The winds of change

The debate over brand versus no-name has reached the notebook market as whitebooks win an increasingly bigger spot on the Canadian portable podium.

“”The whitebook market experienced steady increases in popularity throughout 2003,”” said Evans Research analyst Michelle Warren.

In the first

quarter 11,800 units shipped, accounting for 2.9 per cent of total white market activity. By the end of the year shipments had increased to 9.8 per cent of volume.

Acknowledging the market is young, Warren expects whitebooks to account for 10 to 15 per cent of the overall whitebox market this year. That market accounts for 40 per cent of the PC’s sold in Canada.

“”Price and service, combined with custom-built capabilities are key selling features,”” said Warren. Increased VAR and manufacturer commitment to the technology also contributes to the growth in popularity.

And since notebook sales revenue is overtaking desktop revenue in the tier-one space, Tech Data Canada president Rick Reid said there’s no reason to think the whitebox market won’t be different. Reid moved into the whitebook space in December following partnerships with Bizcom and Intel.

“”From the business perspective of a system builder, it is a pretty good value proposition. The average selling price of a notebook is significantly higher than a desktop,”” he said. “”So building and selling whitebooks will leave a system builder with more margin dollars in the pocket.””

Customization and flexibility are top reasons why system builders will prove successful, Reid adds, stressing relationships are key. “”A customer is more likely to take a chance on their first whitebook based on their relationship with their system builder.””

Increased user comfort with computing technology, along with mobile computing and custom design capabilities are other contributing factors, said Warren.

Intel country manager Doug Cooper agrees, adding Canadian SMBs, in particular, are seeing the benefits of going mobile. “”The channel is responding to this demand by sourcing unbranded whitebooks on which they can sell services like wireless,”” he said. Enterprises with an IT department, on the other hand, are more likely to choose a branded notebook.

Cost, service concerns

But VARs selling whitebooks have two customer concerns to meet: Price and service coverage.

On the first, industry watchers say whitebooks must be priced at least 10 per cent lower than branded gear in order to be profitable.

“”Herein lies the challenge the whitebooks have: If they are not less expensive, people will buy brand name,”” said Jim Estill, president of EMJ Data Systems, which distributes the Trillium line of whitebooks.

“”And I am finding brand-name notebook suppliers often have similar packages. If this trend continues, whitebooks will not gain marketshare. Of course the opposite is also true: if whitebook prices are dramatically lower, the whitebook will win.””

That said, heads are turning to whitebooks, Estill said — particularly with cost-conscious PC buyers — because the technology to build them is now not as complex as it once was, and is more readily available.

EMJ has seen steady growth of its Trillium line (although Estill wouldn’t talk numbers), and has also measured success producing whitebooks for other companies with their labels.

Beyond price, the biggest limitation on the market revolves around service, said Reid. Tech Data’s way of meeting that was to ink a deal with W3 Solutions for extra coverage.

“”People have different service expectations for a notebook versus a desktop,”” he said. “”Resellers who can overcome the nation-wide service objection will win in this market. The partnership with W3 will provide that service on behalf of resellers, and because of our volume, they can offer it to their customers at a very attractive cost.””

Under the program, Tech Data has married its whitebook offering with W3’s build-to-order warranty program. Depending on a user’s needs, warranty packages include accidental damage protection, express shipping, and a host of options for on-site servicing.

The latest offering will boost whitebook activity, which has seen steady growth since the company jumped into the market in December, Reid said, adding sales and customer count has ramped nicely.

“”We continue to see an increase in the number of unique resellers ordering product, and we are starting to see the reorders.””

EMJ’s Estill agrees the primary problem with whitebooks is nervousness about support and service. “”People figure with a name brand, they will get support. But with whitebooks, it ranges from the garage shops with no service to established suppliers that stand behind their products like EMJ and Staples.””

And since notebook technology is more complex than desktop systems (in terms of batteries, compact size and heating issues), Estill said whitebooks are still considered a buyer beware market.

Partnerships key

The costs associated with manufacturing is another consideration, along with ensuring the right parts and components are readily available.

Forming partnerships with overseas manufacturers of the products is also tricky, said Warren. “”As the Canadian market is small, compared to other markets, resellers must convince manufacturers of the market opportunities.””

Whitebook assemblers must also establish credibility, battle the lack of consumer confidence — and give customers a range of offerings, she added.

To help, Intel is creating a whitebook ecosystem made up of distributors, OEMs and resellers. Cooper said Intel is working with original design manufacturers (ODMs) in Asia, as well as training notebook VARs on how to properly install and configure mobile Intel processors, mobile chipsets and wireless solutions.

AMD also in game

Advanced Micro Devices Inc. is also getting busy, said Bahr Mahony, product marketing manager of mobile processor group, adding whitebook development — and the push towards 64-bit computing — is a top priority.

It’s working with OEMs to provide value-added services such as layout reviews, schematic reviews, electrical characterization and testing.

And the wireless push is making a difference, Warren said, citing its hotspot partnerships in major urban centres and other initiatives which fuel the whitebook market.

“”Intel has invested a ton of money in branding Centrino,”” agreed Reid. “”They want the whitebook to succeed,”” he said. “”To that end, we are working closely with them to develop the infrastructure to build and support whitebooks, as well as market them appropriately.””

Reid said the rollout of an electronic configuration tool this month will help support resellers in the quoting and ordering process.

“”Through our Web site, resellers can configure a whitebook with the appropriate compatible components, and then turn that into an order which we will configure for them.””

Smart resellers needed

Ottawa-based Eurocom Corp. — considered by Warren to be one of the biggest whitebook players in the Canadian market — has seen 25 to 50 per cent growth over last year across its four lines: mobile workstation; desktop replacement notebooks; thin and light; and all-in-one portable LCD-PC, said president Mark Bialic.

He said resellers are warming to built-to-order laptops because of an inability to make money selling desktops. Consumers (in the gaming and engineering markets) are attracted to the push towards mobile systems, and are seeing more choice of whitebox solutions.

And while there’s hype about the whitebox market, he said the hard part is finding knowledgeable resellers. “”The biggest challenge is to find quality resellers — people capable not only of understanding the technology, but able

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