Comment Articles

Dell's garden shed secret

Matt Loney ZDNet.co.uk

Published: 21 Aug 2002 11:11 BST

This is exactly what Dell does, only on a larger scale. Many of its orders, which come from individuals and small businesses, are paid up-front, and the company is such an economic giant that it can dictate whatever terms it likes to its suppliers. In Europe, this position has only been strengthened by Gateway's ignominious retreat. Not even the combined might of Compaq and HP is making a dent in Dell's shipments.

But sometimes, where the big guns can fail to make an impact, there are often more subtle ways. Like rust. Or, in the case of Dell, the small computer resellers that are thriving out of the limelight on local business or by offering specialised services, such as customised PCs. Customised PCs are distinct from custom-made PCs -- which Dell makes -- because they are just plain weird.

There's a whole industry growing up out there built on blue, green and red cathode lights, neon string, window kits with biohazard etchings to make it look like there's something really potent inside your PC, and even etches of hamsters running round a treadmill. (As far as I can tell there are no Marie Osmond Stephen Tiny Tot etching kits yet, but mark my words; they will come.)

Dell has smelt an opportunity here. In the US, these small suppliers constitute a $3bn annual market, according to some estimates. Judging from the number of small and specialist suppliers popping up in the UK there is money to be made here too.

For Dell, it's a no-brainer to make a few 'white-box' PCs to ship out to these suppliers so they can re-badge, fill with hamsters or do whatever it is they do to cater for their markets. Certainly, it is much easier for Dell to use those left over bits in the back of the potting shed to make a few bog-standard PCs, than it will ever be for HP to gear up its entire -- and now disparate -- manufacturing lines to compete with Dell's just-in-time market.

Dell is onto a winner here; and of course in Dell's world it is not so much about margins as it is about slowing down that flow of money back to the suppliers, so that it spends more time in the bank on its way. The fact that there will be virtually no margin for Dell on these white box PCs becomes much less important. It can still make money, and it can still grab more market share without damaging its brand. And that garden shed can go, too.

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