Full-Court Press

That's the strategy developing inside the offices of the Santa Clara, Calif.-based chip giant: a road map for bringing solution providers into new, strategic business areas that range from the digital home to the high-end enterprise.

And that's the message Intel President and COO Paul Otellini is taking with him to partners and customers as he hits the road pushing the company's new, broad vision.

"The channel is fundamental to our business because [solution providers] touch customers with the latest technology who otherwise would not be touched by [it]," Otellini said in an interview last week with CRN at the Intel Solution Summit. "The channel has been very adept at servicing the early adopters."

And he's hoping for many more early adopters. Last week, during a speech to solution providers at the summit in Las Vegas, Otellini told them he essentially wanted North American channel sales to more than double over three years to $3 billion by 2007.

"It's important for us that the channel is capable of selling the breadth of Intel's product line," Otellini said in the interview.

But he cautioned that much of the growth won't come from a wholesale PC refresh cycle at large corporations. "We all lived through a wonderful, probably once-in-a-lifetime few years which was the Internet boom and the euro conversion and the Y2K conversion elsewhere," he said. "All three of those drove hardware purchases ahead of their natural curve. You look back at the natural growth curve vs. the accelerated growth curve of the late '90s, and then the corresponding trough of 2000 through 2002, it's very clear there was acceleration. So I think it's healthy now that we're back to normal sort of growth."

Now, he said, the convergence of communications and computing and the new devices and markets it creates will be the biggest driver of growth.

In the emerging digital home market, for example, Otellini said he believes integrators will be essential to tying new and disparate technologies into smooth-running home networks. In the enterprise, he touts a system builder's recent sale of a 1,024-node Itanium-based supercomputer to the Lawrence Livermore National Laboratory as a major win for the platform. "That's a channel product," Otellini said.

And to fuel the momentum, Otellini,who is on track to take over Intel's CEO reins next year upon Craig Barrett's retirement at age 65,has told others at the company to use channel spending to open new markets and create new, solution provider-friendly products.

Those initiatives are starting to roll out.

Last week, Intel said it would enter into a marketing alliance with Sprint PCS to allow as many as 45,000 of its Intel Product Dealer partners to resell the telecom's wireless services. It is the fifth such telecom deal Intel has made, and executives say there will be as many as five more by year's end.

The company also said that by midyear it will open a new Los Angeles-based distribution center in an effort to cut between a week and 10 days of inventory out of the channel pipeline. Steve Dallman, Intel's director of North American channel marketing, said such a move could help boost solution providers' credit limits by as much as 25 percent in one fell swoop.

"That's the smartest thing Intel has done in a long time," said Gordon Schroyer, computer services manager at Mader Tschacher Peterson and Co., an Intel Premier Provider in Laramie, Wyo. He said that ongoing product shortages have been a problem for his business.

Still, Premier Providers have complained about the lack of components for servers, particularly during the fourth quarter, that forced them to put deployments on hold. Jeff Richardson, Intel's general manager of the enterprise platforms and services division, said the company would respond in part to the ongoing supply issues by creating a standard, bare-bones server chassis with Intel components already bundled into the system. Such a move would give system builders a single SKU for multiple components that at times have been spotty in supply.

Intel said it will also continue alliances with suppliers of "whitebook" components to system builders,standard, snap-together building blocks they can use to begin selling their custom solutions around Intel's Centrino mobile platform.

Some solution providers say that's not enough. They suggest that if Intel's Premier Providers (its highest level of channel partner) can't compete with the economies of scale and muscle of Dell, other actions might be moot.

"Massachusetts doesn't have white-box builders on the state contract," said Mike Carbone, vice president of operations at MicroNet Associates, a Premier Provider in Hopkinton, Mass. "I'd like to have Intel talk to the state agencies on our behalf. Dell can't provide the instant service on complex problems," he said. "I can't sell [to government entities] because I'm not on the contract." However, Dell is, he said.

Robert Kennedy, president of Computer Creations, a Dayton, Ohio-based system builder, said he hoped Intel would go to bat for its solution providers with software giant Microsoft, which, he said, gives Dell "massive discounts" that smaller system builders don't get. "Intel and Dell have got to be smart enough to know that if they don't have the channel, their products would have no support," Kennedy said.

Mader Tschacher's Schroyer said he'd like Intel to step in and negotiate better pricing for Premier Providers on Microsoft licenses. "Dell has an enormous advantage.

We easily pay 200 percent more for Office and OS licenses," he said.

But Intel channel executives don't hold out much hope for action on issues like these.

Frank Raimondi, Intel's director of strategic alliances, said negotiating better discounts from Microsoft "is not our game." And he added that negotiating with states to get Premier Providers on state contracts poses legal hurdles. "We've looked at this before, but the question is, 'Who would hold the contract?' " He said Intel couldn't hold the contract for Premier Providers because the company wouldn't be providing the systems.

Sophia Chew, vice president of Intel's sales and marketing group and general manager of the reseller channel operation, added, "That's not really what we do," she said of a broader Intel advocacy role on behalf of Premier Providers with governments. She said instead that Intel's channel efforts will focus on "enabling and uplifting [channel partners'] knowledge" so they can better understand and sell Intel technology.

In other areas, solution providers say Intel has made substantial progress in helping them to sell into key, strategic areas.

Lyle Epstein, a systems engineer at Kortek Services, a Las Vegas-based solution provider, said sales of his company's custom-built notebooks have taken off over the past year, a year in which Intel forged alliances with component providers to offer customizable laptop components to the channel. And, Epstein said, his company has also tapped into Intel's alliance programs with telecom companies and has brought in additional revenue through wireless service contracts.

"I think Intel is the best partner of any other vendor out there," Epstein said.

Otellini added, "There's a degree of excitement and entrepreneurialism that is still rampant in the channel that keeps us fresh in terms of the feedback they give us. It keeps us on our toes in terms of competition."