers pre-select products suited for local markets; offer competitive pricing with local product support; as well as offering a full range of spare parts, which are stored locally.
Painting the town white
For others in the trenches, whitebook business is expected to take large strides, and build on the momentum that started last year.
Notebook product manager for Optima Technology Solutions, Henry Lee, said the company had followed the Australian market trend and sold more desktops than notebooks in 2004, mostly because tenders favoured desktops over notebooks.
But 2005 may see some changes in the shipment ratio, Lee said. Expect more whitebook action in the education space.
The company offers three main models, and expects to strike a chord with consumers thanks to the company's service, installation and support capabilities.
System builders could differentiate by offering a range of peripherals, he said.
But resellers needed to consider several factors before getting involved, Lee said.
"The key for resellers looking to break into the whitebook market is value adding and upselling," he said. "Being local and able to provide prompt personal service is a definite advantage that all resellers should be looking to capitalise on."
Managing director for Pioneer Computers Australia, Jeff Li, said Pioneer was no stranger to the whitebox business, servicing it for the past eight years.
Even so, the whitebook business was especially demanding, Li said.
"Whitebook manufacturers have to build a brand, have the structure in place for service and support and have sufficient volume to get the best price breaks," he said.
In a bid to get an edge, Pioneer's main push is focusing on high-end desktop replacements.
"The strategy has paid off, with a loyal following of government and customers," he said. "Models like 470k, powered by Athlon 64 processor and runs on Microsoft Windows XP Media Center edition, has been tremendously popular."
Rounding out the whitebook list, the company is also offering a set of feature-rich notebooks including the 300N and the 900T, which includes a 17.1-inch WSXGA widescreen, PCI Express chipset and a high performance graphic chip and DDR2 memory.
The potential for larger margins were an obvious turn-on, Li said. And now that many component manufacturers and distributors were getting into the game, more market action could be expected.
"The margin of high-end notebooks is certainly much more attractive than that of a PC," Li said. "That represents attractive business opportunities to the reseller channel."
Indeed, customers had turned a corner, he said.
"Customer feedback indicates a demand for feature-rich notebooks at an attractive price point," Li said. "At the recommended retail price of $999, the Pioneer 300N Notebook has achieved the breakthrough in price and reached a segment of the market previously only catered to by PCs."
Integrated features such as graphics to whitebook models is also attracting consumers to the space. The technology is moving past standard-built models and addressing the trend from low-cost units towards feature-rich machines.
Indeed, consumers were attracted to the flexibility associated with build-to-order machines, particularly the SMB market, QDI's Chan said.
QDI Technology has an edge in the market thanks to its local and overseas market experience and infrastructure.
But even with a decade of experience, challenges remained, Chan said.
"Building up a consumer's trust level is the most difficult aspect of the whitebook market," he said.
"It's harder to sell the whitebook concept to consumers. People have a bigger tolerance for branded players. And one bad deal or incident with a whitebook player is equivalent to about five with a branded player."
Whitebook players run the risk of being blacklisted if the consumer suffered from even one bad experience, Chan said.
Shoddy service and a lack of warranty options can add to the frustration.
But Chan said QDI was strong in the warranty department - analysts claim warranty infrastructures is essential to stay competitive.
Quality assurance was another main hurdle, he said.
Lack of parts, support and services were other sizeable concerns, Optima's Lee said.
"There are some hurdles for resellers when building their own whitebooks, including keeping spare parts for warranty, difficulty in servicing onsite warranties, and [in general] whitebook purchasing power may be expensive for small quantities," he said.
But Pioneer's Li said some vendors could rise above the challenges and offer customers an attractive low-cost alternative to brand name gear.
Certainly, whitebook activity wasn't going unnoticed by the branded cousins.
Toshiba's Mark Whittard said there were considerations that a reseller must answer prior to going down the whitebook route.
Typically, whitebox notebooks were still 100 per cent manufactured and assembled overseas and often did not provide for local assembly given the complexity of design and miniaturisation, which required higher engineering skills and equipment, Whittard said.
"Hence there are fewer opportunities for savings in component sourcing, freight and lower level build to order, configuration to order opportunities than whitebox desktops," he said.
Moreover, Whittard said due to the complexity of design, tooling and component assembly, the whitebooks were typically all manufactured at one of three or four manufacturers based in Taiwan or China and made from the same blueprint.
"Therefore, while these are unbranded there is a lack of differentiation from one whitebox to another so that only leaves price and local service and value-add as your differentiator," he said.
Whitebox products are also often assembled using lower quality components due to the fact that global brands ensure priority supply of premium quality components for utilisation in their brand products, he said.
But Todaytech's Hsieh said the industry needed to dispel these and other lingering whitebook myths.
"The new technology and design is far more advanced from where whitebooks emerged years ago," she said.
"Resellers need to build up the confidence and move out of the comfort zone to explore the hottest trend of mobile technology."