The Economics of Scale Are Anything but Economical
Saturday, November 23, 2002
There is a pervasive, though ill founded, belief that computers from the major
manufactures are somehow cheaper than those assembled by your local computer
shop. We were recently taken aback when a customer told us that they wanted to
buy a computer from us even though they were going to have to pay more. Though
this isn't a completely unusual thing for a local business to hear, it is, nevertheless
disturbing. So, once and for all, we'd like to debunk the myth that a computer
purchased locally costs more than one purchased from a major manufacture.
For the purposes of this comparison, we are using Dell. There are a couple
reasons for this. First, they are the largest of the major computer brands. Unlike
some of their competitors, it is still possible to get a business class computer
from Dell. Additionally, as a mail order company, people generally expect them
to be cheaper than those computers sold from the national retail chains. Lastly,
the information we were able to collect is available directly from Dell's Web
site and is therefore readily available.
So, let's get right down to it, shall we? We went to Dell's site and built
a "Small Business" "Desktop." To give them the best shot
at being cheaper, we started with one of their low end series, the OptiPlex.
Specifically, we chose the Dell OptiPlex GX260, which reads "from $499,"
a starting price far below ours. We then customized it to best match a computer
you could walk in and buy today from Cape Cod Computer.
First, let me say that this wasn't as easy as the commercials suggest. Dell
still insists on using the proprietary RDRAM for most of their systems rather
than the industry standard DDR RAM. Why? We're not sure. RDRAM tends to be slower
and more expensive. We can only assume they have a deal with Rambus (the guys
who hold all the patents for RDRAM) that their lawyers haven't found a way out
Additionally, if you're not careful, you could end up with an Intel Celeron
processor in your brand new Dell computer. We're glad to say we never sold one
of those chips to a customer, even when some people argued that it what was a
"good bargain." Regardless, nowadays, the price on uncrippled chips
is so low that there is no justification for the performance hit a Celeron based
After a bit of work, we were able to find a true Pentium 4 system with DDR
RAM. We were also able to further customize that system to match a Cape Cod Computer
system from this month's price sheet. Here's the specs, directly from Dell's
site compared with the C3 Custom PC:
||Dell Dimension 4550
||C3 Custom PC
||Windows® XP Professional Version, Service Pack 1, with CD, using NTFS
||Windows® XP Professional Edition, Service Pack 1 with post Service Pack
1 fixes and updates. Includes CD.
||Dell, by virtue of it's close ties with Microsoft, can only
offer Windows XP or Windows 2000. For comparison purposes, we have priced ours
accordingly. However, if you have software that won't run on Microsoft's latest
operating system or you just can't afford to relearn how to use a computer,
you can get Windows Millennium or Windows 98 on your C3 Custom PC. That's one
of the reasons we put "custom" in the name.
|Processor and Motherboard
||Pentium® 4 Processor 2.40GHz, 533FSB, 512K Cache, Intel Gigabit NIC
||Pentium® 4 Processor at 2.40GHz
with 533MHz system bus/ 512K L2 Cache
||Ours has the same specs, but we're using an ASUS motherboard.
They neglected to mention a name. Dell has a gigabit network card built in.
Ours is a separate 100Mb card. We would argue that a separate card is better
as the integrated cards usually take up resources and conflict with a real
network card should you need to upgrade or install a different card. In all
honesty, for the average consumer, this is probably not an issue. For the computer
repair person (you know, the poor sap who has to work on your computer) integrated
anything can be a nightmare.
||256MB DDR SDRAM at 333MHz
||256MB DDR SDRAM at 333MHz
||Again, same specs. In this case, we are using Micron memory.
Again, they don't mention a name.
||32MB ATI Radeon™ 7500
||64 MB nVidia GeForce4 MX 420
||Besides having more memory and, in general, being a faster card,
nVidia, by virtue of being the video card used in Microsoft's Xbox gaming console,
has become the standard development platform for games. At least this time,
however, Dell included a name.
||Dell 17 inch M782 flat CRT color monitor (16.0 viewable)
||17" (16" viewable) ViewSonic E70F .25 dot pitch perfect flat monitor
||They conveniently neglect to mention the dot pitch, which directly
reflects how clear the picture is. Don't be confused by the name: Dell doesn't
actually make their monitors. They rebrand monitors from other companies. We
are then left to wonder whose monitor this is.
||80GB EIDE 7200RPM
||80GB 7200RPM Western Digital Ultra ATA/100 w/ 8 Megs cache
||The key here is the 8 megs of cache, which make our drives as
fast as those used in high end servers. Again, no name on the Dell.
||40X Max CDRW
||TEAC 40x12x48 TEAC CDRW
||They don't list all the speeds (read, write and burn) for their
drive, and of course, neglect to mention the manufacturer.
||Integrated Sound Blaster Compatible
||On-board 6-channel controller
||"Sound Blaster Compatible" means it's not a Sound
Blaster. So, these are probably the same for all intents and purposes.
||Harman Kardon 206 Speakers
||Cyber Acoustics 10 Watt Pedestal Stereo Speakers with Power Supply
||This time, they have provided a name but left out the specs.
Fortunately, with a little research, I was able to find out that the Harman
Kardons are only 6 watt speakers.
||Dell® Quietkey® Keyboard
||Mitsumi 104-Win95 Enhanced Keyboard.
||The difference here is personal preference. I've used the keyboards
Dell ships on severs and they are really nice. However, that's certainly not
what you get with the OptiPlex. In all honesty, I don't love the Mitsumi keyboards
either for feel, but they never go bad. There's something to be said for that.
|Mouse and Pad
||Microsoft PS/2 2-Button IntelliMouse with Scroll
||Microsoft USB 2-Button IntelliMouse with Wheel
||This is virtually the same mouse. However, we were amused to
find that Dell charges extra for the mouse pad.
||Norton Antivirus 2002
||Norton Antivirus 2002 with 1 year subscription
||They didn't list the subscription, but based on what they are
charging for it ($40), we have to assume it's also one year.
||Belkin Components Surgemaster Gold 9 outlet w/10ft cord
||Cyber Power 890 with power, telephone, network, satellite and cable connectors
||Theirs only protects the power and phone lines. However, as
we all know, a surge can follow any line. It can follow your cable or satellite
connection into your home. So, you need to protect these as well. Our Cyber
Power does this.
||3 Year Same Day 4Hr Parts Onsite (M-F 8am-6pm) + GTS
||1 Year in store.
||At first glance, the Dell warranty seems great. However, as
anyone who has ever tried to cash in on this warranty knows, there is clause
with the phrase "user serviceable part." What that means is that
they won't send a technician onsite if they feel the user can fix the computer
themselves. Dell claims even the motherboard (the piece of hardware which connects
every other piece of hardware) is "user serviceable." We, on the
other hand, handle all repairs to your computer. We even loan out monitors
to customers if they have one go bad. As a result, Dell simply can't compete
with us on the warranty, no matter how they phrase it.
On top of the price of the Dell, you would normally tack on shipping. Dell
was running a sale when we built our system, however, so we only paid shipping
on the surge suppressor. The price of the Dell may go up by as much as a couple
hundred dollars at the end of the sale. Shipping costs are already built into
our numbers. Both systems would be subject to sales tax.
Unlike some of their other bargains, free shipping is a good deal. We
saw other systems that offered free printers, scanners, digital cameras, Internet
access, etc. As we noted in an earlier
article, free printers are anything but free, and these deals are anything
but good. The same goes with free, bundled software. In most cases, the software
bundled with a system is crippled software, either lacking features or timing
out. Dell bundles these products with your computer because they get paid to,
not because these are products Dell's customers actually want.
In all fairness, if we weren't trying to so closely match the computer that
is on our price sheets this month, we probably could have configured a Dell computer
cheaper than $1,769.25. In other words, we chose the best video card Dell offered because
even their best was not as good as our standard card. Had we been buying this
system for ourselves, given the limited options, we would have probably chosen
the video card which offered the best price to performance ratio.
Nevertheless, the Dell OptiPlex configuration above is the closest match and
therefore provides the best comparison. In the end, we found it lacking in almost
every category. Despite this, and despite the limited time offer for free shipping,
the Dell was still much more expensive than the C3 Custom PC. So much for the
economics of scale.