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Hardware Today: The Changing Wrapping Paper on the White Box Market

By Carl Weinschenk (Send Email)
Posted Sep 15, 2003


Announcements this summer by AMD and Ingram Micro should be all the proof needed that the white box industry has arrived as a mainstream way in which enterprises acquire computer resources.

The white box market is going mainstream as it shifts from serving a low-end niche to being the technology of choice for a growing number of small and midsize enterprises. Carl Weinschenk discusses why some organizations are passing on a branded box and picking up a less decorated one.

While this statement may be a bit overstated because of white boxes' long history, it appears that the industry is entering a new phase characterized by an effort to forge an identity equal to -- albeit different than -- the branded computer industry.

White boxes are computer devices -- PCs, servers and, increasingly, laptops -- put together from commodity parts by vendors other than manufacturer. The boxes, which obviously don't carry major brand names, are configured by value-added resellers (VARs), independent software vendors (ISVs), system integrators, and other third parties.

Buyers don't get the security of a Dell or Gateway on the box, but they do get more uniquely configured items, often from a local vendor that they know. "White box servers offer customers greater flexibility, which allows software developers and solution providers greater options in customizing the specification to meet their requirements," says Jim Wang, sales manager for Area Electronic Systems, a white box manufacturer headquartered in Placentia, Calif.

White boxes are put together quite differently than units from big vendors, Wang says. Most organizations assume that the configuration from commodity parts is the reason the price is lower. This isn't quite the case, Wang says. He notes that it actually costs more to put together a white box unit because it is generally handmade, whereas a box rolling off the Dell or Gateway assembly line is put together by robots, which is less expensive.

The reason white box units do cost less, as much as 10 percent to 15 percent less according to Wang, is that the white box industry doesn't spend as much money on marketing or after-market services.

However, this appears to be changing, at least to some extent. White box manufacturers claim the bugaboos of the past -- poor tech support and production/parts inconsistency -- are fading. Increasingly, vendors are focusing on providing advanced management capabilities to white boxes in networked environments, including grids. "Manageability is a key driver in terms of how IT is able to reduce overall costs, says Steve Rokov, the director of marketing for OSA Technologies. "We see that expanding into the white box market."

Proponents have some impressive numbers to point to. Ingram Micro, citing statistics from IDC and Computer Reseller News, claims 43 percent of "solution providers" said white box desktops were their best sellers in June; 17 percent said white box notebooks ("white books") were their best sellers in May; and 40 percent of small and midsize enterprises use white boxes, a percentage greater than any single brand.

Wang cites the improved parts quality and partnerships with companies capable of supplying tech support as reasons for the market's penetration. Rokov added that white box support of the Intelligent Platform Management Interface (IPMI) -- a standard used to monitor the key physical elements of a server, such as temperature, fans, and power supplies -- is a sign that the industry considers management capabilities an important issue.

Any market segment is not monolithic, however, and concerns about service capabilities still exist. "Support remains a question," according to Rokov. "There's a perception that nobody owns the problem."

In the big picture, the challenge facing white box vendors is to upgrade the areas in which they are weak without becoming indistinguishable from the branded industry. This will not be easy, since the factors that constitute the difference are important to companies. This must also be balanced to ensure the freedom held by ISVs, system integrators, VARs, and other vendors that play in the white box playground doesn't fade.

Geno Marcoux, vice president of the components business unit for Ingram Micro, says that white box suppliers fill a niche beyond simply providing inexpensive gear. They are better able to provide individualized and localized services and support than the large server vendors.

Thus, at least in some cases, one of the space's vulnerabilities -- the ability to provide service after the sale -- can be positioned as a strength. This is particularly important for small and midsize enterprise in vertical markets, which are unlikely to have an IT staff member onsite who can make sense of instructions provided by a vendor expert on the phone.

"Using a white box lets him get control of his configuration," says Marcoux. "A dental office, for instance, can call his local VAR and doesn't have to worry about someone coming from somewhere else. That guy has installed the entire solution. ... That dentist can say, 'Come fix my solution, something's not working.'"

Carl Weinschenk writes a weekly server hardware series for ServerWatch.

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