Q&A: Intel CEO Paul Otellini

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Intel President and CEO Paul Otellini discussed the chip giant's channel programs in an interview with CRN at the Intel Solutions Summit in San Diego.

CRN: What's your main message to channel partners?

Otellini: The channel in particular is doing a spectacular job ramping our most advanced microprocessor, Core 2 Duo, and in North America even faster than the worldwide channel and in both cases faster than multinationals.

CRN: Why is this?

Otellini: We made product available to them [on] day one from a processor and motherboard standpoint. They know their customer bases and are not worried about the lowest-cost product. They did very well on servers, which again was a major product refresh for us, but we're also doing a lot of work with validation and preconfiguration. We're announcing [at the summit] a program with Red Hat where we can do product and validate for every server. That takes part of the hassle out of the channel.

CRN: To what extent has Intel capitalized on AMD's supply problems?

Otellini: We have a 30-year commitment to the channel, and I showed [at the Intel Solutions Summit] 10 years' worth of data about the percentage of microprocessors shipped to multinationals and local OEMs. In 10 years, it's statistically flat. About one-third, plus or minus 5 percent, go to the channel day in and day out for a decade. We have had a three-decade-long commitment to the channel, and we know when we have leading-edge technology we win, and when the channel has access to leading-edge technology, they win.

CRN: How is Intel looking to expand channel growth?

Otellini: At the same time, Intel is implementing a number of programs to help channel efficiency. We talked about Red Hat, for one, and we have much better systems now to respond to requests within 24 hours around the world for 180,000 partners worldwide, and [we have] a tactical improvement to deliver an answer on the upside if the customer is out of stock on something or needs a products or there's a price change. We can respond very quickly to that. The bigger one is the motherboard, which is ramping to the channel's needs in flavors and volume.

CRN: Is there anything coming to help partners in whitebooks?

Otellini: Yes. VBI [Verified by Intel] and the Common Building Block program is a slow-growing one but very consistent. We are bringing on a new aggregator to help improve logistics and time to market.

CRN: What will be the end result of having a new aggregator?

Otellini: Faster time to market and, hopefully, lowered costs. At the same time, we know the vast majority of our channel customers also sell branded notebooks, and they do that because they have to hold their customers. We have changed our internal Intel sales incentive plan so there's no longer a disincentive for our channel sales guy to have a branded box or notebook sold vs. a whitebook sold. It's no longer a disincentive, and that's good for everybody involved. The key is to engage customer by customer and find out what they want—if their strategy is to build their own or to resell HP or Dell.

CRN: How do you measure success with VBI?

Otellini: Whether customers are happy or not. They could be happier, so we continue to work on the program.

CRN: What is the big challenge with VBI going forward?

Otellini: Cost. Part of it is time and place utility, which is logistics. That'll get much better, but part of it is making sure we have sufficient aggregation such that [whitebook builders] are not disadvantaged in terms of cost. It's not Intel pricing per se. It's the cost of components, power supplies, displays, things like that.

CRN: And vPro?

Otellini: Things like vPro, which cut across both white and branded, are very critical to the success of the channel because it addresses a critical profit center for these guys, which is managed services. Many or most of them sell managed services today and may have managed services as their largest profit center, so being able to deliver a new platform that addresses it is critical to them.

CRN: How will Intel market vPro to channel partners?

Otellini: The incentive for them is natural. It's a slightly higher-priced platform in the low-double-digit dollars, but the capability it enables is to sell more managed services. We are validating a number of software services for that, and we're trying to work on scenarios so we can help broker access to the software service for [vendors] working directly with the channel [such as] Symantec or OpenView.

CRN: In general, how important are channel partners to Intel?

Otellini: Critical. We can't grow if they don't grow.

CRN: Where do you see big opportunities for the channel over the next year in North America?

Otellini: Servers and vPro are right smack down the center of their market. I showed them data on server deployment and told them less than 5 percent of servers that need to be installed by 2010 have been installed. There's a huge server opportunity. I think vPro is a big deal for them, and we'll continue working on notebooks for channel partners.

CRN: Do you see evidence that virtualization has slowed server sales?

Otellini: No. We support the server consolidation stuff but the projected growth of servers assumes there's some degree of server consolidation. Virtualization is a necessity to deliver the capacity people need so we're not worried about cannibalism. We're worried about deploying the new technologies that make people more efficient.

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