CRN Interview: Nvidia Channel Chief Gives Take On System Builders

John Lonergan, vice president of worldwide channel operations at Nvidia, the industry's largest independent graphics processor developer since the acquisition last year of rival ATI by Advanced Micro Devices, talks with Senior Editor Joseph F. Kovar about the Vista opportunity, the acquisition of ATI and other trends affecting graphics technology and the system builder channel.

CRN: How is the release of Microsoft Windows Vista affecting graphics technology? And how will that affect system builders?

Lonergan: Vista has raised the bar in terms of the technology required to run graphics. There's a variety of impacts to the system builder in terms of graphics and memory particularly. We and Microsoft and the industry have been talking to system builders for the last year about enabling them. System builders are already up-specing their systems for Vista through the various channels they serve. You do need a dedicated GPU to get the premium Aero effect. I think that the marketplace is beginning to understand that. It takes time and momentum. But for the system builders, it provides them an opportunity to up-spec. It provides them the opportunity to upgrade their various customers in whatever segments they're in. Generally, the system builders are fairly cognizant about Vista.

CRN: How long will it take before integrated motherboards for Vista will be available?

Lonergan: They already are. We've been shipping UMA solutions for AMD for a few years. Vista requires DX9 [DirectX 9], and we have a family that has been shipping for a year, year and a half, that are already Vista-certified. On the Intel side, we do not yet have a UMA solution, but that is something that we will be working on for this year. On the Intel side, [users] would have to use an add-on card.

CRN: Does Nvidia have a solution yet for DX10?

Lonergan: We've been shipping DX10 hardware for some time now. DX10 content, applications and games will be coming to the market soon. We're the only vendor shipping GPU hardware for DX10.

CRN: How does Nvidia work with the channel? Nvidia does not sell video cards that can be plugged into a system.

Lonergan: We are providing technology in a number of market segments. First, we enable the board partners. These are companies like EVGA, XFX, BFG, PNY, AsusTek, MSI, Gigabyte, a variety of players who are focusing on different segments and marketplaces.

Our job in channel operations is to help educate and make the general channel market aware of all those various technologies and initiatives to create more market pull and market momentum for our board partners in servicing their various channels.

My job is not to sell products directly to e-tailers or retailers or system builders, but rather to influence and educate and make sure all those various channel entities are up to date with all of our product initiatives.

CRN: What are some ways you influence the market?

Lonergan: First, we use different advertising mediums and different programs. The channel is incredibly diverse. I think some people might pigeonhole Nvidia in the gaming segment, the enthusiast segment, high-end graphics. If you actually look at the various products and segments we're covering, it's everything from solution VARs with high-end Quadro-based [graphics] products to, yes, the gaming market, the enthusiast market, but also the mainstream market, the retail and e-tail market, the distribution sector.

It's very diverse, which I think makes it very interesting and challenging. Which means we have to deploy a couple different avenues. We have a few sales teams who go out and call on the larger channel partners. And we have an inside sales team, which calls on the thousands of smaller white-box resellers, bringing the latest information to them.

On top of that, there are programs we deliver to channel partners. And we customize them depending on whether it's for an e-tailer, a retailer, a system builder or a distributor, which are the four main channel segments. Then, we have our outside board partners who are servicing the various channels.

CRN: One of the biggest events in this industry is the acquisition of your rival ATI by AMD. How has that impacted Nvidia?

Lonergan: If you look at the overall business trends and if you talk to our customers, since that happened, things are pretty good in terms of our fundamental business strategy [which] really hasn't changed. Technically, we're innovating on both platforms—AMD and Intel—across a number of different form factors, from desktops through mobile to servers. So that hasn't changed.

Then, if you look at the go-to-market strategy, what my team is responsible for, once again, that hasn't changed. We run activities with both partners, AMD and Intel, through the channels in the U.S. and across the world.

We believe it's really important to stay focused. And our focus is graphics. We're extending the graphics into other segments, for sure, but our core technology and our core strength is [that] we have the largest and best team of graphics IT experts in the world. And what we're going to do is harness that on both platforms—not one or the other, but both.

Our chipset product line is top-to-bottom with AMD. And with Intel, it has been expanding pretty fast these past 12 months.

CRN: Before the acquisition of ATI by AMD, most of the Nvidia chipset focus was on the AMD platform, right?

Lonergan: If you look at the number of SKUs, there are certainly more on the AMD platform. But we started our nForce business on the Intel platform well before the acquisition. We had a series of products on the market before the acquisition. We've been simply extending our presence in the Intel marketplace and to the Intel channels also.

CRN: Has the acquisition of ATI pushed Nvidia closer to Intel?

Lonergan: I think we're focusing on both, as we did before the acquisition. In terms of my responsibility in the channel, we've run co-promotions before and we've run co-promotions after. At the end of the day, what we're doing is providing to the end-user through our various channel partners the best graphics experience. And we think we can do that through both platforms.

More: Q&A With John Lonergan

CRN: Has there been a change in the way you approach AMD? Has AMD changed the way it works with Nvidia since the acquisition?

Lonergan: There isn't any fundamental change. I'll just give it to you straight. We're designing, we're innovating, we're bringing our products to the wide, diverse marketplace. Both platforms are highly relevant to the marketplace. So I don't see a big change, quite frankly.

CRN: Do you want me to ask any more questions about that topic?

Lonergan: By all means.

CRN: Just kidding. What I'd like to do now is go through a couple of key areas where the system builder market plays, and talk more about graphics trends for those areas. For instance, if you look at gaming, what are some of the key trends, and how are they impacting Nvidia and the system builders?

Lonergan: It's one of those segments, especially on the desktop platform, that these past several years has been expanding and providing more opportunities to the white-box system builder. The white-box system builders have received a lot of pressure from multinational OEMs these past several years on various form factors, particularly in the gaming segment, where the end user wants the latest and greatest high-performance technology and has absolute zeal and zest for it.

It's not just the top enthusiast system builders such as Alienware, which got purchased [by Dell], but it goes much, much broader than that. If you look at the U.S. market, state by state, there are a variety of system builders out there who are building gaming-class PCs with a full price range, from the entry-level at $500 way up to the $5,000 deluxe systems.

I think the breadth of applications that are available for the PC platforms has expanded. I think that DX10 is going to happen this year, and that's going to raise the bar once again in terms of performance and experience. So we're pretty upbeat on the gaming segment.

CRN: Is there any risk on the graphics board side from motherboards for gamers with high-end graphics built in?

Lonergan: There isn't that phenomenon at all. At the low end, there are mainstream customers who just want to run their productivity up. But in the gaming segment, you definitely need an add-on graphics card. Certainly, the gamers and the wannabe gamers want a graphics card. And with Vista coming over the next several months, the market's becoming more aware they need a dedicated GPU to run some of the more mainstream applications, even the operating system itself.

CRN: How about other parts of the market? Specifically the home or business user. Is the move to integrate the GPU on the motherboard going to affect the video card manufacturers?

Lonergan: Yeah, it is. That has been happening for some time. And the mainstream customer isn't as worried about high-end applications. So they're buying on a price-performance requirement. I think our board partners recognize it; we recognize it, and for some time now we've been enabling (this market) with integrated nForce GPU chipsets.

We have to differentiate obviously within that integrated space, and that's where Intel is obviously more of a competitor than in the other segments we've discussed, where we're much more like partners.

I think this is a segment of the marketplace that is growing. We recognize it. Our board partners recognize it.

CRN: How does that affect the industry? Do you expect consolidation?

Lonergan: In the motherboard sector, there's been talk about consolidation for a while. But it hasn't happened yet. There's still smaller motherboard manufacturers who have carved out segments or niches or territories where they're very successful. We haven't seen the consolidation happen.

I think in the U.S. there's been consolidation. But outside the U.S., it's less consolidated. You get into some of those markets, and you've got a number of distributors. Those distributors don't want to carry just one motherboard line or one graphics line or one of any component line. They want to have a broad portfolio. And hence, the smaller as well as the bigger motherboard manufacturers continue to serve them.

CRN: For business users, what trends are you seeing on the graphics side, and how do they impact the way people build PCs?

Lonergan: If I look at the business marketplace, there are customers who just want mainstream solutions, and customers who want high-performance computing solutions and graphics solutions to solve their critical business problems. Our major strength within the enterprise is with our Quadro line for the technical workstation segment. There, we've deployed in a very vertical market approach. We decide on the various verticals that we and our partners want to concentrate on. And our partners—our VARs and ISVs and board partners—then take that collective solution to market. And it's much, much more than the hardware. It depends on the vertical market, such as financial, marketing, gas, mechanical CAD, manufacturing and medical.

The other aspect of the business market is the more mainstream and SMB segments. We also have products there and continue to focus on it. Our program there has been the Nvidia Business Platform program, which has been focusing on the type of customer who evaluates hardware, who wants stability and quality and longevity of supply.

CRN: What are the dynamics driving graphics technology in the portable PC market, and what does it mean for the system builder?

Lonergan: The overall growth in the notebook market is still pretty exciting for the industry and for the channel overall. The makeup of that business is totally different. It's dominated by large players. The whitebook segment hasn't taken off. Over the past few years, there have been various initiatives to try and enable the whitebook segment. But in terms of sheer volume and market penetration, I don't think it has taken off. It's grown, but not huge, stratospheric growth.

I think the challenges remain: All customers want high-quality service and support. The end customer wants a recognized brand, the channel wants much, much more standardization and interchangeability of parts.

So there's a few different vectors there that need to be addressed—from service to brand to support to interchangeability.

What we have at Nvidia is a pretty successful notebook segment, predominantly OEM-based. We have a standard form of interchangeable graphics module called MXM. And we're continuing to concentrate on MXM as a standard and improve its overall value, not only in the OEM market but in the channel ODM market also.