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March 26, 2007

The Slow Death of Built-to-order PCs: Part One - The High Cost of Customization

Dell's recent financial trouble may signal a shift in how consumers buy computers.  Dell pioneered the built-to-order PC, the idea being that customer ordered exactly what they wanted and Dell would never be sitting on unpopular systems.  They streamlined the process out the ying-yang and beat everyone's prices.  But now it's becoming harder and harder for Dell to turn a profit on the PCs they sell.  While I'm sure there are tons of theories as to why this is the case, I'm going to offer up my own: after a certain point offering too many options causes more harm than good, and Dell is well beyond that point...

Let's look at a simple example: optical drives (i.e. CD, DVD drives).  Dell still sells home desktop computers with just a DVD reader, i.e. one that does NOT record CDs.  This is the kind of option that does not serve customers well, and I'm shocked it's still available.  Every computer Apple sells reads DVDs AND burns CDs, and the upgraded drive burns DVDs too.  For processors and enclosures it's even worse.  On home desktop computer Dell offers, by my count, 15 microprocessors and 5 enclosures (2 of which are almost the same form factor as another 2). 

Instead of endless options, computer manufacturers should focus on providing fewer great options and no redundant options. At a certain point so may options is going to cost much more than it's worth to provide customers with the choice.  All the configurable components means manufacturers have to buy and stock tons of parts. Additionally when there are so many options each system has to be built totally from scratch, instead of having popular starter configurations with just a few parts to drop in before shipping.

By comparison when I look at laptop configurations from Apple and HP, I see great starter configurations that only have maybe one or two parts I want to upgrade.  Sadly that's not the case when I look at Dell.

Lastly I'd like to offer just a little anecdote about one of my many computer buying experiences.  A few weeks after I purchased my first Mac (a iBook G4), Apple refreshed the iBook line.  Much to my delight, every upgrade I had selected on my laptop now came standard.  It demonstrated to me that Apple was watching what people were frequently upgrading and making those options standard.  That kind of move is win-win, customers get a better system, and Apple spends lest time installing parts.  Dell could learn a lot from that kind of strategy...

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