Intel Channel Products Group Execs Aim To Re-energize White-Box Partners

Bill Siu, a 25-year Intel veteran who this week was appointed as head of the new Intel Channel Products Group, and Steve Dallman, Intel's director of distribution and channel sales and marketing, discussed the chip giant's sweeping restructuring and drive to re-energize the white-box channel in an interview with Editor In Chief Michael Vizard, Editor/News Steven Burke and Senior Editor Edward F. Moltzen.

CRN: What does Intel's restructuring mean for the company's white-box builder channel and tens of thousands of solution provider partners?

SIU: If you take a look at it, this is one of the most significant companywide reorgs we have done in many, many years--some say in the last 30 years. I haven't been around that long, so I can't tell you whether it is true or not. Certainly, it is a very significant change. To me, the messages are very clear. First of all, we are going to pull together the effort that Intel has developed over many years in the channels into one cohesive group, forming a business unit around it, reporting directly to the executive office. There is a very strong message in terms of Intel's commitment and continued commitment to the channels. What you should take out of that is that we are going to increase the focus, increase the commitment and make it a strong thrust. We have obviously been doing this for 10 years. Again, we have been very successful at it. But what we believe is we want to take it up a notch and continue to make it a success for us and our partners.

CRN: How is that going to translate into specific products and programs for solution providers? Do you see more money being invested in white-box builders and solution providers?

SIU: I think we will have more investment from the Intel side. Here is the thing: Intel, across the company, has made a lot of investments in terms of enabling solutions. One of my first tasks is really to find out how we can marshal all of this capability and bring it to market to the white-box builder in a more effective way. We have done a pretty good job so far, don't get me wrong. But I think that as we unfold the technology and product road maps in the coming years, there are a lot of exciting products coming. For example, we soon are going to be ramping our dual-core processors. We have new desktop, mobile and server products coming. Yesterday we announced that we are going to accelerate the Vanderpool virtualization technology. All of this means a lot of energy and a lot of excitement in the marketplace, and it will require focused programs from the Intel side, working with our channel partners to exploit these technologies and bring real value to the end users. That is clearly the top of my agenda.

CRN: How much of work and time are you going to be investing in North America vs. emerging markets such as China, South America and Eastern Europe?

SIU: There are two aspects of my job: channels and emerging markets. They are really different and not synonymous. So, in channels, this channel business is one of the most strategic and most important parts of our business, and we recognize that. The marketplaces in North America and in some of the emerging markets have some characteristic differences. I will come back to that in a little bit. But today, 40 percent of the channel revenue comes from the North American part of the market. By no means are we not investing in North America. What you will see is that we will continue to have the kind of focus that Steve [Dallman], his team and others have and will continue to put a lot of energy in maintaining it and developing it. Earlier, I outlined many of the exciting technologies that we are bringing to market this year and, obviously, more beyond that. But we are going to invest a lot of energy working with our channel partners to make those products into a value-add for the end customers.

DALLMAN: Forty percent of the channel revenue comes from mature markets, which is North America and parts of Western Europe. In general, Western Europe is another mature market. Parts of Europe would be considered emerging.

CRN: [Addressing Siu] How will you be working with Steve Dallman at this point?

SIU: Part of the reorganization unified a number of groups, both from the sales side--Steve is part of that group--as well as the product development side and the software-enabling side under my group. In that regard, we are going to have a lot more critical mass and synergy to drive a lot of these issues, both in the mature and emerging markets. The focus of the mature market we don't expect to change. We are going to have a lot of energy and focus in terms of new products. The emerging market is also a fast-growing area, [and that] market happens to be dominated by channels. Clearly, we will have investment in products targeted at some specific solutions that those markets want. CRN: How will some of these new developments result in new offerings for white-box builders serving specific vertical markets? The white-box market, for instance, is moving beyond servers into storage and networking gear. Is Intel going to push that as well?

SIU: If you look at what I described earlier, for example, on the computer side, we are going to bring new capabilities such as dual-core processors and virtualization. I think those capabilities bring forth new frontiers in terms of both servers, computers, storage and a whole bunch of other capabilities. In bringing these new technologies to market, our desire and goal is to work with our channel partners to exploit these technologies and address some specific vertical concerns. Is this focus going to shift from support of the mature market to focusing more on the emerging market? Absolutely not. But are we going to increase our investment and presence in the emerging market to grow it.

DALLMAN: Recently, Bill [Siu] kicked off the I-Cafe in China, which was a platform defined out of Intel building blocks that was put together to provide a solution to the Internet cafes in China. One of the big issues we have in North America that Bill's group will be working with us on is the digital home. In North America, we'll probably be the lead geography to drive the launch of digital home to the channel partners we have out there. In much of the same way, we'll take advantage of our dual-core technology. We'll take advantage of some of the technologies coming up, with the virtualization that we just announced--as well as our management technology--to provide embedded IT to the home user. That becomes the platform that's really aimed at the more mature market that will be key to our channel strategy. In much of the same way we did I-Cafe for China, we'll do the digital home for North America.

CRN: How would you grade Intel's efforts to serve white-box builders with the best-price performance products?

SIU: I think we have done a very good job. We have provided the products, technology and support, and we have driven new programs--including the digital home--that create new categories and values for them. I think that we have provided more leadership, more investment and more enablement than anybody else in the industry.

CRN: Some of the white-box builders doing aggressive price-performance products for specific verticals, such as scientific/engineering or gaming, say Intel comes up short on the best price-performance and that AMD Opteron beats Intel hands down. Will that change?

SIU: You mentioned scientific computing and things such as gaming. For each of those markets, I personally--even before transitioning into this job--have put energy into trying to understand what the specific needs are and where the path is evolving to. For example, as we bring the dual-core product to market today, gaming performance is actually based more on single-threaded capability. But we believe--and this is not just Intel's belief--that the industry trend, as evidenced by what we are doing and what our competitors are doing and what game-console makers including Sony and Microsoft, is moving to multithreaded gaming. And guess what? Intel for two-plus years now has been leading the charge of transitioning the industry to multithreading, and we are working with the game developers and white-box integrators to transition to the next paradigm, where gaming is led by multicore, multithreading capabilities. I think you will see us taking a very strong presence in those areas. CRN: In what other areas will the white-box and whitebook builders have an opportunity to play?

SIU: Mobile is growing very fast, as you know. So far, I think the channel participation in mobile has not been that significant. It has been impeded by a number of infrastructural issues. Will my group's effort be looking at the opportunities and working with the integrators to see how we overcome some of these barriers and making new capabilities and growth opportunities? You betcha.

DALLMAN: Speaking for North America, I can't tell you enough how important it is to have this division in place to tackle those infrastructure issues. Our feeling now is that is our roadblock to grow the channel in mobile. Last year in North America alone we had 10 percent more channel customers taking server products and building servers. Last year, we had 43 percent more customers--integrators and builders--taking mobile products and building systems. For the Sonoma launch, we put in place a 25-city training program, where over 900 integrators will learn how to build a Sonoma system in the month of March.

CRN: White-box builders are concerned about shrinking hardware margins on the desktop. Where are you going to take the bread-and-butter desktop to allow that to continue to be profitable for these partners?

SIU: The competition--be it from Dell, [Hewlett-Packard] and so on, or even among the white-box manufacturers--is going to continue to be heated. That kind of competition is being fueled by just simple marketplace dynamics by our competition, so on and so forth.

Intel is doing several things. Steve Dallman earlier brought up the digital home. Part of Intel's strategy is to create new categories where white-box integrators have an opportunity to add significant value in terms of integration and support. You will see a lot of that coming this year. Earlier, we talked about mobile as another area. New technologies that we are bringing to market, including virtualization, open up some very exciting value-add opportunities for the channel. I think part of what Intel brings, going back to the earlier question about the [AMD] Opteron, is more than just one product and just one component. We bring to the market our CPUs, chipsets, motherboards, the whole enabling program, infrastructure building and the industry leadership. Going back again to your question about how would I grade Intel's performance in that area? In terms of the totality of what we bring, I think we are the No. 1 partner.

DALLMAN: These new technologies aren't just a piece of hardware that goes faster or suddenly gets an application running quicker. When you look at the Intel embedded IT strategy, using our active management technology and virtualization, those are solutions that will now be enabled in hardware that could never have been done before. But it is going to require someone like our solution providers and integrators to go into small businesses, where they are extremely strong, and help bring those solutions to market. And with that, their value is going to go up an order of magnitude. They will be able to bring more margin on the platform they deliver because we are focusing on the solution those platforms bring to market. Most of our business in North America is probably refresh, enabling, replacement and productivity, and solution providers do those kinds of things for the customers they call on. And with these new groups of technologies, it is more than a few more gates and transistors. These are actually benefits that need to be enabled that will be very empowering to the solution providers we find in North America and other mature markets.

CRN: When will you approach white-box builders with the virtualization technology? One concern among white-box builders is they see Intel working closely with Dell and HP but the white-box guys are second-class citizens.

SIU: First of all, in terms of enabling the technology, we are doing this in the open-source community. We are not making it exclusive to any customers only. We are in no way disadvantaging the channels. The other thing to keep in mind is that the value of these technologies, a lot of it lies in integrating the vertical stack with your customer, understanding the specific applications. The other technologies we have talked about, such as the manageability technology, including the recent product we launched in China such as the I-Cafe, is well beyond just a CPU price-performance question. In no way are we ignoring CPU price and performance. Of course, we are very competitive in those areas. But Intel is one company that brings a much broader set of solutions--hardware, software and usage models--and enables them to happen. I think you can take note from some of these products that we are bringing to market today. Today, people want to buy a computer not just because they can have another 5 percent better performance but because it solves a problem. Some of the problems could be security, manageability. It could be the cost of maintaining the whole IT infrastructure in the department. It could be apps migration. These are the kinds of things that fall squarely into the kinds of technologies that I describe: virtualization, manageability technology and the dual-core capability. You tell me what other companies in our industry bring this entire slate of capabilities to the marketplace, enabling the hardware, software and the ecosystem. I don't think there is anybody else.

CRN: Are you happy with the level of usage of all the technologies that Intel brings to bear? My sense is a lot of people are just using the core fundamentals and don't take advantage of half of what they could be using?

SIU: There really lies the opportunities for the channels and the white-box manufacturers. What I would like to do is really understand how we can work with them more effectively to amplify these technologies. And the purpose of this, aside from the obvious benefit to Intel, is that it brings new value to them. I think we need to change the mindset here of just saying 'How come your product is 5 percent more than the competitors?' to focusing on how we together, as the ecosystem, utilize the technologies to generate value for both of us.

CRN: That is going to mean some structural changes and new investment. How are you going to approach white-box builders differently?

SIU: I think we have that presence in the market already. But the short answer is, you should look at our investment not just in terms of pricing, rebates or whatever else we do, but also the software and platform-enabling that we bring. Again, the operative word here is platform. Platform is hardware, software and the application model. It is creating the ecosystem infrastructure. If the question is, 'Is Intel going to invest in that in order to create the ecosystem, new uses and new markets, leading to new opportunities for Intel and our partners to get value?' You betcha.

DALLMAN: That is exactly why we are doing the 'platformization' of Intel. We had all these piece technologies that probably weren't being fully utilized and enabled. Look at what we did with notebooks when brought out Centrino. We were talking about the platform, and it energized the industry and energized enough of our white-box builders, with 43 percent more this year building [notebooks] than last year. That is the whole idea of the platformization.

CRN: What is your message to U.S. white-box builders who feel they're second-class citizens to Dell?

SIU: I will make it a personal priority to understand their needs and work with Steve [Dallman] and his organization to talk to them directly and get their input so I understand what we can do from our side to create value for both of us. In fact, I view this as a top priority.