Dual-Edged Sword

In an exclusive interview with CRN on the eve of two key conferences, President and CEO Paul Otellini; Bill Siu, vice president and general manager of the channel platforms group; and Steve Dallman, director of North American distribution and channel sales and marketing, laid out product and channel plans that Intel expects will be key for its partners over the next year. Intel executives will detail upcoming products at the Intel Developer Forum (IDF) this week followed by a channel update at the Intel Solutions Summit (ISS) for its Premier partners starting on March 12.

Solution providers say those executives will need to present a compelling lineup to demonstrate strength against AMD, which continues to gain market share while orchestrating a more organized push into the corporate arena. Last week, Intel said it would miss first-quarter revenue estimates “primarily due to weaker-than-expected demand and a slight market segment share loss.”

“AMD has a lot of momentum in the market,” said Fred Schlaffer, president of B3 Computers, a Gwinn, Mich.-based system builder and Intel Premier provider. “Intel needs something to counter the one-two punch of AMD.”

Intel’s efforts this year will be two-pronged. New brawny, but low-power, chips based on a redesigned architecture will start shipping in the second half and will be complemented by new channel initiatives, said Otellini. Intel feels so confidentabout the redesigned architecture, according to sources inside Intel, that the Santa Clara, Calif., company will reinstitute product benchmarking this year.

“By our own technologists’ estimates, this is the best product lineup we’ve had perhaps in a decade. In all segments,” said Otellini. “We have the factory lineup. We have four 65-nanometer, 300mm factories coming online.” Moreover, Otellini said Intel has spent the past year making sure each of its key platforms, around which Otellini reorganized the company last year, has a strong channel component. “Every platform we are working on, without exception, has a channel aspect to it that we believe offers the channel an equal opportunity to grow their business along with the OEM customers,” said Otellini.

‘NOT STANDING STILL’
Otellini may feel confident about Intel’s latest plans, but the world’s largest chip maker has clearly struggled to get to this point. It’s been nearly two years since Otellini’s predecessor, Craig Barrett, fired a public missive at employees admonishing them for failing to meet several key product release dates. As Intel worked to execute a retooled product schedule last year, AMD shipped the industry’s first x86 dual-core server processors. Intel’s rival ended the year with 16.4 percent of the server market, more than doubling its take, according to Mercury Research. Then, in the fourth quarter, Intel could not meet demand for some of its desktop chipsets, resulting in a shortage of motherboards for many system builders.

This came at the same time AMD was launching a push into the corporate market with its first stable image platform for desktops and a newly minted VAR program.

Next Page: Intel's Managed Services Play; New Channel Notebook Initiatives Otellini counters that Intel’s desktop supply issues have been solved and it has long had a stable image platform and ecosystem validation, like AMD’s fledgling program. “But we are not standing still,” he said. Intel is positioning its new Pro platform, code-named Averill, as a way to help system builders move from a traditional break/fix business to more margin-rich services, and something that will help justify more costly high-end processors. With products expected to ship in the second half, Averill will use Conroe, Intel’s next-generation desktop processor, and will include Intel’s second-generation Advanced Management Technology (AMT) and trusted computing security features, said system builders who have been briefed on the technology.

The AMT features will allow solution providers or IT managers to gain more control over a desktop. Built-in flash memory on the motherboard, for example, lets an administrator collect information about a system, including error logs, even if it was powered down or had crashed, said Dennis Johnson, product manager of AMT at LANDesk, a network management ISV that supports the technology. (Intel once owned LANDesk and is still an investor.)

Peter Sandiford, CEO of LPI Level Platforms, an Ottawa-based managed service provider, said AMT also will let solution providers power on a system remotely. LPI currently does not support AMT but the service provider’s road map calls for that addition toward the end of 2006, he said. “This is critical technology at the chip level that we certainly are very interested in,” he said.

Other software providers that have pledged support for AMT are BMC, Cisco Systems and Symantec, among others.

Otellini declined to provide specific details about Averill before its official launch. At press time Intel was expected to discuss it at IDF and ISS, with a more encompassing launch to come in the second half of the year. But he did say that, for the channel, managed services would be a key component.

“There will be plug-ins to it to provide things like down-the-wire manageability,” he said. “It will be much like we did with Viiv, where there were a whole bunch of ecosystem partners and content made available to all players up front.”

Said Intel’s Dallman: “This is something [solution providers] can offer that Dell cannot.”

Averill also will include hardware-assisted virtualization technology, Intel’s Matrix Storage Technology, Gigabit Ethernet, chipset support for dual displays, and compact form factors, according to a channel brochure viewed by CRN. It will launch in two varieties: Fundamental for basic client support and Professional for the high end.

Sony Safion, president and CEO of SADA Systems, North Hollywood, Calif., said the new platform is a great way for Intel to differentiate itself from AMD. But he also noted that it will help solution providers offer richer managed services. “I see it plugging into tools like ConnectWise or N-able. It will make systems more intelligent,” he said.

Though Joe Toste, vice president of Equus Computer Systems, Minneapolis, sees Intel’s vision as more of an enterprise play, he believes SMB solution providers will also be able to take advantage of the features. “Most of the market is about break/fix,” he said. “This could help increase ASPs and then offer a recurring revenue stream.”

ADDRESSING WHITEBOOK ISSUES
The Averill launch may be months away, but Intel immediately plans to launch another key channel initiative: Common Building Blocks (CBBs) to help make whitebooks more profitable for system builders. As previously reported by CRN, Intel has been working with Original Design Manufacturers (ODMs) to standardize some key components of whitebooks, starting with batteries, power supplies and drives. Specific CBB SKUs are expected to be rolled out by Siu at ISS. “The non-interchangeability of components for notebooks makes them a lot more difficult to service and makes them more expensive to own and to buy,” said Siu.

Indeed, solution providers said CBBs will help them build and service systems more efficiently and should ease supply problems. For example, Ken Shafer, president of Agape Computing, Salem, Ore., said CBBs will make assembly and sourcing easier. “If we have a standardized set of components we can go to ABC Company, get what we need, and get back to business,” he said.

Siu noted that CBB isn’t reserved solely for the system builder market. Intel would like to see the standard expand to branded notebooks as well. “What you can expect is that CBB standards will continue to evolve, and in so doing the industry [will] rally around utilizing these standards,” he said.

Several system builders also noted that Intel has been working on other programs to help boost the whitebook profile in the mobile market. Sources said Intel is expected at ISS to roll out some type of validated whitebook program where Intel would offer its stamp of approval on ODM systems that meet certain requirements. The effort would be an attempt at beefing up quality.

Todd Swank, director of marketing at Northern Computer Technologies, Burnsville, Minn., likes the validated idea but would also like some help from Intel on support. Nor-Tech has been selling more branded notebooks lately because whitebooks are difficult to service, and support from some of the ODMs can be lacking. “I had a couple of whitebooks we dealt with recently where [the ODM] sat on them for a couple of weeks, and that doesn’t count shipping time,” said Swank. With branded notebook sales up in the industry as a whole, Swank is looking for a way to offer whitebooks to VARs profitably but has been stymied on the serviceability aspects. “We do all the PC warranty work ourselves, but whitebooks are not cost-effective for us,” he said.

Intel is looking at ways for solution providers to partner to offer large support networks fueled by the availability of interchangeable parts, Otellini said. “One of the big issues for the channel is service,” he added. “If the customer moves outside of their immediate area and the notebook breaks, how do they get service? So we want to be able to use Intel—the Intel ecosystem—from both an infrastructure and local support capability for people to be able to offer, say, cooperative service arrangements.”

But Intel has no immediate fixes for their price and supply concerns, say some system builders. Many pointed to low-cost notebooks from Dell—with basic small-business notebooks starting as low as $449—as a barrier to helping them stay competitive. Some have called for Intel to guarantee a level of supply to help keep prices down. “Brand-name manufacturers are killing price in the market,” said David Su, president of Jetta International, Monmouth, N.J., which specializes in whitebooks.

Otellini’s response? Intel will work to make the channel more competitive, including making sure new technology is available at launch with little or no lag. “That is how we built what is today the [white-box] desktop business,” he said. “I think the same business model applies here in the notebook area.”

After Intel lays out its plans this month, it can be sure AMD will craft a response. How it will turn out, according to many industry watchers, is anyone’s guess. “What I expect to see is things getting a lot more competitive in the second half of year,” said Dean McCarron, an analyst at Mercury Research.