RAM | Reseller Advocate Magazine: Issue 52

by William Van Winkle

ONE OF MY FAVORITE IMAGES from Eastern philosophy is of the reed in the river. Over time, a hard, immovable rock in the stream will eventually wear down to nothing. A firm stick will snap off when the river rages. A leaf will blow anywhere the water takes it. But a reed is able to sway with the changing currents while holding its ground and continue its gradual, steady growth.

The image of the reed in the river has been something of a consolation to me during stressful times. It also helps center me when overenthusiasm might drag me off in a bad direction. And in our industry, there are a lot of causes for overenthusiasm. We all know the numbers for mobile PC adoption. Some have said that if you as a channel reseller aren't getting into whitebooks, then you're as good as gone. Now, I've banged the whitebook drum louder than most journalists, but I'm not going to say that you should shift your business over to mobile just because that's where the trend is. That would be like saying you should buy an SUV because everybody else is driving one, never mind that you live by yourself, have no dog, and are allergic to anything capable of photosynthesis.

And look at Viiv. I just finished off a cover story on Viiv for the debut issue of Inside Intel, Reseller Advocate's new quarterly publication for Intel Product Dealers. By the time I finished researching and writing it, I thought Viiv was about the coolest thing since Caller ID. Should you learn about Viiv? Absolutely. Should you sell Viiv? Probably. Should you transition your entire business to flow around Viiv? Probably not.

We live in a culture infatuated with radical change for the sake of short-term gain. If you're overweight, eliminate all carbohydrates in order to drop weight like mad. If you're over your head in debt, just declare bankruptcy. (I'm 30 pounds overweight and have two bankruptcies in my immediate family, so don't think I'm getting all holier than thou here.) A lot of the industry messaging we receive from vendors and from the press—yes, guilty as charged—would push us to think, "Well, my regular business is pretty unsatisfactory. This new thing is where the action is. Let's change!"

Swaying to the side as the currents change is fine. Lean a different way, see how it goes. You still have your roots feeding you. It's when you actually uproot yourself and float freely in a new direction that many people find it extremely difficult or impossible to successfully reattach and thrive. When you lose sight of your core business, the thing that makes you special and needed in the market, you're in trouble. From early childhood on, I knew without question that I was going to be a writer. However, up through college, I was positive that I was going to be a novelist, and all of my efforts went into developing that. Yet the waters took me off in a slightly different direction. Had I not gone with the flow, you wouldn't be reading this column now and my family would likely be a lot more hungry.

In January, MSI put on a two-day trade event called the MSI Channel Star Forum. The primary purpose of the event was to educate resellers on and generate interest in the company's line of whitebook PCs. ASUS is #1 in this space, but MSI is running hard to clinch the #2 spot.

"One of the ways to add value," says Beech, "is to truly understand what your customer goes through on a day to day basis. How do you integrate technologies to give the customer a solution?"

"The top notebook OEMs own 80% to 85% of the market," says Kevin Huang, channel marketing manager for MSI Computer. "It's very hard for channel resellers to compete against the OEMs with whitebooks. That's why we put on this show, to invite people to come see what options they have available and to get ideas for how they can succeed here. We've found that time to market, product specs, and service are the most important factors for creating value."

MSI is an interesting case of trying to flow in new directions while staying centered. The company's core products, motherboards and video cards, remain some of the best in the business, and MSI has been a far better channel partner than most of its competitors. Branching out from its core competencies, the company has also done well in barebones PCs. However, the further from center the company has swayed the more challenging it has been to succeed. MSI's MEGA PC series arrived at a time when there was only niche enough in the SFF space for Shuttle, and now even that seems to be in a state of ambiguity in front of the Viiv charge. I've used MSI Bluetooth adapters, but there are a hundred similar products from other vendors right alongside them. Ditto that for the company's portable multimedia players. MSI makes very good notebooks, but they have one primary problem: They do not yet offer unique value in the marketplace.

MSI has the same problem its resellers do. How do you try to flow with the waters, grow business, and succeed? One of the attendees at MSI's show was Howard Computers, a Mississippi-based white box builder. Howard's core business has been white boxes for the past six years, and about three years ago, the company felt it was time to grow. But how and in which direction?

"Essentially," says Tim Beech, manager of desktop and mobile products, "we went out and talked with our customers and asked them what was their pain point. What were their problems? How could we make their life easier? Through that, we developed the design for our medical card, and it's been phenomenally successful."

Within Howard's customer base existed a medical niche group. This group made use of carts on which PCs could be rolled through a facility to handle medical records, medicine dispensing, and similar tasks. However, Howard's salespeople reported back that many of these clients were dissatisfied with the products. The sales staff followed their customers around their jobs, making observations and asking questions. Ultimately, through working with engineers and several generations of prototypes, Howard Computers put its own white boxes to use on a new line of medical carts that debuted two years ago. Today, these carts account for 30% of the company's revenue and are sold nationwide with margins 150% greater than those obtained by bare white box PCs.

"One of the ways to add value," says Beech, "is to truly understand what your customer goes through on a day to day basis. How do you integrate technologies to give the customer a solution? What value can you bring that others do not? That's important for any company but especially important in the PC business."

Sometimes expansion follows a harder path. Take Portable One, one of the largest notebook resellers on the West Coast. Portable One has specialized on notebooks for 10 years, and much of that time was spent focusing on ThinkPads. However, according to CEO Ivan Gospich, ThinkPad quality issues became an increasing problem over time, and the company was forced to find alternatives. Ultimately, Portable One settled on selling premium configurations from three manufacturers: Fujitsu, Panasonic, and Apple. But no company wants to stand still, and Portable One needed a new direction close to its core competency. The answer was whitebooks, ASUS whitebooks in particular. Gospich notes that the most important facets of a quality whitebook are its motherboard and chassis, and ASUS has some of the best implementations on both points available within the industry. So Portable One committed to the change. I asked Gospich how his company handles growth beyond its core offerings.

Howard Computers put its own white boxes on a new line of medical carts. Today, these carts account for 30% of the company's revenue and are sold nationwide with margins 150% greater than those obtained by bare white box PCs.

"Very slowly," he answered. "The support you get from Taiwan and China is just not that great. We committed to a 500 or 1,000-unit order with ASUS last November. Well, here we are in February, and we still haven't received anything. Apparently, popularity has kept ASUS' run rates slow. And we want to bring MSI on board. Their motherboards are great, but we have some issues with the casing. So we've asked them, ‘Can you change this and this and this?' ‘Yeah,' they say, ‘what you want is about a year away.'"

In Gospich's opinion, service is the key way to add value. Dial up support from a major OEM and you'll spend 45 minutes waiting to spend another 45 minutes on the phone with someone in a distant country with very little solid support capability. Whitebook sellers have the ability to add value based on the speed, accuracy, and efficacy of their service, and this is the avenue down which system builders and VARs can expand their product offerings.

The secret of being the reed in the river is of growing, not changing. Howard Computers grew its white box business into a specialized, high-value medical niche. Portable One grew its notebook business by adopting premium whitebooks. In the Viiv context, perhaps your customers need robust storage solutions. Don't become a storage vendor. Become a multimedia PC vendor with a unique, high-value storage bundle. And I don't mean an everyday, off-the-shelf USB drive anyone could buy. I mean something with a high-performance RAID controller, a custom drive enclosure, and other facets that together make the bundle distinctly suited to your target market. The more this bundle reflects your shop's unique expertise and the "pain points" of your audience, the more success you'll enjoy.

Hold your ground. Consider trends carefully and critically, and be true to the things which have allowed your operation to thrive this long. When trends afford you an opportunity to grow your business outward from its core, make sure you have a market for your ideas and get your ideas from your market. Do this and you'll likely find that the waters around you are much calmer than you'd thought.