Battlefield Strategies

The Not-So-Hard Drive. Hard drive mountings were never one of the trickier parts of building a whitebook, but now with CBB specs, there are fewer screw and drive cage variables.

As indicated earlier, whitebooks are already selling in droves—small droves, maybe, but still better than no notebook business at all. Eh? What's that? You've had decent luck selling Acer or HP notebooks, your customers are happy with the brand, and you get to pass through the service calls?

See, the danger with reselling OEM notebooks is that the value you can offer is minimal. You can't accelerate the turn-around on warranty work. You can't really stock spares. You can bundle the notebook as part of a larger solution and sell your customer a line about how you've validated the product, blah blah blah. But in the end, both you and the customer know that you're little more than an order taker and delivery boy. Even worse, the OEM knows this, too, and the minute your customer calls the OEM for service, you've lost your position as sole contact point, and that OEM now has your customer's contact info. Maybe that OEM will someday decide to make an effort to take your customer direct, maybe it won't. Either way, it doesn't take much for a client to one day think, "Hm. Money is tight. I wonder how much I could save if I just called Acer or HP."

By now, you should see that tier-one notebooks have few if any advantages left over whitebooks. Even clever doodads like rescue and recovery buttons or biometric logins can be duplicated on whitebooks by solution providers who take the time to do adequate research and testing. The basic shells all come from the same factories.

Wi-Fi on the Fly. The latest Centrino platform includes a tri-mode 802.11a/b/g wireless adapter. However, as standards evolve, easier back panel access will make upgrading the NIC a one-minute operation for resellers.

This doesn't mean that the choice is only between tier-one notebooks and barebones whitebook shells. Most major distributors and certainly the four major VBI MVADs (mobile value-add distributors)—namely ASI, D&H, Synnex, and Wintec—offer whitebooks from stripped-down shells through fully configured systems for out-of-the-box readiness. These can be privately branded by the reseller or distributor (ASI's nSpire line is one good example) or selected from the ODM/OEM's self-branded lineup. ASUS is probably the leading instance of this last option.

"The ASUS brand has always been very strong in ID design," says ASUS' Raymond Chen. "We have a very high image, and many resellers want to leverage that name with our branded notebooks to be able to sell the product with better margin. On the other hand, they may want to leverage the benefit of being able to customize the specs of the product. But even on this end, they want the quality and support we put behind out whitebook business. That's where the Built on ASUS platform concept came from. This is ideal for resellers who don't have the 200, 300 quantity necessary to contract with ODMs and create their own unique ID."

This is not corporate marketing bluster. C9's Sasha Trupcevic observed that the interest and subsequent sales for his ASUS notebook line was tremendous. Enthusiast customers who were already fans of ASUS motherboards couldn't wait to get the same quality and name in a notebook from a reseller they already trusted.

Interestingly, ASUS originally positioned its retail SKUs at the high-end, trying to preserve the name's premium image, and offer Built on ASUS whitebooks at the mid- and low-ends. However, resellers soon pointed out that whitebooks tend not to fare well at the lower price points, so today ASUS branded notebooks cover the entire price spectrum. Resellers can pick from either line at any price point and configuration that suits the client's needs.

Branding is one strategy that works. Some strategies don't. For the last two or three years, industry messaging came down from on high that whitebooks had an advantage over tier-one machines in being able to bring new technologies to market faster because smaller companies could adapt to innovations more quickly than big tier-ones, which had to cycle through more older stock. There may have been a time when this was even true. But now the message is effectively dead. Tier-ones beat the channel with Napa by nearly two months, and the gap with cutting edge GPUs is usually even wider.

"The channel always used to be first on desktops, servers, and notebooks when new technology came out," says Alok Sarna, business director for Bizcom Canada, a subsidiary of Compal. "But obviously, the brands got more flexible, and today the argument is the other way around. Now, I think that gap is going to narrow and essentially disappear by the end of the year. Merom [mobile successor to Yonah] will be a good example. All of the current Core Duo platforms are pin-compatible with Merom, so everybody will have the same time to market." Several of the old whitebook messages still form the basis of strong sales strategies, though, and are worth exploring here.

Upgradeability

Deceptively Simple. This Compal EDL81 sports several CBB components, but perhaps even more important are some of the additional details an ODM can offer, such as keyboards for different languages.

The logical flaw in the upgradeability argument is that the tier-one notebooks and whitebooks are rolling off the same shell production lines. Big brand notebooks are no more difficult to upgrade than any whitebook. Tier-ones don't hard-mount their CPUs any more than whitebooks do, and it's not like modular GPU designs from NVIDIA or ATI ever went anywhere. There may be some minor differences in accessibility to the miniPCI card or second memory slot, but overall things are pretty similar.

Or are they? You may find ways to distinguish your whitebooks based on corners cut in tier-one designs. For example, the 910 chipset in the Sonoma platform was only Celeron-compatible. Users could not upgrade to the Pentium M, and most had no clue about the fact. All they knew was that a $699 price sounded pretty hot. Three months later when they realized they really did need a Pentium M, they were stuck. A channel notebook could have and should have been compatible with both CPU platforms. Again harkening to the upcoming Merom processor, Core Duo is a strong upgradeability play because it's pin compatible with forward technology.

No tier-one is going to present customers with an Apricorn EZ Upgrade notebook hard drive option. In single-channel memory platforms, tier-ones are less likely to guarantee an open slot for future upgrading. And again, the CBB platform is a veritable battering ram for opening the doors of opportunity with clients of all stripes who might never have considered whitebooks a serious option before.

Simple but Flexible

You can't carry everything. We've heard from multiple sources that resellers would be smart to carry three or four whitebook SKUs, each targeted at a certain prominent group within its client base. C9's tactic of focusing on only one notebook manufacturer may be advisable under certain circumstances, such as C9's, where the primary client base is looking for a characteristic best embodied by one brand. Some find it advantageous to narrow their focus even further.

Mo' Memory. Whitebook designs make give resellers full control over items such as system memory. Select single- or dual-module configurations, vendor, speeds, and even the chips used on the modules.

"We like to standardize on two SKUs and keep a couple notebooks on hand for when somebody comes in," says Lamar Weaver of TCW. "As long as the problem isn't the hard drive, we'll just take the hard drive out and stick it in an identical machine we can give back to them while the first notebook is being serviced. The operation might take 20 minutes, and they're on their way. That's the kind of service that has helped us sell whitebooks."

Going the other direction, two brands may be more advantageous for general whitebook selling, especially now that the CBB program is making many of the parts between them interchangeable.

Be careful, too, not to focus solely on brands or models. Keep an eye out for ways in which manufacturers allow you to customize their products in unconventional ways. One example comes from Compal/Bizcom, which offers multiple language keyboards, including Spanish and French, in the Americas.

Also give serious thought to settling on a limited range of component manufacturers. With whitebooks, admittedly you have fewer options than on desktops, but the temptation to follow fads or jump on temporary sale prices outside of your regular lineup is still there. Don't give in.

"I'm not saying AMD doesn't have a good platform," says TCW's Lamar Weaver, "but we standardized on Intel about 10 years ago, and when you standardize on a certain range of product, it makes it much easier to support. That's why we've stayed exclusively with Intel. That's also why we stay with Seagate hard drives and so forth. It's just easier to maintain spares and conduct service efficiently."

Sell Like You Mean It

As ASUS' Raymond Chen noted, many resellers only move one or two whitebooks per month. This would indicate that whitebooks are often sold only on-demand or as a "by the way" deal, as in "By the way, can you throw some kind of notebook on this project?"

You cannot afford to view notebooks as an afterthought. Market stats all point to whitebooks needing to be a part of your regular business offerings. And beyond that—yes, you've heard this before—the profit potential of a stand-alone PC pales beside that of an end-to-end technology solution.

"Resellers shouldn't just be trying to sell a notebook," emphasizes D&H's Dan Schwab. "A lot of guys are doing whitebooks or buying notebooks from other manufacturers. They should be selling it as a solution—setting up the wireless network, installing the VPN and firewall software, making it more a solution than a stand-alone product. Customers that are just buying whitebook components versus those that are buying components plus ancillary software and similar products are not growing as fast as those that are selling the full solutions."

Notebooks won't sell themselves. Raymond Chen advises that when trying to increase whitebook sales, the most important thing is to promote the platform. Resellers should have plenty of collateral on hand, not only for the individual SKU but for the product family and, if possible, the technology platform(s) within it. Be ready to pull out a brochure and say, "If you need a notebook, I can provide you with all of these models to fit all of your different needs, and here is the technology within these notebooks that addresses your specific applications."

The Other Pricing Game

We'll say it again: Not only will resellers fail to beat tier-ones on pricing in the low-end notebook market but most likely they will lose in any spec-for-spec pricing match-up against a tier-one opponent. Those are the rules of engagement. Fine. So change the rules.

Whitebooks Are Not Islands. Create problem-solving solutions with security software (such as Trend Micro's security suite), USB accessories, encrypted external drives, carrying bags, and similar value-adds.

Raymond Chen notes that ASUS recently did a survey on customer buying priorities. At first, half of all respondents said that pricing was the number one criterion they had when buying a notebook. No surprise there. Then the survey turned to specification priorities: screen size, battery longevity, and so on. After having survey takers give thought to these features, the majority of respondents revealed that they were more concerned with specs than price. Then the really interesting finding kicked in: With the spec priorities straightened out, the survey brought pricing back into the equation, and suddenly it seemed that most customers were willing to pay an extra 30% to 40% in order to get the specs they really wanted.

We have yet to see a tier-one site perform adequate feature-level customer education, and our experiences with tier-one phone sales left us little more impressed. Bring your local touch and superior knowledge to bear here. Your ASPs will show the results.

"You may not be able to price compete on a particular SKU," notes Bizcom's Alok Sarna, "but if you adapt your strategy to sell at $1,199 instead of $999 and back that up with a longer warranty and appreciated specs and upsell to that, that's a strategy we see successful resellers focusing on. And they're making better margin doing it."

Moving Map Lines

Gartner analyst Leslie Fiering made several good points about whitebooks early on. Yes, the economics of whitebooks have been grossly weighted against the channel. But that doesn't mean that conditions can't change. The war is on, and the borders between camps are being redrawn now.

Fiering's logic is perfectly applicable to a pre-CBB, 2005 landscape. Yet let's consider:

1. Will consumers pay for new features, usage models, and/or customization? Certainly, especially the closer you move toward the enthusiast segments.
2. Will SMBs pay for localized support, specialized service, faster response times, and new usage models? Bank on it. If your SMBs clients aren't paying for this already, chances are you're not asking them to.
3. Can CBB change the cost dynamics of whitebooks? Without question. Lower costs for CBB components and a streamlined supply chain alone will have a dramatic impact.
4. Can or do some local, regional, and/or national brands carry more weight than multi-nationals? Only if you promote them as having weighty value. As a trusted source, your recommendations are highly esteemed by your client base.

"End-users buy products because they're either influenced or recommended," observes Bizcom's Alok Sarna. "To the extent that resellers can recommend a product, I think statistics indicate that 75% of the time, whatever they recommend will be the end-users product of choice. This is why they have to believe in the product they're selling and recommend it. That's how the product gets sold."

Yes, tactical mistakes were made in the whitebook market, even at the highest levels. Intel was late on the CBB effort. Perhaps the program was impractical or infeasible in 2003 when Centrino first appeared, but the first generation of whitebook shells proved undeniably that interchangeability was critical for channel sales. CBB and the fundamental VBI elements should have been present for Sonoma, but instead the channel has an extra year of lost ground to recoup. Additionally, Intel should have shown the way with internally produced and widely promoted reference designs. No doubt, the company didn't want to tread on its ODM partners' toes, but that didn't stop it from evangelizing the ePC, the ashes of which spawned today's Viiv initiative.

"Another part of the problem is that whitebooks came very late," says ASUS' Chen, "not like white boxes that happened way, way back. That said, the number of resellers who are moving whitebooks is growing very fast. Two years ago, the percentage of Intel IPDs who were convinced to start selling whitebooks was probably in the tens. According to our survey, that number today is above 40%, and we're seeing 50% to 60% growth annually on whitebooks overall."

Promising as these numbers sound, whitebook sales rates have yet to show 100% year-over-year doubling like CPUs. Perhaps Intel took for granted that the whitebook concept was so obviously valuable that the world would beat a path to resellers in order to buy them, and perhaps Sonoma-generation whitebook sell-through finally convinced Intel this wasn't the case. Double-digit growth is not enough. Intel wants 4X or 5X annual growth and wants it enough to make achieving it one of the company's top three priorities.

Why? Because whitebook sales may be imperative for the channel's long-term viability. Today, notebooks outsell desktops in certain niches, and the overall market is slated to hit parity in 2008, then keep moving toward mobile dominance. Some industry insiders posit that we could see an 80/20 mix favoring notebooks by early in the next decade, and planting all that sales power in the hands of a few companies is significantly dangerous.

"As the industry moves toward that direction, Intel and Microsoft will just end up with 10 customers because all these [system builder] customers are building desktops and assembling solutions for companies, and the desktop market is shrinking," says Synnex's Ron Sakurai. "Intel/Microsoft has to say, ‘If we don't enable these guys with a solution, they're going to either go out of business or move into a different business.' They foresaw that the channel would shrink too rapidly too quickly. So we've tried to find out who those resellers are and bring the mobility solution to them."

The reseller channel is Intel's number-one customer globally. If that segment falters with the shift to notebooks, then the company risks seeing that business base migrate to the top OEMs, and just as trusting your notebook business to the OEMs has dubious overtones for your long-term security, Intel depending on so much revenue from so few sources would give the major OEMs an unprecedented and crushing amount of leverage. So Intel may be late coming to the rescue of the whitebook industry it helped create, but believe that reinforcements are en route, and it's going to be a shock and awe affair.

"Looking back, we could give us all a B grade," says D&H's Dan Schwab. "But I think we should be optimistic. If you look at the growth of our whitebook unit sales, we're up 165% from Q3 to Q4 of ‘05, and Q3 is generally the strongest quarter. That's solid growth, but as a channel we still need to accelerate.

If triple-digit growth in whitebooks is already happening at the distribution level, then it follows that such growth is also present among resellers. Either a few resellers are experiencing astronomical growth or a wide range of resellers are ratcheting up incrementally. Now, the pieces should finally be in place for that wide range to enjoy astronomical results. It doesn't take exceptional genius or massive marketing funds, only confidence in the product and prioritizing it more highly in your offerings.

"I feel this whole discussion is the tipping point of BTO notebooks," says Intel's Wes Sieker. "I think it is ingrained in even the system builders that they cannot service these notebooks, there is no margin in the business, and they can't play. The few that have challenged this status quo and figured out how to offer services to their customers through BTO notebooks are laughing right to the bank while delighting their customers at the same time. I feel very strongly that the move to mobility favors the system builder and VAR channels, not the opposite, which seems to be conventional wisdom today."

The key is finding ways to add value that don't lend themselves to comparison with tier-one units and shooting down the bogus "value propositions" the tier-ones promote. Worldwide warranties? Seriously. How many of your customers take their computers outside of the country? And the value of tier-one service that is actually outsourced to a lowest bidder third party? Are we the only ones who think that some customers, upon reflection, might see this as a security risk for their data when compared with a quick on-site repair enabled by CBB components all conducted under the customer's eye?

No one expects whitebooks to take over the world. But there's no reason not to expect that whitebooks can't obtain the same 30% to 40% share that white boxes enjoy in the desktop world. Get smart, fight the good fight, and as a committed channel we can make it happen sooner than you'd think.