I was recently approached by a small business that handles pipeline flow measurement to implement an entry-level server with Microsoft Small Business Server 2003, which could be used to manage email, host a web site delivering real-time flow data, and facilitate remote management. Easy enough, right? But the customer wasn't interested in a custom-built system. He had been recommended HP hardware, and he insisted on a ProLiant ML-series server.

No problem; I'm gunning for customer satisfaction. Besides, HP offers its own reseller rewards program that spits back up to 10% for influenced sales—an easy bounty for those disinterested in hardware or tired of fighting for slim-margin sales. Using HP's site, we were able to pick a suitable server, save the configuration, hail a representative on the phone, and get the ball rolling. With an estimated delivery date in two weeks, I had plenty of time to ready the site and procure software.

Things didn't quite turn out as planned, though. Two weeks passed without a word from HP. As it were, some component—they couldn't tell me which—held up construction and the system wouldn't be ready for another two months. HP's VAR support was so disorganized that there were no lines of communication between sales, tracking, and manufacturing. Each department blamed another for the mix-up. With egg on my face, I instructed sales to cancel my order. I'd go elsewhere.

That seems like a logical end to the story, right? However, manufacturing never received the order to cancel. I found that out a week later when a box from HP arrived at my door containing 10 pieces of the part that originally held up the server order. Another call to HP determined the box had been sent accidentally, my server was still in a queue to be built, and it'd be canceled "for real" this time. And by the way, could I please take time out of my day to return the box that was sent? Otherwise we'll bill your customer's credit card. Thanks for that.

Needless to say, my customer's delusions regarding HP's swift service and SMB-friendly nature were dissolved in the short course of a month. HP made is painfully clear that it didn't care whether it secured his business or not. The sales guy wanted his commission, the tracking folks wanted to get off of the phone, and manufacturing was deliberately kept from communicating (even with the other departments, an HP representative admitted). That sounds more like a hostile environment rather than the model of collaboration and support I'd want backing my small business. Understandably, with such a negative experience under his belt, my customer was more than happy to take his business elsewhere.

Now, I have little doubt that most of HP's transactions go much more smoothly than mine. Research data from IDC indicates that the company increased shipments and revenues in 2004. Clearly, something is going well in Palo Alto. It's enough to make a small VAR feel even smaller when his customers get blown off, isn't it?

But Why Fight It ?

Of course, it's much easier to say "screw it, there's no money in building white box servers" and tolerate the occasional browbeating from a top-tier manufacturer who really couldn't care two shakes about your occasional five thousand dollar order. But nobody ever made a positive difference by merely taking the easy route. And beyond the simple principle of it all, failing to deliver means you look like the bad guy when it comes to facing your customer with an excuse as to why his project is getting pushed back. In my case, it involved delaying the installation of a critical LOB software package. My customer lost money while one arm of HP blamed another for botching a simple job.
Turn that previous argument around and analyze it from another angle. Is there not value in providing a timely solution? Aren't customers more likely to call upon a VAR with the resources to service their needs immediately? Does HP's warranty service address problems in a timely fashion? And, given the sales hack-job cited, are those the hands in which you would willingly place a customer? Previously, I may have been comfortable handing off technical support issues. Now, I plan to recommend against it and take care of them myself.

No matter what, though, there will always be the VARs who would rather take an OEM incentive, deliver a name-brand server, and be content not to sweat the technical details. That's an especially attractive proposition when it comes to those who lack the hardware background and instead focus on deploying software. Fair enough, I'm not gunning for converts. Rather, I'm looking at 2004 revenue numbers $3.2 billion dollars higher than 2003, with Dell, IBM, and HP all growing business. (Sun, it seems, was the only loser.) In the fourth quarter alone, total sales increased 5.7 percent. UNIX servers were down, x86 was up, and packages such as Microsoft Small Business Server 2003 helped simplify the footwork involved in setting everything up. There's no money in hardware? Phooey. Servers aren't your $599 budget boxes. They're lower volume, higher margin, and generally more lucrative.

Doing It with Precision

That isn't an invitation to throw away caution and assault established tier-one server sales. You may command a squad of soldiers, but those big names constitute entire corps. Going toe to toe is downright foolish. Instead, as in war, it is advisable to concentrate on an opponent's weak points, winning battles along the way. The preceding story hemorrhaged weak spots in HP's infrastructure all over the place: commissioned salespeople with no stake in the outcome of a deal, poor interdepartmental communication, surprisingly lackluster supply, and a general inability to deliver on promises. My oil and gas guy doesn't care who is at fault. He knows he's spinning his tires while I, his consultant in the matter, am standing by, waiting for paint to dry. The rest of the engagement had better go off without any more problems, else I risk losing a customer.

Let's start from the top. As a VAR, when you upsell a product, the impetus is twofold: increase margin on your side and add value for the customer. It is a trust issue whereby your non-technically inclined customers rely on you for the equipment they need. HP's representative was more focused on making a sale, quoting a two-week ETA on hardware that would have taken three times that long to arrive. In the end, he lost his sale and turned off all parties involved to HP's products.

Then there's the issue of communication, an inevitable top-tier weakness. When a different person answers the phone every time you call the same number, it's virtually impossible to establish rapport. And when every new rep gives you bad news that in turn has to be passed on, the situation quickly becomes an "us versus them" standoff. Without a third-party responsible for a completed server, the white box VAR is in a more favorable position to cultivate relationships that lead to repeat business.

Both of the preceding problems might have been overlooked had my customer received his equipment in the projected time frame. But HP does massive volume, and an order placed for a server gets queued up behind many others. One kink in the supply chain puts a squeeze on deliverable product. Although HP undoubtedly has multiple sources, putting all of your eggs into just one basket just doesn't seem prudent. The VAR with multiple distribution partners can draw upon ancillary supply should one dry up. And don't underestimate the impact of a shortage, either. One of the components that purportedly held up my machine was an 80GB SATA hard drive—yes, the same part you can find on a CompUSA or BestBuy shelf. A resourceful VAR should have little difficulty solving that problem in a timing crunch. HP, unfortunately, could not.

Finally, always be cognizant that you're engaged in a relationship with your customer. They trust that you'll satisfy technology requirements while you count on return business as a reward for a job completed thoroughly and priced fairly. Once you're the established solution provider, God help the competitor who marches in and claims he can do better. Yes, it has happened, and the poor guy was shown the front door. You have to get to that point first, though, which means delivering quality on time. A white box server helps make that possible.

Help, Please

One thing that top-tier manufacturers do particularly well is cover their bases when it comes to support and warranty service. HP sells installation services, varying levels of support services priced according to duration and response time, security assessment services, and software troubleshooting services that can cumulatively cost in excess of $30,000. If you're selling consulting services with your hardware, add value by pricing out the server with examples of those tier-one services to demonstrate how much money your customer will actually save on support by going with your white box package.

Depending on your market, it might also be possible to outsource the warranty and support work. Of course, that means getting into quality control and whatnot, but there are plenty of businesses devoted to servicing support desk-type questions after your successful deployment, and subcontracting is certainly an option to keep you competitive with tier-one support options.

More Speed, Less Freed

As I dug deeper into the fiasco that was my HP dealing, I determined that while the ProLiant server on order was priced competitively, a comparable white box would have been both faster and less expensive. To begin, the default configuration includes one memory module. For those in the know, the latest Intel Xeon and AMD Opteron platforms employ dual-channel memory buses. HP neuters the servers right off the bat by only populating half of the bus. Add a second processor and effective memory performance drops off even faster as the two chips contend for throughput.

Moreover, the only option available for Serial ATA RAID turned out to be an expensive PCI-X card with more bandwidth than a mirrored set of SATA drives would ever utilize. Replacing it with a standard PCI controller would save more than $300. Substitute a set of Kingston memory modules for HP's branded default and you save another $200. The markup on some of those components is simply ridiculous.

And therein lays the final key to why VARs selling white box servers hold a distinct advantage. I engaged this customer with a server in mind. I knew all of the parts we'd need and what it should cost. Constrained to a tier-one manufacturer, I was unable to outfit the box per my wishes. HP simply didn't offer the flexibility to accommodate the exact configuration. Self-sourcing would have made it much easier to get the appropriate motherboard, memory, chassis, processors, and hard drives, saving money and outperforming the competition.

In Retrospect

Had I pushed harder for a white-box server system from the start, my customer would probably already have his proprietary software up and running under SQL Server 2000. I would have saved him money, I would have saved myself time, and I could have tailored a maintenance package to add some recurring revenue. Instead, we're still waiting on an emergency replacement from CDW—a system that was supposedly in stock and ready to go when it was hurriedly ordered. Live and learn, they say. Consider me schooled.