In Build vs Buy, Building Is Rarely the Better Option
Whitebox PC building has been an honored tradition among computer technicians for a long time already. I have a lot of respect for those who see the value and quality in a computer built with the full white glove treatment in mind. From picking the best parts, to installing the OS of choice. Stress testing, tweaking, and overclocking all play a part in this classic pastime.
But as the computer repair field keeps changing, alongside the technology industry at large (and the consumers that go along) we need to be mindful that like with any business: you evolve or die. It’s as simple as that. I’m not here drumming the death bell for PCs as we know them. They aren’t going away any time soon. But custom building computers, as far as I’m concerned, is a thing of the past.
Before you jump on me, let me clarify my thoughts a bit. Custom building PCs as a primary service offering is a thing of the past. Tony Scarpelli penned his thoughts recently in a guest post on why he believes in just the opposite, and how it has been working well for him. I applaud his success and it’s good to see that a custom built market still exists.
However, I want to do my best to steer fellow computer technicians in the right direction. From a business sense, custom building at my perspective is a dying venture. A lot of people email me each year asking for my opinion related to striking it rich in the custom box building arena, and I steer them clear time and time again for reasons I will explain.
It’s not that I have a dislike for custom PC building. I enjoy it as much as any other technician. I grew up tinkering, building, and swapping through much of my younger years. All of my bench systems for FireLogic are custom built towers that serve our needs very well. And we do actually pump out a handful of custom built PCs each year – but for very niche purposes like gamers or stock traders. Aside from that, the other 95% of our customers are usually steered towards OEM PCs and the large majority of them are quite happy with their purchases.
Where does my opposition to custom built computers lie? In a few key points:
- Bang for the buck: Quality OEM systems (business oriented machines) these days come with the same or better components compared to similarly stocked custom builds, generally for less cost. And I can never match the warranties they provide – generally 3 years on the systems we tend to recommend.
- Time loss: There is no way you are going to be able to bill a client fully for all of the time spent researching, procuring, installing, testing, fixing, and delivering a custom built PC. Anyone who says otherwise is cutting corners somewhere.
- Unmatched warranty support: Most of the OEM PCs we source for customers do in fact have 3 year warranties with 24/7 phone support. I would never think of attaching such a warranty for my own custom built PCs as it just isn’t sustainable.
- The question of quality: If you seek out business-oriented OEM PCs, then you will likely get good to great system build and component quality. Buying the cheapest of the cheap and custom building doesn’t overcome the mantra: garbage in, garbage out.
There are still situations where custom building makes sense. For example, niche scenarios like a business that wants an SSD-RAID powered Windows server. Or, you may have a client that wants a SLI-powered gaming machine with the latest and greatest specs. Systems for stock traders are also usually better custom built, because we can use higher end Quadro video cards with quad DVI or HDMI output for multi monitor setups. These situations warrant custom building, and the margins henceforth make it worthwhile.
But general usage PCs for the average office worker or a family of four? No way. My recommendation is to stay away and save your laborious efforts for services more worthwhile and profit bearing, like training, installing peripherals, or assisting customers with upgrades. I’ve never gotten rich custom building and don’t expect to do so.
Why The Odds Are Against You
If you’ve made it a customary part of your routine to recommend custom building over buying OEM prebuilt systems, then you’re doing yourself or your customer – or even worse – both of you a disservice.
In his recent posting taking the opposite position as myself, Tony Scarpelli wrote, for example, how he sells his lowest tiered systems at around $600USD and builds them for around $300USD. Sure, at face value this looks like a stellar money maker. But the pitfalls surrounding this approach are just under the skin.
For one, Tony’s specs on a sample $300USD system are actually closer to what you’d find in a mid range system circa 2009, complete with a Core 2 Quad and 2GB of RAM. In just a simple example of a comparable system I would recommend to a client instead, a Lenovo M72e micro tower PC, such a system can be currently sourced for only $450.57USD on Electrociti.com (price current as of 7-9-2013). You can easily pick one up, slap a 25-30% markup on the unit, and end up selling your client a rock-solid modern Intel Core i3 computer. And the system is backed by Lenovo’s 3-year 24/7 warranty support with full parts replacement coverage.
Just taking the CPU comparison as one example of how selling an OEM PC in this case benefits the customer greatly, just compare the benchmarks between the Q8200 Core 2 Quad and the lowly Core i3-3220. CPUBenchmark.net places the Q8200 at a mediocre average CPU mark rating of only 2840. In contrast, the Core i3-3220, even being a bottom rung processor in the Core i-series line, rakes in an average score of the same criteria at 4234. That’s over a 49% performance increase for pretty much the same face cost to the client. Tack in the modern system board being used, the 4GB of DDR3 RAM, and a nice 500GB SATA hard drive, and you can see how this spec sheet is a winning combination.
In a similar example, I wanted to see how a prebuilt OEM machine could stack up against a custom build of roughly the same quality. Mind you, the specs I worked with aren’t exactly 1:1 comparisons. Some of the parts used in prebuilt OEM systems are only sold through the respective OEM in their machines and cannot be bought on the open market. But this doesn’t mean we can’t make an educated comparison of like quality systems.
So I put together a comparison of how much it would take me to custom build a PC similar to that of a Lenovo M92p micro tower PC. Such a computer I would likely recommend to a power business user who needs lots of storage space and a dedicated video card for multiple screens or perhaps for CAD programs. Below is my spreadsheet comparing off-the-shelf parts to the M92p sourced from Electrociti.com:
As you can see, the custom build actually won out. By a mere $11.92USD. The parts I sourced for the custom build used the “lowest priced reputable vendor” available for each category based on Google Product search. I might have been able to shave off another 10-15% if I used the vendors that Tony mentioned in his article but regardless, the custom build pricing still doesn’t have my research time, procurement, installation, and testing time taken into account. Not to mention that I would never offer a 3 year parts warranty with 24/7 phone support, and you can easily see how this is a lose-lose scenario.
Even on the above M92p tower, you can tack on a comfortable 20-25% markup and still end up making good money at a tick under $1K USD. And you’re not on the hook for parts that go down or be expected to answer run of the mill customer questions in the first year – as would be the case if you tacked on your own warranty. We push OEM machines, charge for the migration and installation, and provide paid follow up support. We offer to handle warranty service when needed, and customers usually choose to have us help them handle this. The upside? We aren’t expected to provide our labor for free, yet the customers do get their parts replaced for free, which they usually find comfort in.
Is Prebuilt OEM Quality As Good As Custom Built?
One of the most vocal arguments the custom-build community has over OEM PCs is a widespread misconception that all OEM systems are “junk.” This simply isn’t true, as long as you know what class of systems to be looking at. Sure, comparing a quality custom build to a clearance shelf doorbuster being sold in the latest Best Buy or Office Depot weekly ad is like placing the Geo Metro up against the Subaru. We are talking totally different quality classes altogether.
OEM PCs are no different. In general, I like to steer clear of the consumer-focused models on the market because they live up to their name: they generally aren’t built to last as long, have shorter warranties, and tend to use lower end parts for the sake of keeping price points down. Business class systems are priced 10-15% higher than their consumer focused cousins because corporations buy for 3-5 year lifecycles and are fully willing to pay a premium for quality components that last for this timeframe. The slightly increased pricing is well worth it.
An easy way to go OEM without sacrificing quality is by looking towards the business oriented systems sold by the same manufacturers. My top favorites are Lenovo, HP, and Dell (in that order) because I have been recommending their business class systems to home and office customers alike for years and clients just LOVE them. They aren’t flashy but they are built like tanks and come with stellar warranties to boot.
Lenovo is hands down my favorite OEM PC maker next is HP at a close second. Both companies have awesome yet cost effective business line PCs with standard three year warranties. Lenovo has their “ThinkCentre” desktop line, and HP has a wider mix of machines under the “Pro” moniker, or towers that go under the “HP Compaq” combination. I’m frequently sourcing rock solid systems of this caliber for under $550USD. I tell the customer, yes, the unit will be a few dollars more than a run-of-the-mill shelf system, but it will last you a few more years and likely have less hardware problems. On the average, I’m pretty accurate and these customers use these machines for 5-7 years (or more…) without many hardware problems.
Custom Building PCs is a Dying Offering – Make Money On Other Areas
I hope you can understand why I have such fervent feelings against custom building as general practice. It’s because I’ve been through that game, both at my former employer and now for my own company FireLogic, and the results have been following a common trend for the last 2-3 years. As margins slim down, you try and cut corners with cheaper components or questionable Windows licenses. In the end, you are just losing valuable time doing this cat and mouse hunt and are degrading the overall quality of the system for the customer. Is scratching a few extra dollars of profit worth it? I don’t think so.
OEMs can simply purchase their parts at dirt cheap pricing because they buy in much bigger bulk then you ever could as a computer repair shop. We’re talking hundreds of thousands of parts at a time – SSDs, memory chips, Windows licenses. It all adds up to tens of dozens of dollars off the purchase price of the machine, as I proved above.
Does this mean you shouldn’t ever consider custom building? Absolutely not! Using good judgement is key to knowing when you should be buying OEM and when a customer would truly benefit from a custom build. I outlined some of these scenarios earlier in this article, but there surely may be others you come across. The biggest thing to take away from this article is that if you are considering making custom building a primary focus of your budding business, I urge you to steer clear. There is better money to be made elsewhere, and good OEM systems absolutely do exist if you know where to look.
Have an opinion on the build vs buy debate? Post your comments in the area below. We would love to hear what you have to say!
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I have gone with custom over pre-built. I do cut out peoples extreme preference by offering Budget, mid-Range, High Performance n Gamer. Any tweaks I can see it to be very easy by already following a pathway. If the client wants a certain something, I already know what to get to achieve it. Now when it comes to time, yes it is time consuming but I guess depending on how busy you get, you might want to department the work. I am only starting out so I can manage. But as soon as it eats time when getting different call outs, I’ll look for help. But now looking at the debate, quality between the 2 seems to be working for you, but hadn’t for me. I have worked with having a pre-built lasting 1 1/2 years with “quality” parts that turn out to be due to laying around, improper build, many possible issues that caused to last shorter than average. But pre-built has always (for me) lasted a max 2- 2 1/2 years before replacing parts that can be more frustrating then it seems (HP) made the build very delicate that they are prepared with tools n tricks or buy new. Warranty is very tricky, I have been jibed many time to call things as “wear n tear” where they refused and warranty cover. Now I have built custom for myself and others, my dad just this year got a whole new upgrade due to 1 part, the GPU failing, after 6 years! Only reason for new build, get up to date hardware that seem to be lasting. An ex worker of Sony told me that with moving around companies, bulk, cheap parts are the way to go. Thet can maximize profit and get great bulk deals but also be prepared for not selling as many as they predicted, then they mix n match to build a “new, exciting” model.
Sorry, decided to post when not done. To continue, the other part for companies is, people want cheap as possible for what they need, why allow to buy a $600 computer once every 5-10 years when they can somewhat control it with more frequent purchases buy having cheap parts that fail in less time? You have to compete with other major companies and small business has to try and get a profit so you find yourself in a position of selling outdated, expensive duds that clients will soon be unhappy and will jump brands so that company loses, they all get jumps… This works and as parts get cheaper, parts get better. I see lasting OEM in another 5-10 years but the longer it lasts, the harder it is to get profit. The saying “they don’t make it like they used too” stands to reason. Car manufacturers do this, computers and all things are the same. You will go out of business from getting your customers for the year come back 10 years later, if that’s all you got for 10 years. My custom enjoyment with custom parts means I do what games do, micro purchase, you build long lasting computers that clients want to upgrade due to how great it is, especially the degree of participation you give them.
One last example is game consoles. Sitting behind in hardware allows them to slowly crawl up the ladder of improvements to keep establishing a profit, Sony Playstation 3 had advanced hardware that indeed cost a heap at launch that restricted purchase. PC has highly advanced power over Consoles but as long as you restrict your product, you can force purchase. At the end of the day, that’s how it is, and as bad as what I said sounds, its a fair strategy. I for one will take advantage of offering (hopefully) a long lasting custom computer that I can service throughout its lifetime.
Derrick:
Your article was spot on. One problem with building for the general public is that they think that your support is free. You seem to own the system forever.
I also feel that steering the public and business’s to the OEM’s is that they have a better warrantee and support.
Great article..
Rich
What your customers expect is managed by you. If you have difficulty with explaining what your customer service policies are that has little if nothing to do with where your customers buy their computer equipment.
We charge the identical delivery, setup, configuration and support labor for OEMs as we do for systems we build.
This idea that since they bought the system from you, that you should give free service is silly and unprofessional. But it is a reason that many technicians prefer to sell OEMS which they seem to feel it is easier than communicating with customers or saying something that you are afraid will get out of your ability to manage it.
I also agree with Derrick. We service 99.9% small businesses, so I’m not speaking as someone that services the home user. Many of my clients MUST use business class branded machines or their software vendors won’t support the software.
A partnership with Dell or Lenovo provides decent margins with no effort. The amount of time involved to put together an estimate for a custom build, making sure the parts are in stock and then building the system when it came in, is just wasted time I could be using to create revenue.
Working IN your business is fun… but working ON your business is what will keep you in business.
As already stated… custom builds as a primary source is long gone. If you’re selling custom built PCs at a 100% markup, you’re screwing customers who are trusting you and don’t know what you’re actually putting in the box.
We haven’t had any issues like Chris speaks of. We rarely have systems that fail. Heck, we rarely have any hardware failures from any device. Except the occasional PSU failure or some fan replacement.
Having said all that, if you’re new to the industry, I recommend offering custom built PCs to a specific customer base. The experience & education you can gain is priceless.
David, a quick look at sites like geeks.com or evertek will show you that there are tens of thousands of RMA’s which get sold through these channels.
Obviously someone is having troubles with them.
Derrick, outstanding job on this article. I’ve been making these same arguments for years and like you, I applaud those that have been able to make the custom build model work for their business. For me, it’s always made more sense to resell a known brand (Dell, HP, IBM, etc.), let them handle the warranty side of the device, and we cover the general day-to-day support, maintenance, and utilization of the machine; at a nice hourly or monthly fixed rate service fee.
Thank you again for sharing your thoughts.
Chris
I am totally 100% with you on this post, even now branded computers such as Dell, HP \, Lenovo and others are falling in price drastically due to the transitions from Desktop/Laptop to all in one and Ultra-books + Tablets. I stop building and I am purchasing through outlets with big coupons discounts and warranties. Make more money that way.
Couldn’t agree more. With retail prices from approx £300 upwards there’s no money it anymore. It’s a long time since the average machines sold at a £1000 so lets move on. I normally recommend carefully and install, that way I’m not expected to do endless “free support”. If you want to build machines as a business and do it well you really need to be doing a large volume to make it worthwhile. The writings been on the wall since supermarkets started selling computers.
A common misconception which leads one to the wrong conclusions is that the average computer is 300 quid. The average is more like 700 quid and at a reasonable margin that is plenty of profit. Techs tend to focus on and be absolutely afraid of those 200-300 quid computer ads but that is not what everyone is buying.
I would like to point out that your $70 Win7 Pro pick is a Dell or other OEM COA which is against Microsoft terms to resell. So you have to pick a legal copy of 7 Pro which bumps the price up another $60+. In turn increases the cost of the custom build. Otherwise good article.
Derrick has the typical “I can’t bother with custom computers, I would rather push spam can computers on my customers” attitude of those who really have never successfully figured out how to build customer computers profitably. In my 22 years of working in technology I have seen many tech’s who are fairly good technicians, sometimes even genius technicians but just do not have the well rounded business acumen to handle the intricacies required in procurement and sales required to do customer built computers.
When you do not fully understand business or how most small businesses work or you get too specific in the IT field it is easy to be blind to the possible revenues sources available to a new or smallish IT house.
Derrick makes the most common fault when making this decision he uses garbage assumptions so he comes out with a garbage decision. He uses his opinions which are mostly wrong to build a case to support his faulty decision.
BTW- IBM is the only company that makes IBM personal computers. Compaq, Dell, HP, Gateway, Micron and the rest are all Johnny come lately OEMs who first started by custom building computer clones. Someone forgot to tell them it cannot be done or it is a waste of time.
Building computers is not for everyone. It requires an interest, time to do it, aptitude not just in technology but in buying, sourcing, selling and conveying the quality differences to the customer.
The reason I believe that most technibblers can master it if they desire to is that we often have time on our hands waiting for more customers. This is a perfect activity that can be accomplished while watching our store. If you are already too busy then you may not wish to have more income opportunities but if you are not busy most of the day this can be nice filler. I think of it in the same way as the auto body shop who buys rebuilders so when work is slow he has something for his techs to work on and which he can later sell and get some money out of or possibly even profit. Or the Auto mechanic, who buys used cars, goes through them and then sells them with his own reputation and guarantee of it being a quality used car.
Bang for the buck: Derrick confuses his opinion with the facts about OEM quality vs system builders. When OEM’s like Dell contract for components they contract for tens of millions of them before they are in the build stage. I have one client who believed the BIG OEM Myth of superior quality, who bought 10 dell business systems and next day onsite warranty. Over the next 7 months 9 of the 10 hard drives failed. I was called in because the client could not wait for 24 hrs for the Dell tech to come out and wait another 24 hrs after that for the failed part to be overnight mailed and repair the computer. So I was on site within 2 hrs replaced the failed hard drive (which was known on Toms hardware and Cnet to have defects and very high failure rates) and I replaced it with a different drive that was not known to have high failure rates. Dell was stuck buying and selling those drives under contract. This is just one example of the absurdity of Big OEM quality.
#2 Derricks opposition Time Loss: Saying that you can never charge for your researching, procuring, installing, testing and fixing and delivering a customer computer is a bit like saying I cannot charge my customer for the 6 weeks I went through Microsoft MCSE training and the following years of experience required to computer consult correctly.
In my article I state that you will need to have a onetime bone up on how to buy computer components and which components match but I also offered a few easy clues to make this step take 10 minutes. If you cannot source and buy a complete computer or dozen computers in 10-20 minutes online then you probably have bigger problems than how to invest your time to run a business.
#Derricks opposition Unmatched warranty support: Again this is just a matter of understanding business. We have offered lifetime warranties and 5 year warranties to customers as a way to ensure that they come back to us. Most of the return business results in billable time doing virus removals so the warranty is almost a black flag. When you call Dell for warranty support they try to sell you on their “supplied from India” computer maintenance program for a fee. Warranties are the biggest bang for small computer repair shops as the customer will always come back to you before going to a competitor on the hopes that warranty fixes it. You will get 10 fee services for every possible warranty call.
So if you have not successfully done the custom computer build business you really should hold your wrongful opinions about it.
Despite Derricks wondering you seldom make money working with gamers as they all source from the same places you might. So don’t waste your time working with gamers.
Derrick recommends buying a $450 Lenovo system and marking it up 25-30% which would retail for $600. However the system I built actually cost $239 and could make 100% markup selling it for $478 with the margin I recommend so comparing a $478 custom built computer with a Lenovo $600 entry system is not exactly even but if I put another $60 into CPU I could easily have matched or out performed the OEMs.
OEMs charge a price which set in your mind but Derrick ignored shipping. Shipping is typical about $30-40 per system and this eats into his profits so he is really not making 25-30%. I can see why Derrick does not do well building systems. He doesn’t make any money doing it. So then he assumes since he cannot make any money doing it that neither can you or I.
Is Prebuilt OEM Quality As Good As Custom Built?
Custom built computers are usually higher quality than OEMs for several reasons:
1. They do not come with dozens of programs designed to get users to use them and then bill their visa if they want to keep the “evaluation copy.”
Many viruses that come in my shop are from systems where the client ignored the warning to give them a visa and pay for the “free evaluation copy of antivirus.” A custom built computer comes with a real antivirus setup and configured to work for the next year at least. It also comes with antimalware and other useful software as opposed to the crapware on OEMS.
2. Unlike OEMs who get locked into procurement contracts to get those great prices, when I find that a motherboard, power supply, video card or hard drive has high failure rate, high heat or noise or vibration issues, I can steer clear of them and pay $2 more for another brand or size or model of component. So I do not have to live with decisions and contracts made 9 months ago, I can make purchases enlighten with new information.
3. OEMs buy license for some items like chipsets Nvidia and then contract to have those chipsets built into their motherboards by cheap Chinese companies. The quality of their motherboard is not usually as high as if they had actually purchased an Nvidia products directly.
4. When your computer is out of warranty you cannot afford a replacement motherboard or most other components. With a custom computer $59-112 buys a brand new motherboard.
5. If you buy into the custom computer montra then when you require a faster computer you simply buy a new motherboard/cpu/memory combo and if you are happy with your case, optical drive and hard drive can save additional money but just doing an upgrade.
6. OEMs play games – I remember one example when Compaq licensed a Optical drive and had it built as a Compaq DVD and it was ¼” too small of cavity for standard Optical drives, so you basically had to pay Compaq 4x the cost of an Optical drive if you ever wanted to upgrade or add another Optical drive or when it fails out of warranty and you need to buy a new one. This same method of price fixing goes on all the time. Derrick is either ignorant of this or just not being honest when he blindly states that OEMs are better quality than custom builds.
7. Especially for businesses who demand same day repair, there is no better system than a custom built where you have 5 universal power supplies in stock, 3 motherboards, 2 spare cpus (I always use Intel for business systems), ram, cases, keyboards and mouse.
8. With the games I mentioned above (not all systems but you never know until its too late) and you buy a OEM you may not be able to run to CompUSA/Bestbuy or call your local PC repair shop and get back running within 2 hrs.
9. The quality of custom components is the same or higher than the OEMs in nearly every case. If you think about it you will understand why. When a new technology comes out computer engineers design the systems and mechanic engineers over engineer the equipment to build this model. Every item when it first comes out is 20x more expensive than it might be 4 years from now so factories and machinery to build this equipment is top quality. 15 years ago we used to worry about 4 layer motherboards or 6 layer motherboards but now a single layer motherboard has 12 layers because the manufacturing process is so refined. Can you buy junk? Yes but you really have to go out of your way to buy junk or just have no idea what you are doing.
Derrick has been following the custom building computer trends for 2-3 years while I have been doing it for 22 years and have built thousands of systems and made hundreds of thousands of profits over those years. True today Apply has a bite out of PC’s, iphone, Ipad, Macs, Ibooks each have a piece of the pie but anyone who says workstations are going away just is not paying attention.
Derrick assumes that you slim your margins. That is another faulty assumption that poor business men might make. You always have to have a very respectable margin. If he cannot keep margins and build quality systems then he did the right thing by moving out of the way and letting a better company perform this service.
Derrick recommends not making a major part of your service custom built systems. Well, “Dah!” For as long as I have been in computers astute business managers knew never base your company on hardware sales. The biggest computer dealer in Wichita is teetering on destruction because he used a hardware sales model for growth and it is like a ponzi scheme with falling hardware prices. But if you keep your service income 80% and you offer hardware sales with a 100% markup or 50% margin however you like to say it, you will do very well.
In summary I think it is obvious that Derrick and the companies that he has worked for before starting his own have never figured out the critical success factors in building custom computers profitably. So listen to those who have.
Interesting, it seems that your market has few people who appreciate the value and customer service they receive when they purchase a custom built machine.
I do agree that you cannot make a lot of margin on the $300-$700 consumer range. I simply avoid building those. However I’ve made a lot of money on business class systems for high end clients. They need CAD benches, they want liquid cooling, they want upgradability. They appreciate and pay for the consultation time it takes to design such a system. They are happy to be part of the design process. They pay for things like theming the cases to their company colors using painted cases, LED lighting, and component color themes. They pay onsite time for these systems to be set up at their office locations at rates much higher than any residential client would ever consider.
I’ve gained a lot of small and medium sized business clients through custom builds. It’s a great foot in the door.
If you’re as talented at sales as you are custom building, you will have no problem finding these particular clients and forming a lasting and profitable relationship with them.
AGREED!! Make money in other areas.
Thanks for writing the other side of the coin, Derrick. You’ve pretty much summed up my thoughts when I read the article Tony wrote previously. My biz has made the switch from custom-built to reselling OEM pre-built in the last 18 months, and I have virtually no complaints (although I did have an issue with a proprietary card reader bay faceplate that was tricky to track down). You do have to invest a little time to learn the ropes, but most mfgs have entire departments dedicated to support partners. As an added benefit, I’ve gotten certified as a warranty service provider, so I get paid for doing warranty work, too. This certification also helps with credibility/professionalism and is a great sales catalyst when people realize they can bring it back to you if something goes wrong, even if it’s a big name brand. And on the other hand, potential customers are 100% covered for the length of their warranty, regardless if they move to another region, or heaven forbid you go out of business. And there is also a marketing upside — flyers, posters, websites, configurator tools, and brand recognition that go along way to cutting down on the amount of time you have to spend updating and polishing your sales offerings. Yes, there are some positives for custom-builds, but in the last five years they’ve been shrinking and are to a point where it just doesn’t make sense anymore, unless you service a very specific niche.
I believe we have been shown two valid methods. Custom or pre-built. Custom building is something you have to do right in order for it to be a valid method for you. Pre-built systems is an easier way to go, and if you deal mostly with businesses, it is quite possible you don’t have enough time to do custom built machines.
However, if you mostly have residential customers, and you sell PCs, you’re already in a niche. People come to you rather than the big box stores because they want better service and support. Countless times I’ve picked up the phone to hear “we bought our computer from you, and now ___” We don’t do custom built machines, but the people who buy machines from us want support from us. They prefer to call someone local than HP’s support. So it would be nice to be able to sell a custom made machine as well as some warranty/support, rather than only making $100-$150 profit any people expecting support anyway.
If doing pre-built machines, business class is the way to go, but I’ve only been able to sell business class laptops to residental customers. Mid range consumer class is what we sell the most of for residential.
Often I get the question, “what can you offer us that ‘name of box store’ can’t” All I can say is that warranty service is easy because we a HP warranty centre and will have everything on file. It would be nice if we had custom built machines that we know in and out and could offer longer warranty, local support, and have PCs will the extras that often get ignored, like how quiet they are.
I believe our residential customers would love it if we had custom PCs to offer. However, we service a lot of businesses and do not have enough spare time to facilitate that kind of thing.
EXCELLENT ARTICLE! THOROUGHLY ENJOYED READING IT!
THANK YOU,
When I started working for a big computer place years ago…I had already gotten really good at building higher end custom gaming PCs…and when that place started getting into the SMB support market (back when it was emerging, I’m talking about back in the Win3/Win95 days)…I was pushing for building computers for them. The place I worked for was a big Compaq house. No not the Compaq Presarios people saw at stores, but Compaq “Deskpro” workstations and “Prolinea” and “Proliant” servers…which were their business grade products. I scoffed at those initially…saying I could build better product. Which I could, if one were to sit there and compare performance specs.
But they (the seasoned experienced techs there) kept telling me….it’s not about the performance, it’s about support! Once you start seeing the huge quantities we put out…you’ll see why. And I started seeing that over time. And also started seeing how their biz grade products were designed to be serviceable, tool-less chassis and easily swapped components. A couple of minutes on the phone with support, or these days…a few minutes on chat with support…and the part is overnighted to you.
Or…even more importantly…if you’re working on a server…a clients server, in service for years. Problem with the RAID controller or something vital like that. Client is hovering over your shoulders while you try to figure it out. It’s nice to have support to call to be able to walk you through steps such as forcing an array back online and the server is back up and running! Try getting that done within 15 minutes if you have some motherboard of the month club cloner server with mix-matched parts from the sale bin.
I also often don’t even have to go onsite to do “warranty stuff”. A few minutes online with Dells chat support, discussing a problem with a clients laptop…determine the system board needs replacement, Dell sends a tech onsite to replace that. I invested a few minutes of my time, from the comfort of my couch at home, or at my desk at my office…with an online support agent from Dell, and got an onsite tech dispatched from Dell. I most likely got other stuff done while doing that chat session…so I really didn’t invest a lot of my time. I can’t imagine doing this if I built some motherboard of the month club cloner. Yeah, would dispatch someone within next business day…LOL..my butt!
I lose time, and often money…if I go onsite to replace parts. Or take the computer back to my shop to replace parts.
I had a good side biz going on for myself…building custom gaming PCs…and as I started getting more and more of them out there, I started realizing this….supporting custom built PCs sucks! I only used the best of parts too. But still, getting support for those components wasn’t easy.
Another reason for tier-1 product use….related to “support”…is that, if you get hit by a bus, your clients will need to find another propeller head to support their stuff. If you stick with tier-1 products, this makes it easy for them. If you build custom stuff…not many will want to support your products. This is not a good approach, IMO, if you have SMB clients. It will cost them more money at the end of the day.
And what stops customers from googling the model number on your estimate and finding it for 200 cheaper??
I have many othe points, but I have to attend to the 10 custom builds were doing this week, and making a lot more than 20%(which as pointed out you aren’t going to make that often on oem)
Compnet…I welcome them to Google the price (or…because I custom pick components as I know which parts to upgrade in the models)…I welcome them to go online to Dell or HP and “build” desktop or server to the specs I did, because I sell it at the MSRP that the website states! So my clients know I’m not ripping them off. I can do that because I’m a reseller.
Just configured and ordered an Optiplex for a client this morning, took about 4 minutes of my time, plus another 2 minutes of my book keepers time to invoice it, I will make ~$125 on the deal for that 6 minutes of our time. Computer being drop shipped to my client where I’ll charge my hourly rate to set it up. I can’t complain about that $ per hour ratio!
…clicked wrong button before I was done..got too many remote windows open
Anyways…my point above being, us OEM resellers do fine there too, you can’t knock that point. MSRP of 740 bucks, I paid 613…for under 10 minutes time, you can’t try to pull a false claim like that about about us marking up in addition to price (I sell at MSRP so yes I welcome my clients to look online), nor do we not make anything. (see my above profit for time involved…do you want to compare $ per hour made? How much time did you spend ordering the components, receiving them, shelving them, getting parts and putting together, installing Windows, drivers. Probably 1 hour of time? I actually bet a little more….
Anyways..my main point still remains about “support” once you get sheer numbers of them out there to support, and you have to factor in “your time” since us guys that do SMB clients typically have them on as “monthlies”. So you want to spend as little of your time as possible.
I’m not alien to building and selling custom systems, like I said…I used to do that. I just had address the misconceptions stated above.
@stone cat
I was more replying to the article. With the i7 lenovo he was saying mark it up 20-25% – well I can google it and find that exact computer for 850-900 in 5-10 seconds, and if I look harder I’m sure I could find it for cheaper. If my trusted IT support company came at me with a quote of 960-1000 I would be finding a new company. Personally, I would rather build a machine than try to sneak one past my customers and upcharge the newegg daily deal 200 bucks and hope they don’t notice. I don’t lose customers quoting them my builds, seems like following the author’s advice could get you in some sticky situations.
If you are a reseller selling business class and not just buying off a random website, then it makes a little more sense.
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As for support, yes I could see your point, but again, the author never brought up the managed services. We can upsell warranties because we have good sales people.. It doesn’t take much to scare people away from dealing with the warranty themselves with the way most warranty/support is these days(not just computers) – “would you rather spend hours on the phone just to convince someone to come out, only to have them screw it up and have to send it out to depot for 2 weeks” – yes even with dell/hp/lenovo next day business warranties I’ve seen this happen. With our custom builds, they drop it off, we call them the next day and its fixed.
We stock parts for builds, probably 90% of the business builds are the same thing – quoting, ordering, putting parts together takes 5 minutes, building 15, installing windows/drivers/updates/apps is 15 minutes actual tech time. Generally marked up 2-300 dollars, sometimes 5-600 for high end machines. 20-30% spend an extra 1-200 on extended warranty.
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In summary, if you don’t have a store front, ARE a reseller, can’t stock parts, are selling to mostly managed clients, then by all means, buy your computers.
If you have a storefront, and can stock parts, building is a huge money maker for us.
Re: the “20-25% markup of MSRP”…I agree, that is poor biz practice. If you’re going into business, do things right, align your company as a reseller and start building your volume and watch your “wholesale/reseller” discounts get deeper and deeper as time and volume go on. Buying at MSRP, turning around and reselling it with money on top of that is….not professional, and sure clients would feel that it was “shady” business if they found out actual prices.
Anyways, turning into an endless debate.
I got to say again from my previous posts, at the end of the day, like a lot of comments, make more money by doing certain things… All major companies need to make and continue a constant in profit by yes, buying bulk cheap equipment in the hopes it fails after warranty and get to a point where you pay for repair or what they really want, buy a whole new machine. That’s it, the fact that anybody states that its better, is good in profiteering but you are assuming people don’t realize that its how they make money. Maybe you never hear it and think people are dumb, but many people I talk to usually talk about the hate and prep of buying a new machine every so often. Simply, you have a better chance buying parts you know will last and you all can actually continue servicing them for the life of the computer that is usually longer than pre-built. Usual warranty is based on conditions that honestly can be hard to achieve and usually you can just handle warranty and yes, you will not profit from dealing with it, but tune-UPS, cleaning, replacement of ware and tear… Upgrading and eventual new build is how you continue. Clients will appreciate you more and respect. People want more for less, and that fact is amazing when you give them pre-built that in my experience, get you in a screwed up situation and loss of client. The major companies work with major companies and as a small business, is harder to hold a place. Everyone is all competing for the doe and people like options. You can control a lot more of what’s going on with your client when you give them something built with your own hands. You will get in a messy spot when something your client doesn’t like and expects results that you will most likely not control. Selling brand Laptops and Tablets is the best, but desktop, which is still needed to do a lot of functions easier than portable does well with building your own.
“Quality OEM systems (business oriented machines) these days come with the same or better components compared to similarly stocked custom builds, generally for less cost.”
Agree to disagree.
Two notes on your article:
1. Lenovo – 100% chinese manufacturer who bought out IBM’s PC business. Thinkpad used to mean something although it was aggravating to support even when IBM owned it. Now? Cheapest of the cheap components world.
2. HP as your number two. No mention of Dell so you are probably a Dell hater. Guess what? When HP did their 180 degree turn around and decided to stay in the PC business, they had to use much cheaper components than even Dell uses to make any money. Results? Low quality, high failure rates. Even the quality they picked up from Compaq is nearly gone.
I have 30 years experience in the pc/server world and provide daily support and expertise in everything from desktop support to datacenter operations. At home I have both custom builds and OEM prebuilts. The prebuilts are all warranted refurbs bought with 30% discount codes that I then replace the drives and discreet graphics cards.
I think custom shops can still make it although they better be good and keep a sharp staff. Personal touch and local expertise are what make custom shops successful. It is very hard to compete with a behemoth that only needs to make 3% profit on hardware and makes most of their money on support agreements.
The last year or so I have been steering the casual user who has little real expertise or knowledge away from any pc or laptop to a tablet, based on their technological ecosystem. Most people don’t need a pc these days. Gamers and SOHOs do and they need good local support as well. Custom shops would do well to stay current and help their customer base stay current as well. Real money gets paid to expertise; hardware is just the icing we get to play with.
Forgot to factor in that I charge for my expertise and all the add-ons and how I setup their system for a custom build. I charge for that, and it ain’t just for a $50 profit either.
Yes, it IS hard to get customers to understand why your system costs more, but the way I build them, they’re ALWAYS better than OEM, and I always steer people from them. I’ve never seen a quality built OEM system, business, or otherwise. Cases alone are always so proprietary that you might as well throw it out. MB gone bad? Guess what, it’ll cost you cause it’s PROPRIETARY. I disagree that OEM is the way to go. Will the customer go with my system? Usually not, but at least I told them so – and when the OEM dies, they come back to me anyway.
Spot on article. OEM custom building has been the foundation of our 6-man shop for almost 20 years. If you include the big contracts from government and schools, we’ve built and sold over 15,000 systems. And it is absolutely, positively true that custom building is quickly becoming a very niche market, for gamers, CAD, etc. At this point the easy majority of our custom built systems are simply for our older and very loyal customers who are used to seeing our sticker on the box.
We’ve also been a Lenovo reseller for years, although only for the Thinkpad laptops up until a year ago when we started integrating the Thinkcentre desktops into our offerings. And thank god we did when we did, moving our system sales to almost all prebuilt OEM has really enhanced and streamlined the business and allowed us to expand our profits in other areas while keeping overhead minimal. Custom building is a cute little side part of the business now and not the crown jewel it once was.
Great article, very insightful and prescient.
Browsed the article but i know that i agree with this. To time consuming and not great mark up now in building systems for business. (unless bulk order maybe) I just buy refurbed machines or if required brand new with warranty. Make my money on the researching the best deal around and add to quote.
Grey area for me though and still learning the art of quotes with own mark up on (if not buying trade)
love the site btw :)
Depends on what you need it for.
I remember buying beige boxes, putting network cards in them and selling them as workstations for POS systems.
My previous build would have been much better pre-built, since I went through four motherboards during its five year lifetime. And after battling RMAs with a company listed above, I won’t do business with them ever again. If I still lived in decent driving time of Microcenter, I would have gotten all my parts there. Getting in front of somebody’s face can really do wonders. It went belly up while I was trying out Win 8 CP, fighting not only the motherboard but a bad 1.5 TB drive as well (S.M.A.R.T. still says that there is nothing wrong with that drive, BTW…).
And by belly up, I mean the motherboard stopped booting, completely. Couldn’t even get the BIOS to show up on screen.
I built my current system, locally, from CompUSA (Formerly CompUSA, the CompUSA under Tiger Direct, and now just known as Tiger Direct…) because I needed something NOW. New case (old one had issues, some not even its fault…), new motherboard, new CPU, new memory (can’t put DDR2 in DDR3 slots…), eventually a new hard drive (after sorting out the problem drive). Same old PS, keyboard, mouse, video card and monitors. Not that any of those are the original ones I started with. The original video card is in my wife’s computer.
I had started planning on what I wanted in a new system (I knew it was going to happen at some point, just didn’t know it was THAT soon), and the only things that I didn’t get that I had written down so far was PCI 3.0 and Ivy Bridge. I’ll survive.
My friends that used to build their own are either buying pre-built, or they have gone over completely to laptops.
Spot on Hot Socks. it’s the after sales support and warranty that will kill you and its 12 months of hassle