YouTuber Mike Tech was attempting to refurbish a couple of Gateway 2000 desktops recently, and he observed that one of them had features you normally only see in business class PCs. And he expressed surprise, because Gateway is a brand we typically associate with consumer PCs. But I can confirm Gateway did attempt to compete in the business/enterprise PC market. Here’s why that didn’t go so well for them.
Gateway in the enterprise
The first thing to keep in mind is Gateway PCs were going to find their way into businesses whether they wanted to be there or not. There was a widespread belief in the 90s that a PC was a PC was a PC, so you could just buy on price, convenience, or anything else, and you would be fine.
This meant you had all sorts of machines turning up in offices that really shouldn’t be there. If someone needed a PC, they might just get a newspaper, look at the sales flyers, then go buy something with a corporate credit card or expense it.
You get in trouble for doing that now. But in the 80s and 90s, it was surprisingly common.
Why Gateway?
And in the 90s, Gateway 2000 offered a competitive product at an attractive price point. I’ve done enough sales in my career that I know price isn’t everything. But when you went to buy a Gateway, you got connected to a call center somewhere in the Great Plains, and a friendly representative with a neutral Midwestern accent answered. They gave off a pleasant vibe, even if you weren’t completely certain what you were looking for. They would talk you through the pros and cons of the different machines in your price range, ship it to you at a reasonable price, and you didn’t have to deal with a brick and mortar consumer electronics store. It was the complete opposite of buying a computer at Circuit City, which was notorious for high pressure sales tactics and a snobby attitude.
So just because of the era and the way they did business, Gateway was going to find themselves in the enterprise business whether it was by design or by accident. And I think they could have succeeded. But having dealt with their machines in multiple corporate environments, I also know why they didn’t.
The problem with Gateway PCs in business
My first IT job was in a university setting, and each department had enough autonomy that we had one of everything. One of my more popular blog posts covers 90s PC brands. It was a pretty easy blog post to write, because nearly everything in that list is something that I saw operating. I remembered all the names, the only research I had to do was when they left the market and why.
But back to Gateway.
In 1997, the department I worked in received top-of-the-line multimedia production workstation produced by Gateway as part of a grant. When the machine arrived, it needed a couple of parts installed. A very senior technician from the centralized campus IT department came over to perform the installation. His name was Gerry, and I had met him before. He would occasionally give classes where he would talk about PC repair and maintenance. Whenever we had a difficult problem to troubleshoot, we would make an appointment with Gerry, bring our toughest problem to him, and he could probably figure it out in about 30 minutes.
The first thing Gerry did surprised me. He picked up the nearest phone. “I’ve learned the hard way that you never work on a Gateway without calling them first,” he said.
This coming from the guy who could fix anything in 30 minutes. And even though the work we needed to do was just installing a couple of components on a freshly built PC, we did run into a couple of complications. Gateway walked us through them and at the end of the phone call, we had a working machine. But it took us longer than 30 minutes to get there.
Trouble in paradise with Gateway 2000
Fast forward a couple of years. I found myself working for a religious nonprofit. Gateway wasn’t their preferred brand, but it was arguably their #3 behind Micron and Apple. All the decision makers were German-Americans who grew up in Wisconsin, and Gateway’s Great Plains vibe played well with them.
But there was a reason Gateway never became their number one. Those of us who had to work on the machines all observed the same things. Gateway bought their parts from the same suppliers Micron did, but the Micron computers were easier to work on and more reliable. This didn’t make sense, so we started tracking statistics. The numbers confirmed it wasn’t just in our heads.
My theory, then and now, was that Gateway would use the same suppliers that Micron and Dell used, but they didn’t use the same parts. I think Gateway had its suppliers substitute cheaper, lower-grade discrete components like capacitors and resistors when building parts for them. So you ended up with a machine with a lot of name-brand parts in it, but not the Grade A versions.
But that wasn’t the only problem. Remember my buddy Gerry? I took his tactic of calling Gateway early and often to my new job. But as time went on, it became less effective. They became less willing and maybe even less able to help. And when you needed a component replaced, they would hassle you for it.
It took some time for businesses to figure out how much money the downtime was costing them, but eventually, most businesses figured out which brands of PCs tended to have fewer problems, less downtime, and lower support costs. That usually meant they were willing to pay a little bit extra to get better quality and better consistency. That didn’t mean everyone ran out and bought IBM. But it did mean any computer manufacturer who could figure out how to deliver better quality than Gateway at a lower price than IBM and do both consistently did rather well in the enterprise market.
The enterprise market vs the consumer market
In the consumer market, Gateway’s downfall was when they skimped on customer service. Consumers will forgive mistakes as long as you own the mistake and don’t hassle them about making it right. Businesses won’t necessarily be that forgiving. But the other thing that really doomed Gateway in the business market was the inconsistency. The price difference between a Gateway and a business class equivalent machine from someone like Dell or Compaq could be less than $200. The time that you saved by buying a little further up market was usually worth quite a bit more than that. So I think that, more than anything, was what went wrong for Gateway when selling business PCs.
David Farquhar is a computer security professional, entrepreneur, and author. He started his career as a part-time computer technician in 1994, worked his way up to system administrator by 1997, and has specialized in vulnerability management since 2013. He invests in real estate on the side and his hobbies include O gauge trains, baseball cards, and retro computers and video games. A University of Missouri graduate, he holds CISSP and Security+ certifications. He lives in St. Louis with his family.
I had 2-3 Gateway machines in the early 90s, but they certainly lost their luster by the late 90s. I switched to Dell by then.
Like you said, I believe they value engineered their components. One example was them shipping Ensoniq sound cards that I recall being just a little bit off. Different part numbers, drivers, etc. from what you would find in other brands or at retail.
I think their retail stores are what finally did them in. I remember when the first Apple retail stores opened pundits declaring that Gateway failed in retail and so would Apple.
I used to drive by one of their retail locations on my way to work every morning. I never went in. I remember pundits saying that about the Apple stores and agreeing with them. I got that one wrong.
I worked for a company in the late 90s that did phone technical support for Gateway. We acted as though we were Gateway, but was actually an outsource in the Midwest. I remember the power button on front of some of their towers had a mechanical design flaw that made it not work. To me, that always seemed like a big lack of quality control.
Interesting, I didn’t know they’d outsourced the tech support. Insider info like that is always fascinating. I never encountered the power button flaw you speak of but I’m also not surprised.
To be specific, they only outsourced some. We had to routinely escalate calls to the real Gateway support center in certain cases.
I provided on-site service for Gateway until they went bankrupt and saw first hand how the company died. At least the business side: It’s my understanding that the consumer division was sold to another company that did okay.
They were an excellent machine for the consumer back in the day. In the event of a hard drive failure, the OS was easily reloaded with the supplied CD-ROMs – the consumer didn’t need to do anything other than a few swaps. The addition of Go-Back even gave them the ability to restore the system in the event that an update or install crashed the system.
Quality went down once they purchased e-machines. Instead of using the facilities to manufacture Gateway computer, they manufactured e-machines with the Gateway logo. Naturally enough, businesses were purchasing the cheapest computers they could – along with the on-site warranty. The warranty was well worth the price you paid: Those computers would die at least once a year. When you factor in my price for on-site service, I estimate they lost twice the cost of each computer with each one they sold.
Near the end I found manufacturing defects that should have been addressed at the factory. Cables installed upside down. CPU heatsinks that warped the motherboard because the mounts were shorter than the standoffs.
I had several customers that got angry of the length of time it took for us to come out and fix their computer, while I thought we were coming out next day. What I found is that Gateway was suffering supply problems. When you consider that they would only ship a completed motherboard assembly, it might take 6 months for them to ship parts because one part was unavailable. (And that part could be something you could remove from the old assembly!) And then the computer would die a week after I left.
I saw the final nail in their coffin when I tried to return their parts to them. Both FedEx and UPS refused to accept packages with their return label. They weren’t paying their bills. It’s no wonder that they had supply issues.