Editorial: Paying the price

Editorial: Paying the price

Reflecting on the recent Department of Defence (DOD) decision to snub local manufacturers in its latest PC refresh, Ipex product director, Shayne Taylor, was quick to point out that the Government doesn't owe anybody a living. He is, of course, quite right. Buying shoddy products just because they sport an Australian badge would be a waste of public money.

But the decision to completely ignore local builders in an order of 20,000 machines suggests one of two things - either the DOD believes all local manufacturers are sub-standard or it has been swayed by newly sharpened multinational pricing.

The first option seems unrealistic in a heavily commoditised PC market, especially when the DOD has a history of sourcing a share of its new machines from local suppliers. The second is an altogether more dangerous possibility and, followed to its logical conclusion, could eventually spell the end of local computer manufacturing.

Local companies have fared a little better in a recently rolled out NSW Department of Education and Training contract. But despite winning a share of that pie, ASI Solutions and Optima have both expressed disappointment at the size of their slice - eight out of 10 regions were awarded to IBM.

For years now, Government contracts have accounted for a quarter of Optima's business. That figure has now fallen below 20 per cent and, although it is currently trying to diversify into consumer electronics, the company would be severely damaged if that Government number continued to shrink.

Public accountability means Government departments have to be price sensitive to some degree, but they must also be seen to support local industry. Apart from the financial value of these deals, they are also invaluable reference sites when local manufacturers are trying to secure corporate contracts. Being registered as a Government supplier is an important stamp of approval and life would undoubtedly become much more difficult without it.

It would be wrong to blame the multinationals for cutting prices to win deals because they can only play by the rules that are set by those with the purse strings. But the Government must be careful not to base purchasing considerations purely on price because the multinationals will win that fight every day of the week and local industry will eventually be crippled.

There is inherent irony in price now counting against local industry. For years, these companies have played cost as one of their strongest cards alongside speed of delivery and flexible configurations.

Optima chairman, Cornel Ung, has said the company is working on increasing its value proposition from a services perspective and other manufacturers are no doubt hatching similar plans. Let's hope this extra investment reaps some reward because the Government must take some responsibility for protecting local industry and the jobs it provides.

The problems faced by local manufacturers of computer hardware are not confined to the public sector. Companies like Dell and Acer have been open in recent times about their intentions to wrestle market share away from the local whitebox community.

This strategy is definitely paying dividends, particularly in the SMB market. Specialist distributor, Also Technology, has claimed its whitebox sales dropped by 40 per cent this quarter - a frightening figure that bodes ill for anybody playing in that space.

At the same time, the latest combined desktop and notebook figures from IDC show Acer, IBM and Dell have easily been the best performers in the branded segment, with each gaining a point if you compare Q1 2005 to the same period a year ago. While there will continue to be a place for whitebox in the foreseeable future, it will increasingly become a tough game to play as the multinationals continue to tighten their stranglehold.

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