1.4 Building or Buying a PC

The make-or-buy decision is a fundamental business school concept. Does it make more sense to make a particular item yourself or just to buy it? With entry-level PCs selling for $600 and fully equipped mainstream PCs for $1,500, you might wonder why anyone would bother to build a PC. After all, you can't save any money building one, can you? Yes, you can. Quite a bit of money, in fact. But that's not the only reason to build a PC. Here are good reasons to do so:

Choice

When you buy a PC, you get a cookie-cutter computer. You may be able to choose such options as a larger hard drive, more memory, or a better monitor, but basically you get what the vendor decides to give you. And what you get is a matter of chance. High-volume direct vendors like Gateway and Dell often use multiple sources for components. Two supposedly identical systems ordered the same day may contain significantly different components, including such important differences as motherboards or monitors with the same model number but made by different manufacturers. When you build a PC, you decide exactly what goes into it.

Component quality

Many computer vendors save money by using OEM versions of popular components. These may be identical to the retail version of that component, differing only in packaging. But OEM versions have several drawbacks. Many component vendors do not support OEM versions directly, instead referring you to the computer vendor. And OEM versions often differ significantly from the retail-boxed version. For example, Micron used the popular Intel SE440BX Seattle motherboard in many of its systems, but modified the Intel-supplied BIOS. That means owners of those systems cannot use Intel BIOS updates. Instead, they must depend on Micron to provide an updated BIOS. Dell and other major makers sometimes use downgraded versions of popular products, for example, a big-name video card that runs at a lower clock rate than the retail version. This allows them to pay less for components and still gain the cachet from using the name-brand product.

Cost

PC manufacturers aren't in business for charitable reasons. They need to make a profit, and that means they need to sell computers for more than they pay for the components and the labor to assemble them. Significantly more, in fact, because they also need to support such expensive operations as research and development departments, toll-free support numbers, and so on. But PC manufacturers get huge price breaks because they buy in very large volumes, right? Not always. The market for PC components is extremely efficient, with razor-thin margins throughout. A PC manufacturer may get the hard drive that costs you $150 for only $145, but they're not going to get it for $100. They may even have to pay $155, because PC manufacturers often have long-term contracts with suppliers. That can work either to the benefit or detriment of the PC maker. When the price of memory is plummeting, for example, a PC maker may have to pay twice as much as you do for memory. Conversely, when the price of memory skyrockets, you'll pay the spot price, while the PC maker may pay only half what you do because their memory suppliers are selling on a long-term contract price. Our rule of thumb is that, on average and all other things equal, you can probably build a mid-range PC yourself for about 75% of what a major manufacturer charges.

No bundled software

Most purchased PCs include Microsoft Windows, Microsoft Office, or other bundled software. If you don't need or want this software, building a PC allows you to avoid paying for it. You might think that the software has some value anyway, for example that you might be able to use it on one of your other systems or sell it to a friend. That is not the case. Under most license agreements, notably Microsoft's, you cannot legally transfer software from a newly purchased PC to another PC. That software is legally usable only on the PC that it was sold with. Note that, although OEM versions of Windows and Microsoft applications are often labeled "For sale only with a new PC," Microsoft has in the past taken a liberal view of what constitutes a new PC. Buying a hard drive or a motherboard may entitle you to buy an OEM version of the software you need at a greatly discounted price, less in fact than you'd pay for a retail upgrade version. There are signs that Microsoft is tightening up eligibility requirements for OEM software, though, so make sure any software offered with a motherboard or hard drive is in fact an authorized version.

OEM software is one of the best-kept secrets in the direct sales channel. It isn't advertised, and no one tells you about it unless you ask. If you buy a motherboard or hard disk and need this software, ask the vendor if they can supply it. The deals are often striking. For example, when we were checking prices for a motherboard for a new system in early 2002, we could have purchased with that motherboard an OEM version of Windows XP Home Edition (full version, not upgrade) for $81, a full OEM version of Windows 2000 Professional for $85, a full OEM version of Windows XP Professional for $127, a full OEM version of Office 2000 SBE for $127, or a full OEM version of Office XP SBE for $173. Full OEM versions are generally about two-thirds the price of retail upgrade-only versions, so if you need the software this is a cheap way to get it. Of course, Microsoft doesn't support OEM versions, which is the main reason for the low price. But then, some might argue that Microsoft doesn't support retail versions very well either.

Warranty

The retail-boxed components you'll typically use in building your own PC include full manufacturer warranties that may run from two to five years or more, depending on the component. PC makers use OEM components that often include no manufacturer warranty to the end user. If something breaks, you're at the mercy of the PC maker to repair or replace it. We've heard from readers who bought PCs from makers that went out of business shortly thereafter. When a hard drive or video card failed six months later, they contacted the maker of the item, only to find that they had OEM components that were not under manufacturer warranty.

Experience

If you buy a computer, your experience with it consists of taking it out of the box and connecting the cables. If you build the computer, you know exactly what went into it, and you're in a much better position to resolve any problems that may occur.

Although there are many advantages to building a PC, there are some offsetting advantages to buying one instead, including:

Time

Building a PC takes time, not just the time needed to actually build it, but the time required to choose and order the components. If you're building your first PC, expect to spend at least a day selecting and ordering components and a weekend actually building it. We maintain web pages at our web site, http://www.HardwareGuys.com, that list our picks for the best components for various types of systems, from budget to high-end.

Integration

When you build a PC, you are responsible for making sure all components are compatible, locating and installing the necessary drivers, and so on. But this isn't as onerous as it may at first appear. With very few exceptions, PC components simply plug together and work, just as any VCR works with any television.

Component availability

If you absolutely need to have the latest, greatest CPU or whatever, you may have no choice but to buy a PC that includes it. Like any other business, component makers favor their major customers, who happen to be the large PC makers. When the Intel Pentium 4 processor first shipped, for example, you couldn't buy a retail-boxed Pentium 4 for love or money. If you wanted a Pentium 4, your only option was to buy a PC with a Pentium 4 in it, because essentially 100% of Pentium 4 production was going to the PC makers. If you're considering buying a PC for this reason, we suggest you think again. It's almost never worthwhile paying a significant premium for the latest and greatest, let alone buying an entire PC to get it.

Support

If you build a PC, you become Support Central for that PC. There's no single manufacturer to call, and it's up to you to figure out where the problem lies. If you isolate the problem to, say, the motherboard, you'll have to talk to the motherboard maker directly, assuming that they'll talk to you. Some will not, notably including Intel. You also may have to deal with multiple vendors all claiming that it must be the other guy's fault. Of course, just because you bought a packaged PC doesn't guarantee that the maker provides good tech support. Some makers, notably Dell, have been famous for consistently excellent support (although, according to some of our readers, the quality of even Dell's support has been on the wane as PC prices have dropped). Others, like Gateway, are more variable in our experience, sometimes providing top-notch support and other times not. Some makers provide better support for corporate users than for individual buyers. Still other makers provide infamously bad support to all comers.

Bundled software

If you don't need bundled software, there's no sense in paying for it. But if you do want the software bundled with new PCs—typically Microsoft Windows and Microsoft Office—you'll be hard pressed to find a full retail version for anything near as little as it actually costs you as part of a new PC purchase. On the other hand, as noted above, OEM versions of the software are often available at very low prices when you buy a disk drive or motherboard.