Intel refreshes channel vision

On local shores to meet some of Intel’s channel partners, Steve Dallman, general manager of the Worldwide Reseller Channel Organisation at Intel spoke to CRN about some of the hot topics in the industry at the moment, alongside an appraisal of how Australia is performing for the chip giant.

To provide an additional local perspective Dallman was joined by Andrew McLean, A/NZ sales manager at Intel.

CRN: We’re hearing more and more about Cloud Computing and Intel recently started an initiative with HP and Yahoo. Can you expand on Intel’s plans in Cloud Computing and how your resellers can get involved, too?

Dallman: To define Cloud Computing, it is where an application is running on a server then you use a PC or terminal to access that application. It is becoming bigger, but nobody is quite sure how far to go and how much is needed. Designing the architecture and how best it should run is probably the things most of us are looking at today. By getting in that team with Yahoo, ourselves and Microsoft, it gives us the chance to get the hardware and software and try a few things out such as how to balance everything.

CRN: Another hot topic is Green IT. We spoke earlier in the year about Paul Otellini’s sand-to-sand vision. Just wondered if you had an update on your Green initiatives and what kind of feedback you have received from partners around working on Green issues?

Dallman: It is funny that you ask as I just sent a memo to our management team asking if there are any Green initiatives they have seen in the channel that Intel could become involved in. We have been doing a lot on Green from bringing the power down on our products, taking advantage of the 45nm technology to reduce consumption; we have initiatives with the likes of Google. Intel’s newest generation of products are halogen-free, lead-free, so we have really taken this seriously.

Our Fabs (Intel’s environmentally-friendly factories), something we like to talk about a lot, are tremendously expensive and no matter country we place them in, we make sure the Fabs reach the highest standards in the world. One of the things we like to talk about is when we take water from the ground we like to return it to the ground much purer than we took it out. Recently it was acknowledged that Intel is the largest repurchaser of non-polluting energy in at least North America.

In the past couple of weeks Paul Otellini, Intel’s CEO, has taken a few people and told them to go to the channel to find out what Intel can do to help pursue Green initiatives. What does the channel need and where can we become involved?

What we are doing right now is going to each one of our geographies and saying “please go talk to the distributors and our customers to find out if any of them are involved in some Green initiatives”. So things that they are doing could be taken to a broader level with some leadership and financing involved.

I don’t know exactly what that is going to look like, whether it going to be around the recycling of PCs or making sure people understand which PCs meet the best energy standards when selling to customers. Probably in the next couple of weeks, we will have a better handle on the directions we want to talk to Paul [Otellini] about. Then at the start of ’09 we hope to have channel-specific Green initiatives in place.

CRN: Are your resellers keen to get involved on Green initiatives?

Dallman: It seems that varies from country to country. I have not talked to any group who does not enthusiastically embrace the idea of doing Green stuff. One of the things many of them tell me is that we need to go do it, but it can’t cost anymore for us to go do it. A lot of companies are starting to demonstrate that if you do Green properly, you can save money or certainly not spend additional money.

There are certain parts of the world that really engage with it strongly. The US has become very sensitive and it has always been a big issue in the EU. In places such as Australia people are very concerned about the environment and what is being done to help it. You are also seeing an increasing importance even in China and India, where a lot of the recycling has been done, but now they are more aware of it than in the past.

CRN: How is your progress in the mobility business going? Do you believe your resellers have been alive to the opportunities in this space?

Dallman: Next to servers in the channel, mobility is growing the fastest for us in the channel today. It is growing almost 34 percent on a global basis and in Australia for the last three or four quarters we have seen a significant growth in the channel. The channel is engaging on mobility in two different ways. Some of the accounts are starting to integrate the mobile chassis, they are bringing in what we call these bare bones systems and they are configuring them to the customer needs.

They are also reselling the products made by some of the tier one suppliers. It seems the smaller these chassis get, the harder the integration becomes. What we keep telling partners is that they need to be in mobile, you need to have a product line in mobile and whether you are integrating it yourself or buying and reselling, we embrace both choices. In Q1 it was a record quarter for the channel in mobility and Q2 actually broke that record, so it seems to be catching on.

CRN: Earlier in the year at ISS (Intel Solutions Summit) in Bangkok we heard a little bit about your Flex+ reseller incentive program, can you now expand on how that is going to work?

Dallman: Flex+ got launched here in Australia this quarter. What we have done with Flex+, different from what we did with Intel Inside, is that Intel Inside is a co-operative marketing program where the customers puts in some money, we put in some money and it is strictly for advertising.

It helps their business as it gets their brand out there, gets their name out there, it drives hits to their website and phone calls to their salespeople. Flex+ is a little bit different as it is a classic points program, where resellers accrue points and can use those to get other benefits. However, these benefits are different to just co-operative marketing, as these benefits are things they can use to help them build their business.

Some of the typical benefits are travel vouchers to go attend ISS. One of the things partners like the most is the demo equipment. When you are a small business, like many of our customers are, needing to invest in demo equipment on the front of a new product is costly.

Now they can take these points and turn them in on demo products to show customers or use internally. We are starting to put consulting services in there, too, so you can turn some of the points in to get a consultant to help you with a marketing program, a sales program or even which direction should your business have and what markets have the fastest growth.

A lot of our customers have not had the opportunity to bring in those types of professional services. We also use sales centres frequently that do callouts and talk to a lot of our customers. Some of our geographies are using the points to get some sales centre time. So if one of our customers wanted to do a seminar for their customers, they could use their points to get some sales centre time to do all the callouts.

CRN: In terms of accruing points, what is the criteria? Is it just done on revenue?

Dallman: We started to do it on revenue and decided that probably was not the best way to do it. There is still a revenue component, but we are also looking at behaviour so if they attend ISS they get points, if they go online and get training or some of our face-to-face training they can get points.
So we are rewarding the behaviours that need to be done for them to
be successful.

CRN: How is Intel performing on a local perspective in Australia? Are there any areas in particular where the Australian market is leading the way?

Dallman: First of all Australia had been absolutely sensational in the convergence of 45nm technology. I think it has been the channel who has managed to do that more than anything. I am constantly amazed, even after 30 years in the business, when you bring the channel new technology, how quickly they can adapt it and get it out into the marketplace.

Here in Australia they have done that exceedingly well and is probably one of the top countries in the world in terms of the percentage of the volume they are shipping which is 45nm. Roughly 50 percent of the chips shipped in Australia today are 45nm. Australia is doing a stunning job in Quad-Core, they are one of the top two countries that led in the ramp of Quad-Core CPUs.

We also still use Australia all the time to help digest and understand the programs we are coming out with. We have started rolling out some of our services programs and what we have done is roll them out in Australia first as trials to test what works.

McLean: New product adoption is something Australian system builders have been doing extremely well. We have worked closely with this community for a long time and our channel partner program actually started in Australia 13 years ago. This is a program which now has in excess of 160,000 organisations which are part of it.

We like to think of ourselves as being a bit of an ideas factory in Australia. There are new technologies which we are good at ramping such as Quad-Core, the server business has been strong and in the last couple of quarters we have seen more than 20 percent growth quarter-on-quarter in our server business in Australia. Also the number of resellers who are buying our products is actually growing. Over quarter-on-quarter we have probably seen around an eight percent growth in the number of buying resellers. So that is healthy to me.

Dallman: It seems like this customer base is becoming more and more segmented into specific niches and as the markets mature that seems to accelerate this. There are not as many what I would call general purpose computer manufacturers within the channel today. Most of them find a specific niche which they can excel at, whether it is for banks, veterinarians, retail POS systems or security, and they become experts in that and provide more of a solution than before.

Just shipping a piece of hardware does not seem to pay like it used to. However, when they ship a piece of hardware which is part of a server and several desktops with some solution software in there, then they seem to be very successful.

CRN: Are there any final messages you would like to give your reseller partners or any advice you would give on how they can interact with you better?

Dallman: When I always talk to them, the things I always tell them is first of all continue to do the things you do best. Your single biggest advantage is that you sit eyeball to eyeball with your customers and you can actually talk to them about what their business is and what they need in their business. The next thing is focus on solutions and not just hardware integration.

Value extraction means how much will I get paid and how important I am to my customers. The value you provide is at the solution level, not just at the integration level. When you do that, pay special attention to services as in most of the markets today we are seeing that forming a larger and larger percentage of the gross margin that you can get.

Whether it is break-fix, MSP services or working on some of the solutions that are out there, when resellers provide that value they get very well paid. The other I warn them all the time, if you look at the statistics in SMBs there is a very high churn factor, that means there are new businesses born and ones that exit the marketplace.

It seems that happens all the time, but there is a higher percentage of new businesses being launched and born than one falling down. I was in Mexico last week where there is five million small businesses, there are 17 million in North America and one million in Australia. Being aware of the changes in the market and bringing these changes into small businesses is an area of high growth.