Microsoft's local OEM partners are facing challenges in the shift from desktops to notebooks and tablets, and the software giant is responding by fostering closer business collaboration between OEMs and original design manufacturers (ODMs).
This week at the 2011 Consumer Electronics Show in Las Vegas, roughly 120 of Microsoft's local OEM partners and 14 of its ODM partners from southern China and Taiwan have gathered to hold brass tacks business meetings. Microsoft is playing the role of intermediary, and it's all part of the company's Linc program, which began in 2009 with local OEMs in China and Taiwan and is now expanding internationally.
Microsoft has arranged the meetings based on the specifics of its OEMs' product roadmaps and the business needs of its ODMs. Ann Marie Rockwell, general manager of Microsoft's local OEM business, describes these as intense buying sessions where details on quantities, pricing and specific needs are being hammered out.
"Linc is about what happens inside the room where discussions between local OEMS and ODMs are taking place. These are truly business meetings that we facilitate in the hope that local OEMs get the prices they're looking for," said Rockwell.
The meetings began Tuesday and have already resulted in around 600,000 PCs in the pipeline. By week's end Microsoft expects to have facilitated between 750,000 to one million units of pipeline, according to Rockwell. "Local OEMs know what's on offer, and they are here to shop," she said. "This gives OEMs the opportunity to expand their channel mix and gain access to quality and competitively priced machines."
Microsoft works with three distinct tiers of ODM: The first tier includes Foxconn, with which Microsoft works on a specific product basis. The second tier includes companies that have made their business working with channel partners, with examples being ECS, Pegatron, and several other southern China-based ODMs. Microsoft has pulled in other third parties like RSI, a multinational firm that handles hardware servicing, says Rockwell.
"We're giving OEMs access to ODMs that they wouldn't normally have, and Microsoft has pre-vetted the meetings," said Rockwell. " We did matchmaking events years ago where we brought the parties together, but local OEMs told us they don’t have time or bandwidth to have this kind of 'speed dating' experience."
Top notebook ODMs are getting the bulk of business from multinationals, but local OEMs find it tough to meet ODMs' minimum order sizes. Bringing local OEMs together to develop collective orders and aggregated order processing can address the size problem, Rockwell says. "This helps them hit a more reasonable minimum order quantity," she said.
As would be expected in such a diverse international business gathering, language barriers do emerge, but Microsoft assigns its regional account managers to handle translation. Rockwell says Microsoft doesn’t see itself as a broker in this case because that's too passive a role. "We're trusted by both parties at the table," she said. "That's practically useful when you have a southern China ODM talking with a local OEM from Portugal."
In the future Microsoft will likely focus its Linc efforts more on vertical segments where opportunity abounds for local accounts, Rockwell says. "You will see Linc happening at health-care and education events with small regional events in the second half of the year, she said.