Inside Intel's Channel Braintrust: An Interview With Bill Siu And Tom Kilroy

A year ago, Intel was on the defensive, says Tom Kilroy, vice president of the Sales and Marketing Group and co-president of Intel Americas. Today, however, the company has more programs and products in front of it than ever before, he insists, presenting a new world of opportunities for literally thousands of current and potentially new business partners.

One way to make sure partners reach their potential is to educate the channel on new technologies and new strategies. Intel is doing that in spades, of course, and again feeling confident about the road ahead. Recently, for example, the world's largest chip manufacturer revised its guidance for the current quarter, informing the financial community that it expects its results to come in at the higher end of the previously provided guidance.

That's quite a turn from just a few months ago when the company was changing its product road map and realigning internal structures. The reorg gave birth to Intel's Channel Platforms Group, headed by GM and vice president Bill Siu.

A technologist by training, Siu is working with Kilroy and Steve Dallman, director of Americas distribution and channel marketing, to refine go-to-market plans and develop best practices. In an interview with VARBusiness senior executive editor T.C. Doyle, Siu and Kilroy outline some of their current thinking, which includes a somewhat controversial message to those clinging to old ways of doing business: If you compete on price, your days may be numbered.

"I think Intel and our channel partners win when we create value. I think we both lose if our entire behavior is to chase pricing into the ground," Siu says.

In the passages that follow, Siu and Kilroy explain why they believe that to be so, in addition to other things.

VB: Primary mission this week is to what? Motivate? Inspire? Incent? What?

Kilroy: For me it's alignment. You know we reorganized the company. We have clear direction on where we are going. And we do this every year to make sure we are aligned with our channel.

Siu: Not the reorganization part: We don't do that every year.

Kilroy: [laughs] That's true.

Siu: This is the first time I have attended the channel meetings and conferences. It's a great learning experience and networking opportunity for me.

Siu: So now I'm going to be the interviewer and ask Tom a question: As we have brought Xeon processors to the market, I think we have created some very unique opportunities for the channel players to add value and develop a new business model. They have to depart from the whole white-box type of capability, leave their comfort zone, etc., and create a new opportunity. I think we are at the threshold of many of those new opportunities, be it the digital home, digital health, and some of the new programs. Do you see some of the same dynamics, some of the same risk-taking and things that can repeat some of the same success of the past?

Kilroy: Yeah. I actually just talked with one of our board of director members [who] is very involved in the health-care vertical. And his plea to me was, "Get me involved while you are in the 'forming and storming' phase." But I think Bill is right. I think the difference is we are off the GHz run. If we can go execute on bringing these real innovation areas to market, it allows [our partners] to go innovate. They can innovate on to [of what we do.] They can really offer the services, where they make their real money. We've never had a better offering in terms of technology we are bringing to market that allows the channel to overlay services.

Siu: Absolutely. I think if you look at technology, such as virtualization, VT, for example, you can let your imagination run wild in terms of what you can do with it. To a large extent, some of our channel partners see some of those opportunities.

VB: You said earlier that some guys are going to have to let go of, perhaps, antiquated business models. Certainly the market will force some of their hands, but some will cling and scratch and hold onto that. How can you induce or incent some of those guys to make the leap that they are going to have to make?

Siu: Well, I think the technology and market forces will be pretty strong. I would argue that people who innovate, like those who do whitebooks, will move ahead of the game in terms of getting to a more innovative business solution. They will have a more profitable return for their effort...People who are struggling to build the lowest possible cost product that they sell at $299 will, I think, have their challenges.

VB: That begs the question...there still seems to be more guys [wrestling] with pricing. Is that just inevitable until more guys move to a value-based business?

Siu: I don't think any of our channel partners could think that they are going to outpace Dell in terms of their size. That's not the most productive path to take. Earlier, I used the example of Target [to illustrate our thinking.] Target is an interesting story. You would have thought that anything you can buy at Target, you could have bought at Wal-Mart. But Target actually did pretty well. So they know that they are not going to be as big as Wal-Mart. But they find a way to add value by creating products that the consumer wants.

Kilroy: You could also take a look at what IBM has done. I hear when talking to channel players more how IBM has embraced the channel in a remarkable way. It's remarkable how often it comes up in terms of partners bringing it up to me. They point out what has been in place and for how many years. I think it's a great testimony [to our strategy.] Is IBM going to be the lowest price? No. But to understand the real way that technology is brought to market is through the local touch. And I think IBM gets it. Most of the audience here is here for a reason. They differentiate on more than just price, though we all know that at the end of the day, price is still important. I think again the real vote comes from an educational institution, a small business, or maybe even a large institution. They vote on price for sure, but also the level of service they are going to get. And I can tell you, having spent most of my career in the channel, that if you look at some of the big server deals, the big boys are in there, and so is the channel.

VB: Bill, you're new to the channel. Earlier observations?

Siu: When you are a technologist as I have been my entire life, you see the technology for the virtue of the technology. And I can go on forever about why some of these technologies are exciting. But translating them into something people can feel excited about and are willing to take out their wallet and pay you for it, is something I will learn how to do.

VB: Any preheld ideas that have been dispensed with?

Siu: The channels are an incredibly diverse environment. I am amazed in the past several weeks as I get introduced to channel partners and channel executives what kind of businesses that they get into. This includes the challenges that they face. If you ask me if that is indigenous to my knowledge base and thinking of two months ago, I would have to say no. Am I learning a lot? Yes. Have I translated learning into actionables? Not yet. But do I expect myself to? Absolutely.

VB: Final thoughts?

Siu: A lot of times, Intel sells technology, but maybe not the benefits of the technology. I would point to a couple of things. If you look at Centrino as an example, I would say that almost everything I have seen in terms of marketing messages has been about benefits, not about the technology itself. I also said earlier that Intel president and COO Paul Otellini at the sales conference made the observation that the five business groups, the name of our five business groups, do not describe the product that they make or the technology that they drive; they describe the market that they serve. I think this is a major change in the mindset of the company, the psyche of the company. To me, it signals our embracement of what the customer wants us to do versus "here's a technology that we want to give to you, and you will like it."

Kilroy: For me it's the question, "Why do we refer to channel as 'whitebox?'" That's a great question because it's more of a statement and it's really not true...We are evolving our overall channel focus to include systems integrators, traditional VARs, etc., that are representing solutions that are not whitebox solutions...We need to be crisper in terms of how we articulate all the importance of all the various segments of the channel that pull a solution together.