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BANFF, Alta. -- The top system builders in the country came to one of the most picturesque towns in all of Canada for the annual System Builder Breakaway event held by ComTIA Canada. As part of this year's event, Computer Dealer News held its annual System Builder Roundtable. This year's roundtable participants included Gary Sohal, president of Audcomp Computer Systems of Hamilton, Ont., Stewart Hayek, president of Forest Computers of Winnipeg, Larry Poirier, CEO of Nitro Microsystems of Ottawa and Rahul Sood, president of VoodooPC of Calgary.

CDN: Supercom is advertising a sub $400 PC. Has price erosion, especially at this level, finally made system builders realize you have to do more to survive then just resell the box?

Gary Sohal: Even if it is a $399 sale we would probably make $500 to $600 on the servicing side of it if we know what we are doing. In that respect there is a lot more money to be made even though it is only a $399 box.

Stewart Hayek: To answer the question directly -- no one can survive on a $400 system. What happens when you go to the $400 system and mark it up six points and then you have a $370 system? You just can't make it on hardware. Hardware is not the way to go. I could care less if we lost hardware. The only thing about hardware is that it brings in the services. I would rather have someone out there making $100 an hour instead of someone building a system where I make $50 profit on. With price erosion this is the death knell for people who just sell systems.

Larry Poirier: It all comes down to value add. If all we are going to do is respond to RFPs that we have no part in writing or specing; our value add is very limited to that point. And we are not going to make a decent living out of that. What we are eager to do is make a transition to services. Now we are 20 per cent services. We are billing $250,000 a month in services now. What we are looking for is VPN, security, firewall implementations. Smaller companies do not have the technical resources to actually maintain them. They are only worthwhile if you maintain them. So what we do is discount the upfront VPN implementation so long as they sign a one or three-year contract to have me come in every quarter and update it or remotely update it. We have changed our focus away from product. As soon as you have given that client a part number you have reduced your solution down to something they can search on the Internet.

Rahul Sood: If Supercom is selling sub $500 PCs, that is a potential ticking time bomb. Service is not the answer for everyone. There is more potential to make money in this industry doing other things besides service. Think product innovation. McKinnon Micro has the media centre PC and the key thing is do not try to be all things to all people. You really need to focus on what you do best. The whole sub $500 market between $500 to $1,500 everyone knows is a dead market and sub $500 you lose money.

CDN: Rahul, you once dabbled in white box notebooks, both Intel and AMD at this conference said whitebooks would be viable in a year's time. Do you think they are out to lunch or do you think they are onto something?

Sood: The biggest fear is servicing. When you sell a notebook you get asked: "If I am in New York and my notebook fails what do I do?" We all know that companies like Toshiba are not going to instantly fix it for you in New York. You will have to fly back and send it to a service centre or take it to a service centre in New York. It will still take two weeks. However, companies like Intel and AMD are taking this initiative to push whitebooks to the channel because of demand. It is huge for notebooks. If everyone requests local service they will ultimately set up the infrastructure for us to do that. They are not out to lunch. It is a big thing.

Hayek: I have always had a problem with it. It has never worked. Brand recognition is also important. If I have to explain a no-name brand notebook to a customer they are leery about it.

Poirier: The reason a company would sell a whitebook over a Toshiba or IBM is to make better margins. If that is the goal then I would look at the secondary brands like Fujitsu Lifebook, Acer TravelMate. If you do volume with those companies you can stand out with those companies. This also protects you with ongoing support. If you are all by yourself selling a whitebook two years later the client wants to upgrade, and you are spending a lot of tech time trying to do it.

Sohal: Once we have access to parts to build whitebooks we would carry it but we would give them a choice with tier ones or cheaper whitebooks. Then let the customer choose. In terms of the margins, overall the bottom line is the same if we sell tier one or whitebooks.

Sood: Let me make this clear. Acer and Fujitsu are whitebook makers. The four OEMs out there build for all these companies. For service, VoodooPC to offer 24/7 tech support it will roughly cost me $200 per unit for three years of service. If the motherboard fails it will not be fixed on site whether it is an HP, an Acer or a Dell. If you brand it properly you have to get away from white box. You have to get this whole white box thing out of your head. The whole word white box is offensive to me. And white book is offensive to me. I just don't like it. We are not a white book. We are a brand name. We believe in our brand. If you don't believe in your own brand then you are going to get stuck in the lull saying: 'If you want to buy a real brand you can buy Acer or you can buy my white book.' That is not a good way of doing this business.

CDN: Windows 95 is not supported, Windows 98 will not be supported starting next year and this will lead to greater security risks and higher maintenance costs. Will these facts make your customers upgrade sooner?

Poirier: At first I was an absolute no. Win98 going away does not matter. I have the technical people in house to support them. In that respect it is not a prime mover. What I realized is that 50 per cent of the boxes out there are below 500MHz and three-year old (according to Intel). So there will be a pent up demand. But, they will be PC clients, which will be notebooks.

Sohal: Because those systems are three-years old it will probably out of warranty so to replace a box on a PC it is $1,000. People are savvy these days and can use the spare parts for other systems. We should see some surge.

Hayek: Maybe we are different in Winnipeg because getting customers to upgrade their systems it is similar to pulling teeth, just because there is a security risk they will live with it. The day they upgrade is the day they get attacked. The Windows non-support is not a big deal. There are a certain percentage of your customers who are active with software updates and they will upgrade and that is only 10 to 20 per cent. Only a minor increases on the corporate side. On the consumer side it does not make a difference so long as their system can still run their game.

Sood: Their computer will not be able to run their game. You should have an upgrade program in place where every two years you upgrade the systems. You tell them that every two years you upgrade your system, period.

Hayek: You would die in Winnipeg.

Sood: I don't think so. You have to show them the value in it. How upgrading will increase their productivity it will be successful.