Market shift at Breakaway

Mont Tremblant, Que. — If System Builders are to make it to the next step, they’ll have to think outside of the box. The PC box that is.

That much became evident at the System Builder Breakaway held here last month.

First off the mark was AMD, which sent a large team from its Austin, Tex.

operations to promote the 64-bit Athlon architecture that it expects will be in demand by the fourth quarter.

One strategy system builders “”may want to consider is selling one server at a time and then cluster,”” said David Barclay, AMD’s product marketing manager for servers and workstations.

The implication? As 64-bit technology comes to market, and Microsoft readies its Longhorn operating systems for those environments, system builders will be not only be able to compete with the enterprise vendors, they’ll do it faster and cheaper, said Barclay.

LSI Logic, and its manufacturer rep N/Stor, was also on hand hoping to get systems builders to enter the market for high-end storage solutions.

“”No reason why storage has to be just an enterprise sale,”” said Tom Kodet, channel sales manager at LSI.

Kodet said with current technology a system builder can create a high-end storage solution at 10 per cent of the cost of an EMC or Veritas system and offer all the same SAN capabilities of a big corporate system.

This trend is already fully underway in the U.S., admitting surprise over why it wasn’t happening as fast in Canada.

One thing was clear from the event: System builders have many things going for them here.

They’ve got good market presence, proportionately higher in Canada than elsewhere, and up to 50 per cent of the PC market by some estimates. Also, in a geographically challenged country such as Canada local system builders have better relationships with customers than do the big-name, national brand names.

“”System builders in Canada are stronger than the ones in the States,”” said James Pedranti, vice-president, worldwide retail development for computer-speaker manufacturer Altec Lansing Technologies Inc.

Whereas Altec Lansing deals mostly with large retailers in the U.S., it uses mostly system builders here.

This is because “”quite honestly our (Canadian) customers want us to do it this way,”” says Pedranti. “”There’s a degree of loyalty (with Canadian system builders) you don’t find in the U.S.””

Contract manufacturing firm Celestica Inc. was saying much the same thing.

“”In Canada, building a brand with the channel has become more important than building it with the retailer,”” said Thomas Ward, the company’s vice-president, global channel.

For system builders, Celestica said it will also soon be offering a comprehensive line of white box wireless LAN, router and access point products.

But it wasn’t just manufacturers, it was evident that the distributors were also trying to coax system builders into new areas.

Greg Tobin, senior director of sales for the VAR division of Ingram Micro Canada, said contrary to popular belief PCs are not a commodity business, and need more support and training than ever.

Tobin’s advice to system builders: Start looking at a full range of services from education to support. “”And start charging for what’s upstairs,”” he added, pointing at his head.

Ray Gonsalves, Tech Data’s director of the system builder unit, said system builders may be overlooking yet another important market segment: Laptops.

Notebooks are selling as high, if not in greater, volume than PCs but carry much better margins and are especially, a very ripe opportunity for the SMB market.

Gonsalves also said distributors now have the back-end infrastructure to deal with a surge in demand, and as importantly, “”Intel has gotten behind us.””

Despite the upbeat mood at Breakaway, Bell Micro vice-president Frank Squizzato vice-president believed system builders will be facing some critical issues soon.

Severe price competition has eroded much of their strength in PCs, and it means systems builders will have to shift gears.

“”The hardware now has to be with a solution, then they’ll find a marketplace.””

One area is video-oriented solution boxes or animation-only boxes. “”Nobody in Canada is really doing it,”” he said. “”At least no system builders here are.”” In the U.S., however, he counts up to as many as 20 companies offering these solutions.

System builders may also pursue whole new areas such as services. But that means they aren’t system builders anymore, he added: They essentially end up a becoming a value-added reseller.

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