Changes to the Western Australian government's server panel will see a local assembler lose up to $4 million of business.
CDM business development manager, Dai Du, said it had been a candidate for all server contracts issued by WA government departments. Now it is only authorised to sell blades.
The decision had wiped it out of the running for any education server contracts, Du said, because schools did not typically use blade servers. He estimated CDM sales to education had been $3-4 million per year.
"This marks a significant change to our business: it's taken away 30 per cent of our server sales," he said.
"Education was our main bread and butter. We were also beginning to make inroads into government agencies with locally assembled servers based on Intel parts.
This new contract means we can't access that market."
The WA Department of Treasury and Finance introduced a new Common Usage Arrangement (CUA) for purchasing servers last month. The changes reflect a growing trend for state governments to centralise IT procurement.
Five suppliers have been approved to sell servers to WA government departments: Dell, HP, IBM, Ipex and CDM. The contract runs until January 2009 with a further two one-year extensions.
While the panel structure is similar to the procurement policy in place since 2001, the new arrangement categorises vendors into three product types: blade, rack or tower servers.
By contrast, multinational players IBM, HP and Dell have been approved for all three product lines.
Another local assembler, Ipex, has been restricted to rack servers.
Du suggested pricing was a major factor in the government's decision to opt for multinationals over local builders.
"It was clearly set up for the big guys that have deep pockets," he said. "If they want the contract, they can cut the price. We can't afford to do that and this contract just eliminates us.
"Not many departments will choose a blade product from us given that IBM and the brands dominate the market."
CDM has spent the past five years building up its server business from scratch.
Du said it initially boasted a price advantage over branded competitors.
"The biggest barrier we faced was changing perception on brands but we were successful with that," he said. "Now the brands see us as a threat and have gone cheaper. When they decide to do that, you are finished."