White Boxes Plus HAAS Have Potential

By Lawrence Walsh  |  Posted 2009-09-14 Email Print this article Print
 
 
 
 
 
 
 

Custom-built computers and servers have suffered the same commoditization as their branded counterparts. That trend may ultimate work in its favor by giving hardware as a service (HAAS) providers an affordable platform for standardizing customer infrastructures at a lower total cost of ownership.

Desktop and laptop manufacturers have seen sales decline precipitously over the last two years. Server sales are off by as much as one-third their 2007 levels. And the average sales price of their core technologies remains in freefall.

So why would anyone think the white box market is due for a renaissance? Commoditization. The same force that’s driving down hardware component prices is making it just as easy to build custom systems as it is to buy them off the shelf from the likes of Dell, Lenovo, Hewlett-Packard, IBM and Sun.

The true beneficiary of this renaissance just could be the growing hardware as a service (HAAS) market, which provides PCs, servers and other core technologies to clients as part of a comprehensive service agreement.

Over the last two weeks, Channel Insider has hosted an interesting, ongoing discussion on our blog about the difference between hardware leasing and hardware as a service. A subtle subtext to the discussion is the true value of white boxes. Many VARs chiming in noted that white boxes are equally commoditized as their branded equivalents, and that makes them valueless in a business proposition.

"As for white boxes, the cost is no longer a differentiator, so you cannot use costs as a major brand vs. white box any longer," says Pete Busam. "The computer is now a commodity and, as such, home grown doesn’t hold the value it did 10 years ago."

The numbers bear out on Busam’s assertion. According to IDC, the market for custom PCs and servers has fallen 37 percent over the last two years. The decline is being driven, in part, by branded manufacturers dropping their average selling prices. Even price leaders Toshiba and Sony are now offering PCs in the sub-$1,000 price range, making it hard for custom, purpose-built systems to compete.

But falling prices is actually working in favor of white box builders. Steve Eyton wrote in the blog discussion, "Remember, computer parts are computer parts nowadays. If you use the same parts as the big vendors, you’ll get the same results."

That’s part of the argument that Alex Rogers, president of CharTec, makes for hardware as a service. HAAS, he says, is not so much about providing hardware, but bundling hardware as part of a professional services package. What the user gets is carefree computing that’s tailored to their business needs. In a HAAS scenario, the customer doesn’t care who makes the equipment so long as it performs as needed. And that, Rogers says, opens the door for white boxes.

"The client buys whatever the reseller tells them to buy. All they care about is that it works and that it’s replaced immediately when it doesn’t," says Rogers, whose company enables solution and managed service providers to deliver HAAS.

If you can master the returns process for equipment and parts, Rogers says HAAS providers would be foolish not to build their own equipment and place it in customer environments. While the costs may be equal or slightly higher than branded equipment, the HAAS provider gains the benefits of standardization of the environments they’re servicing. And that leads to lower management costs.

And, as Eyton noted, the cost of components continue to fall. Intel’s release of Lynnfield, lower cost versions of the Core i7 and i5 processors, is bringing power and performance of the Nehalem chips at a significantly lower cost. The cost for boards and chipsets, drives, cases, KVMs and other components are equally within reach of even the smallest white box builder.

The opportunities in white boxes are such that it’s even spurring startups in this doldrums market. Nova Mesa Computer Systems, located outside of Phoenix, tells The Arizona Republic that business is brisk and growing, as businesses and consumers opt for custom-built personal computers that retail for as low as $460 – well within the competitive reach of equivalent systems by Dell and HP.

Some solution providers are still gun-shy about white boxes because of the risk exposure of equipment failures. Getting replacement parts from Intel, AMD and other components manufacturers has often proven laborious and not worth the hassle. Going with branded vendors, many say, provides a certain level of assurance that replacements will be more manageable since the entire piece of equipment, and not just the part, is under warranty.

CharTec’s program provides managed service providers offering HAAS equipment replacement and maintenance, taking the worries out of the RMA process. Michael Burke writes on the Channel Insider blog that the process is equally simple; replace the equipment and use the returned boxes for spare parts.

"I build white boxes and use the major brands like Intel and Seagate, and have no problems with RMAs while under warranty. I just replace the parts out of pocket and use the replacement in a new box," Burke writes.

Hardware as a service, Rogers says, is nothing more than a math problem in which the total cost of computing ownership is either born by the customer in one lump sum or supported as an operational expense. In that equation, white boxes may prove a more fiscally sound platform for building holistic computing services and provide the white box market a newfound purpose.

 

Lawrence M. Walsh is vice president and group publisher of Channel Insider. Read his research reports at [CI] Perspectives.

GET CONNECTED WITH LARRY
>> Click Here to Follow Larry on Twitter

>> Click Here to be Larry's Facebook Friend

>> Click Here to Link Up with Larry on Facebook

 
 
 
 
Lawrence Walsh Lawrence Walsh is editor of Baseline magazine, overseeing print and online editorial content and the strategic direction of the publication. He is also a regular columnist for Ziff Davis Enterprise's Channel Insider. Mr. Walsh is well versed in IT technology and issues, and he is an expert in IT security technologies and policies, managed services, business intelligence software and IT reseller channels. An award-winning journalist, Mr. Walsh has served as editor of CMP Technology's VARBusiness and GovernmentVAR magazines, and TechTarget's Information Security magazine. He has written hundreds of articles, analyses and commentaries on the development of reseller businesses, the IT marketplace and managed services, as well as information security policy, strategy and technology. Prior to his magazine career, Mr. Walsh was a newspaper editor and reporter, having held editorial positions at the Boston Globe, MetroWest Daily News, Brockton Enterprise and Community Newspaper Company.
 
 
 
 
 
























 
 
 
 
 
 

Submit a Comment

Loading Comments...
























 
 
 
 
 
 
 
 
 
Thanks for your registration, follow us on our social networks to keep up-to-date