White Box Servers Maintain Share

Despite increased competition from top tier vendors, white box servers continue to be a viable alternative to their more well-known competitors, especially those small and midsize businesses and local government agencies seeking a long-term business relationship.

"The server market in the white box area has only continued to get stronger," said Doug Daniel, CEO of Atlanta-based NASBA, a professional trade organization whose more than 12,000 members sell more than 100,000 servers each month. "It is not a commodity at all. It's a relationship-driven model."

While vendors such as Dell and Hewlett-Packard have increased their customization capabilities, white-box server system builders are holding on to existing customer relationships and capturing new clients by tapping high-end technologies and offering personal, local support. Since they generally have short production schedules, white box server vendors also can adapt new technologies quicker than tier-one vendors, said Jim NieKamp, a NASBA director and vice president of member services.

New Technology Solutions Inc., as one example, sells a line of sophisticated dual and quad servers that use AMD's Opteron processor, which give users another option in addition to Intel-based technologies. "People seem to be interested in buying these systems," said Shawn Harty, president of the Lowell, Mass.-based system builder.

On the service side, white-box makers tout their ability to react nimbly to customer requests and to offer specialized services. In addition to designing, assembling and installing the servers, a growing number of system builders are offering services such as remote management that national firms are less able to provide, said NieKamp.White-box makers are also finding new opportunities since white boxes increasingly are being used in cluster servers, NieKamp said. "Where you'll find white box penetration does really well is in the oil and gas industry where they have sophisticated cluster servers," he said.

Factory revenue in the worldwide server revenue reached $11.5 billion in the second quarter of 2004, according to IDC's Worldwide Quarterly Server Tracker. Volume servers grew 21 percent, year-over-year, making them the primary growth engine for the overall server market, IDC found. High-end server revenue grew 6.1 percent compared with the same period last year, due to server consolidation and data centers, according to IDC.

White box servers represent about 22.5 percent of total server shipments in the U.S.—a number that has stayed pretty constant for the past few years, said David Daoud, research analyst at IDC.

Fortunately, white box vendors are getting increased support from technology vendors. In fact, vendors increasingly are targeting the white box channel, said Daniel. "We've seen folks recognize how important the channel is in terms of IT infrastructure and support," he said. "A lot of vendors are really interested in what white box server makers are doing."

In addition to stalwarts such as Intel, AMD, Microsoft and Seagate, smaller vendors continue to hone their white box programs and products in an effort to capture this large market. Recently, for example, CyberNet Systems began offering its channel discounts of up to 33 percent, exclusive channel online support and more marketing tools for its line of Linux-based network server software.0