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Morphing the PC model

Morphing the PC model

Only a year ago, PC users driven by price bought direct from a vendor. If support was a main concern, users bought through a reseller. But the distinction between direct and indirect is clouded today, with each camp copying some of what makes the other so successful. The dramatic shifts in the PC industry - the copycat strategies and the blurred boundaries between the vendors and resellers - have sent many buyers back to re-examine what their vendor's competition has to offer, and often those buyers are finding many previous beliefs are no longer the truth. IDG US conducted in-depth interviews with a dozen PC managers at large organisations and a telephone survey of 152 other sites to identify the strengths and weaknesses of the competing PC acquisition models and to examine pricing and support trends Managers say support from direct vendors today appears more than adequate. At the same time, buyers say indirect vendors are advertising and negotiating more attractive prices than they did in the past. Still, preconceived notions may keep buyers from even investigating their options. Yet some of those ideas - highlighted below - may be myths, according to buyers.

YOU KNOW WHAT YOU'LL GET FROM BIG-NAME VENDORSInconsistency is a beef aired by users of the most prestigious PC companies as well as low-cost suppliers. For years, there has been a perception that name-brand vendors use known components and deliver similarly configured machines. Yet when buyers were asked why they changed vendors, they often said it was because their previous supplier, including name vendors, couldn't provide them with truly identical systems, even in a single order.

"We didn't expect to have this problem with Compaq," says Norman Brideau, a database administrator. "But we've had several shipments of the same system with several different kinds of motherboards. It's ridiculous."

In addition, vendors that deal through indirect channels may have an additional concern when it comes to inconsistency. It's often the reseller, not the manufacturer, that controls the final product in those situations.

With inconsistency in system configuration, corporate information technology managers get headaches. Troubleshooting and upgrades are easier when you know the hardware you're dealing with, and there are always software and hardware compatibility issues to worry about if supposedly identical systems have different types of memory or BIOS.

Brideau did a bulk order of memory for a number of Compaq ProLiant systems of the same model. His staff didn't realise they contained a variety of motherboards until he opened them up and discovered that some used parity SIMMs and others used nonparity SIMMs. "We were livid - it threw off our entire upgrade schedule," Brideau says. "It was supposed to take us three weeks, and when the CIO came down on week six, he wanted to know what the hell was going on down here."

Tom Milazzo, a director of information, ran into problems when he went to upgrade a fleet of IBM ValuePoint PCs. When he saw the number of different memory types he was dealing with, and their unorthodox BIOS, he knew he had discovered one of the reasons his network crashed daily. "I can't expect to build an infrastructure that stands up if I can't control the quality of my desktops," he says.

Dell was the only vendor praised by the interviewed users for being adept at building systems with absolute consistency. Milazzo, who has been buying from Dell for two years, says: "Each order comes exactly the way I want them, all alike, right down to the specific drivers for my network boards."

YOU ALWAYS SAVE MONEY BY BUYING DIRECT

Not necessarily. Yes, even with industrywide price chopping, users say they can save at least $US500 per PC with direct vendors. Indirect vendors sometimes negotiate for lower prices, according to users and analysts, and even the direct vendor's $500 price advantage doesn't translate into a pure saving. Some users argue that the additional services available to them through their resellers are worth more than $500.

That wasn't the case for Compaq customer Jeff Collins. He recently purchased systems from Gateway 2000 and says he received no more, and no less, support from Gateway than from Compaq. He estimates $US150 worth of his staff's labour goes into setting up each system. "We were doing the exact same thing when we bought from Compaq," he says.

With margins so low, "reseller support is almost nonexistent", says Michael Lind, PC support manager, who has been buying Compaq systems from his reseller, MicroSystems Warehouse, for the past three years. "I get most of my support directly through Compaq," he says.

Lind says he is mostly paying his reseller to help him stay ahead of the market. "I don't want to worry about configuring with the latest hardware or software. That's the value I look for." He may be typical of corporate managers in that he uses only a limited amount of the support for which he pays.

INDIRECT CHANNELS MEAN BETTER SUPPORT

That depends on how much support you need. If you are intent on doing your own installs, memory upgrades and drive replacements, and your IS team is large enough to support your user base, direct vendors may deliver all the basic support you need. However, a direct vendor would never cut it for someone like Dale Cochrane, a PC service manager. He has 1400 PCs and an in-house support staff of 15.

Cochrane says his reseller earns every cent supporting him. MicroAge technicians come by twice a week to pick up Hewlett-Packard systems covered under warranty, he says. "I can't afford to have my people calling vendors all the time."

Then there are users like John Mazzella, an information systems manager. He stopped buying Compaq systems because he didn't want to ship them out to be fixed. He wants a single point of contact at the vendor, to explain the problem and to have parts delivered the next day. "Gateway does this. That's all I need," he says. "I'm paying very competent technicians on my staff. Money going to a VAR would be like paying double."

IT'S BEST TO STICK WITH YOUR CURRENT VENDORUsers interviewed here say it's true. No matter how good the deal appears with other vendors, users say the relationships they have built with current vendors are worth much more than any short-term perk.

Although vendors are always trumping each others' value, price cuts and additional services are only good until the rest of the market follows suit.

But a good vendor relationship - one in which your sales representatives know you, your business and the equipment you already have - takes time to develop, and users say it shouldn't be thrown away to save a few measly dollars.

Talk about PC price cuts

By Kevin Burden

Price cuts - How much of what's promised will buyers actually see, and what other ingenious ways will vendors think of to make up for those cuts by sticking it to them? Buyers might be a bit sceptical of the lures vendors cast to get their attention, but the PC market is showing some credibility here.

A telephone survey of 152 US corporate PC buyers shows users are getting very close to what vendors promise. An IDG information management group asked these users what they would realistically expect to negotiate from a vendor that announces a 15 per cent list price cut. Nearly half are confident they would get the full 15 per cent. The average is just under 14 per cent.

But enough of the hypothetical. Ninety per cent of the users say they are paying an average of 13 per cent less for systems than they were six months ago.

But the cynic in most of us says vendors are surely socking it to us in other ways. No, 60 per cent of these users say.

And the 40 per cent who have seen these savings offset by vendors say it's only because they are buying more advanced PCs for the same cash. "The size of the cheque I write is no different. But I'm seeing more bang in the systems I'm buying," says systems administrator John Berryhill.

Figures

Eighty per cent of the respondents say their typical users are getting better systems than they are used to, and 64 per cent say more advanced systems will go to their high-end users.

However, price cuts haven't persuaded users to buy more services or to shop for vendors with the best price. Only 9 per cent say they are paying extra cash for extended service plans. And more than 60 per cent say there isn't any reason to change vendors, with many of those buyers noting that all vendors have lowered prices equally.


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