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Microsoft's OEM, System Builder Plan: A Plus For White-Box Makers?

Posted by iNext - 2006-03-29

Microsoft’s decision to meld its system builder channel organization into its OEM group may be good news for beleaguered white-box makers.

Thomson Koon, sales manager at Hi & Low Computers, a system builder in Hicksville, N.Y., said he is hopeful that the restructuring may ultimately lead to Microsoft narrowing the pricing gap between system builders and OEM behemoth Dell. He said the large volumes that Dell does compared with system builders definitely puts Microsoft at risk of being at the mercy of a single large customer.

“My hope is that Intel and Microsoft will level the playing field a little bit more to make sure that the system builder can survive,” he said. “The system builders are an important part of the PC business,” Koon said. His company builds about 200 systems a month, down from as many as 600 a month in 1999. “Pricing is just too low,” he said. “There is constant price pressure.”

Todd Swank, director of marketing at system builder Northern Computer Technologies, Burnsville, Minn., said he hopes to interact more with the broader Microsoft hardware community. “I’d love to go to meetings with HP and Dell and hear some of their complaints," he said.

System builders have long bemoaned what they call Microsoft's preferential pricing to and treatment of the Dells of the world, making it difficult for systems builders to compete and make money bundling Microsoft software on machines. The large PC OEMs get Office and Windows at a much lower price than these smaller system makers.

As first reported by CRN, Microsoft’s system builder effort will fall under the purview of Scott Di Valerio, corporate vice president of the OEM division, starting July 1. Kurt Kolb, vice president of system builder and license compliance, will work on that transition, a spokesman said.

A spokesman said the move “will better align local field resources to local PC manufacturers.”

Microsoft has been opening up some new software to a wider range of system builders, said Andy Kretzer, director of sales and marketing at Bold Data Technology, Fremont, Calif.

Windows Media Center PC Edition is perfect for his small-form-factor PCs. But for the first year, it was only offered to large OEMs who put it in their standard minitower PCs. “It took a year for it to become available to us,” he said.

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