Last summer, Contra Costa County released a pair of desktop computer bids designed to boost competition among microprocessor manufacturers and potentially generate savings of several hundred dollars per PC. Instead, the county got a lesson in the computer industry's supply chain dynamics.
The idea was simple enough: Contra Costa released two bids for several hundred personal computers. One specified machines equipped with Intel Pentium microprocessors, the other with comparable AMD Athlon chips. County officials intended to compare the bid responses head-to-head and choose the best deal. In the end, however, the jurisdiction received no response to the AMD-based bid request, leaving it with nothing to compare.
"It's like we threw this big party and these guys didn't show up for the dance," said Contra Costa CIO Steve Steinbrecher. "I was extremely frustrated."
The problem is that AMD brand processors are hard to come by in PCs designed for the corporate market, especially among machines from tier-one manufacturers such as IBM, Compaq, Dell and Hewlett-Packard. Although AMD-equipped machines capture about 20 percent of the total PC market, nearly all of those sales flow to consumers and small businesses, according to Gartner Group. Intel Pentium processors dominate in the desktop computer models marketed toward large organizations.
That amounts to a monopoly, said Mark Moore, AMD's marketing manager for state and local government.
"The bottom line is the global microprocessor market is a closed architecture," he said. "It exhibits all the characteristics -- escalating cost, premium price structures, supply shortages -- and the only time it will become an open marketplace is when the tier-one supply chain offers multi-component selection."
Over the past year, Moore has become an evangelist for procurement changes that he contends will boost competition among microprocessor manufacturers and yield lower PC prices for government buyers. "You could buy a computer that lasts two years longer for $100 less," he said.
Government jurisdictions can generate more competition by making a few simple alterations to their PC bid requests and desktop IT policies, Moore said. Current policies often stifle competition among microprocessor manufacturers by specifying Intel's Pentium chip, either explicitly or implicitly, he said.
Even bid requests that appear processor-neutral may not be, Moore contends. These documents often specify equipment containing Intel Pentium processors "or equivalent" -- language that simply doesn't provide enough incentive for major computer manufacturers to build corporate machines based on competing processors, he said. Therefore, AMD is trying to convince jurisdictions to ask for two quotes from PC manufacturers, one for Intel-based machines and another for PCs based on AMD's Athlon technology.
Moore calls the process "open-architecture bidding," and he says it's easy to implement. "What we did was take the same bid that governments currently use and put in two key words -- one is 'and' instead of 'or' and the other is 'AMD.' So when you put this bid on the street, it says give me an Intel price and an AMD price," he said. "We're not saying 'buy AMD.' We're just saying change the words to maximize competitive tension in the marketplace."
A few jurisdictions appear to be giving the technique a try. Contra Costa County's unsuccessful attempt consisted of two separate PC bids released over the summer. One specified machines containing Intel's Pentium III, 733 MHz microprocessor; the other specified AMD's 1 GHz Athlon microprocessor. More recently, New Mexico's Information Technology Management Office and California's Secretary for Education revised their minimum requirements for desktop PCs to include AMD's Athlon chip in addition to Intel's Pentium III.
Will It Work?
Whether these changes will yield more competition remains open to debate. Intel contends AMD's poor performance in the corporate market stems from customer preference rather than flawed bidding practices and other barriers.