Eager for the extras

Federal government PC buyers are demanding more bells and whistles—and are willing to pay for them.

The summer buying season is shaping up to be a particularly strong one for desktop computer manufacturers because agencies are willing to shell out a little more for the fastest microprocessors, DVD drives and even flat-panel monitors, according to executives from several vendors.

Harry Heisler, executive vice president and general manager of Micron Government Computer Systems LLC, said the company is banking on the PC "sweet spot" for the end of the year to be centered around machines with 1 GHz processors, 17-inch flat-panel monitors and 256M of RAM. He also said customized orders are becoming more common.

"Demand for customization is out the roof," Heisler said. "The customer wants us to configure proprietary software with industry-standard software, debug it and add third-party [applications] in the box before we ship it."

More than just bargain hunters, agencies tend to be value shoppers who want the most bang for the buck and will pay a bit more for useful features, Heisler said. "The federal government is very much a value buyer, not a price buyer. They have specifications to meet requirements, and they will hammer the price into the ground as best as possible, as opposed to the price shopper who is looking for price first."

The average price for a Micron Government PC is about $1,400, he said.

Because prices for flat-panel displays have fallen, agencies can more easily justify buying them. Heisler also said that DVD capability is "darn near standard," and CD-Rewritable (CD-RW) drives have a growing fan base in government agencies as well.

"For data-intensive, proprietary things like [Defense Department] applications and where security is important, burning a CD and locking it up is a good way to control large chunks of information and also control who's using it and when," Heisler said.

Requests for 1 GHz processors are on the rise because chip makers have made them more cost-effective, "which is good for them and good for the customers," he said.

Gateway Inc. is seeing similar trends.

"There's been a surprising amount of 1 GHz buys," said Jay Lambke, vice president of government sales at Gateway. "And we're seeing a ton of DVD [requests] because that is now at such a low cost that agencies are asking, "Why get a CD when you can get a DVD?'"

The average price agencies are paying for a Gateway PC is more than last year's. Lambke said a typical mid- to high-end configuration includes a 1 GHz processor, a 17-inch monitor, 128M of RAM, a Network Interface Card and a dual DVD/CD-RW drive—for a cost of about $1,650.

In addition, sales of flat-panel monitors are up because prices are lower and the devices offer better energy efficiency than traditional CRT displays.

Overall, volume and revenue are up, and the "death of the PC has been greatly overexaggerated," Lambke said.

Heisler also said business looks good this year, even though it's still early in the buying season. "You can't bet on one short period of time, but in the [first two weeks of June], my sales are up over the previous year at a higher rate than I've seen all year. We're very bullish about the season."

Tom Buchsbaum, vice president and general manager for Dell Computer Corp.'s government business, echoed that rosy outlook and said Dell is "seeing rapid adoption of new features like Intel Pentium 4 [processors] at 1.4 GHz and 1.7 GHz, RDRAM, flat-panel displays, dual processors and DVD," all of which "are unusually affordable and in high demand."

Buchsbaum said government customers are surprised when they learn how far their budget dollars will go. For example, federal customers can order a Dell PC with a 1.7 GHz Intel Pentium 4 processor, 128M of PC 800 RDRAM, a DVD/CD-RW drive, a 40G hard drive, a flat-panel LCD display and three-year on-site service for under $2,000.

Alan Lawrence, manager of strategic programs for Hewlett-Packard Co., said the company's e-PC products have come into their own this season, citing some large buys of the machines, which are compact but feature 800 MHz to 1 GHz processors and large hard drives. They also require no on-site maintenance. "If it breaks, you take out the hard drive and do a box swap," he said.

Lawrence also said sales of DVD and CD-RW drives are gaining momentum, but disagreed with his colleagues about flat-panel displays. They're still too expensive for most of HP's government customers.

That is also the assessment of one government buyer. "I am not sure about the flat-panel displays," said Gary Krump, deputy assistant secretary for acquisition and materiel management at the Department of Veterans Affairs and vice chairman of the Procurement Executives Council. "They are pricey without really adding to functionality, and people seem to be willing to sacrifice them for more power and processing capacity. They may become more desirable when the price comes down a bit more, but right now, I'd spend my money on the power and use the regular monitor.

"I just have not seen a great migration to the flat panels as yet," Krump said. "But it may come sooner than I think."