Tier-1 Original Equipment Manufacturers (OEMs) like HP, Dell and Lenovo are facing new competition from Original Design Manufacturers (ODMs), and other companies providing “white-box” equipment based on open-source specifications.
ODMs, which used to only produce components for OEMs, have only recently begun selling servers directly to customers. A few large hyper-scale companies like Facebook, Google and Rackspace have gone to little-known vendors such as Foxconn, Pegatron, Quanta and Wistron to populate their vast data centers. ODMs have been successful in selling servers for lower margins to these large corporations, but there are various reasons why a company has to be careful about what IT hardware they purchase. For instance, eBay and many other companies have chosen to stick with traditional Tier-1 suppliers, believing that their technical expertise, service, warranties and other features make their products more cost-effective on the whole.
As this paper will discuss, there are more factors than initial price