When Is a Manufacturer Not a Manufacturer?By Wayne Rash | Posted 2004-10-18 Email Print
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White-box resellers fill a critical need in satisfying diverse requirements.
When I talked to Michael Chang a few days ago about his company's decision to sell Microsoft XP Media Center in quantities of one, it soon became clear that this wasn't a mom-and-pop operation screwing computers together in the backroom. No, what Chang and his company Directron.com have become is a maker of custom solutions. He is, you might say, a bespoke tailor for the new century.
While many of his customers probably look to Directron as a low-cost source for everything from parts and components to complete computers, in fact the company goes far beyond that modest role. While Chang's company does, in fact, sell those parts as well as complete computers, he also provides larger customers with a source for custom-designed and -built machines configured exactly as those customers need them.
During our conversation, for example, he told me of a contract he has for 4,000 computers for a school system. He prepares and ships those computers as the school system needs them, making changes as requested.
Because of this, the school system might, for example, order a few hundred Media Center computers, followed by a few hundred more that have, perhaps, smaller hard disks and standard productivity software, followed in turn by something else different still. Because he builds the computers as they're requested, he avoids the high costs of warehousing, and he also increases his flexibility.
It's the flexibility along with the reasonable costs for his products that keeps Chang's company in the running, he said. But this also demonstrates why Microsoft made the obvious decision to stop restricting its Media Center edition to only major manufacturers.
While Directron may not sell the volume of computers that you'd find at HP or Gateway, this 50-person Houston company isn't exactly tiny. More important, the differences between his computers and those from the major manufacturers are fairly small. Agreed, he doesn't have a big-company logo on the box, but look inside and you'll see the same stuff that you'd see inside nearly any other computer, whether it came to life on the Dakota prairie or across town at HP.
Well, there are a few other differences. Directron sells most of its products to other resellers, so the support load is fairly light. Those resellers will provide the end users with support that's required, and this cuts Directron's costs even further.
But in reality, the equation is the same whether those resellers were providing the end users with computers from Directron or from a vendor such as Dell or IBM. Yes, there would be a familiar logo on those boxes, but the resellers would still be providing the support. So how much is that logo really worth?
As I talked with Chang, I reflected on the days when I was reselling computers to the government. In those days I would have given a lot to have had a means of providing a completely configured computer, with all of the specialized hardware installed and set up, delivered to the place where we'd be doing the work. Instead, we could always count on opening each machine, adding network cards or whatever, and then updating the software before we could move ahead with the installation. I still shudder when I think about how many staff hours were wasted doing such things.
But things have changed. Through what can best be considered custom manufacturing, resellers are getting exactly the product they need delivered to the end user in exactly the place where it should be, exactly when it should be there. I think it must have been abundantly clear to Microsoft that companies like Directron.com and similar white-box providers were really the manufacturers that stood an excellent chance to spread Media Center into businesses.