Intel Increases ‘White Book’ Effort, Pushes Solutions

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EDITOR'S NOTE: CRN Online Executive Producer Jeff O'Heir recently sat down with Steve Dallman, director of North American distribution and channel marketing at Intel, and discussed Intel's efforts to help system builders increase profitability and gain new business.

CRN: According to new figures released by Reality Research, the number of white-box systems sold over the last year decreased by about 14 percent. Despite that decrease, you say Intel saw an increase in the number of processors it shipped. In what areas are you seeing the increase?

Dallman: Intel has had a lot of focus on growing our channels business, and we're seeing probably about a 40 percent year-to-year increase being shipped into the white-box market through authorized channels. This year, we've almost doubled the number of units going from authorized distributors into the white-box market.

CRN: What type of systems builder is making up the bulk of Intel's sales?

Dallman: Those serving the small-business and government markets. Systems builders serving small and medium-size business seem to have a very stable market going forward. It has even increased a little bit. Additionally, we've seen a good increase in some of government and education purchasing. Federal government [agencies have been buying in a big way. Unfortunately, I think the Sept. 11 events really triggered a lot of procurement from the government agencies. I think they were refurbishing and putting the things in place they need to track all the things they have to track, like hijackers. There's been a huge surge in that type of thing.

CRN: You mean the government is using white-box integrators to build those systems instead of going to IBM, Compaq or Dell?

Dallman: This is the good news for systems integrators. Those guys [large OEMs were caught by surprise. If you talk to the [distributors Tech Data or Ingram Micro, they sold out of units and the white-box guys were able to pick up that business. Additionally, you get what I call 'bumping.' If all of the available units that were needed in September and October were sold out to the government by a Compaq, that means local government, state and education bought what was available from the local white-box builders. Those guys have also been selling a lot of solutions because most of the government agencies don't just want a PC, they want a PC with a solution. Whether it's a wired or wireless solution.

CRN: Have the amount of total solutions sold to the government increased over the last year?

Dallman: Oh yeah. But not just in the government market. We profile our Intel product dealers and our premiere providers, and clearly, the ones that are doing best aren't the guys that are hardware integrating, trying to drive a specific price point. It's the ones who have been integrating and supplying a solution that goes with it. They seem to be the ones that are healthiest and surviving the longest.

CRN: Are wireless solutions now the hottest sellers in the government and education markets?

Dallman: Wireless is big. Even Steve Raymund, [chairman and CEO of Tech Data, was on the news the other day and said wireless will be big next year. Intel thinks wireless is going to be very big for us: wireless products, access points, networking cards, as well as the silicon that goes into the wireless solution. We've made some acquisitions, which are bearing fruit now, so we're kind of excited about wireless.

CRN: What's Intel doing to help white-box builders provide more profitable solutions?

Dallman: Inside our channel programs, the Intel Product Dealers and Premier Providers, there are certain stacks of information. We're focusing on our wireless [business to be a dedicated area with more product and training. Along with that training is our Intel channel conference, which we do twice a year. We also do technical solutions training. This is a much more dedicated and hands-on, almost like application engineering training. We also do a server track, and probably around the first of the year, we'll do a wireless one. In the last three or four months, we've directly trained 28,000 customers. That's just in North America.

CRN: You mentioned the server training. Are you finding more white-box builders transitioning from the slow PC market to building Windows NT-based servers?

Dallman: Yeah. I think NT is making a comeback. It seemed that for a long time everybody was doing Unix and Linux. It seems like we're getting more and more of our systems builders saying they're going to NT solutions.

CRN: What's driving that transition?

Dallman: I think Microsoft is putting more energy and time into this part of the channel. I know that I, along with my sales and distribution managers, are meeting with our counterpoints at Microsoft. We're talking about how we can help accelerate and move the product through the system quicker. Microsoft was pushing hard, backed off a little bit, and now they're getting back into it.

CRN: How important is the server market for Intel's growth, and what are you doing to help white-box builders understand the importance of selling a value-added server solution?

Dallman: Servers have had a rugged time; they're down 29 percent last year, 9 percent quarter-to-quarter, according to IDC. And we've seen some leveling off of the market because of spending and because people overbought. I think we're at the point where some of that product is being used again. But where are we at now, and when will that buying start up again? We think a lot of this will start kicking up again with positive growth for the servers in [the first quarter. For the boards we're selling to the white-box builders, we're seeing a better-than-expected server-buying rate this quarter. Some of that's driven by our 10 new server products. What we don't know yet is what segments are actually buying it.

CRN: You're out there talking to a lot of white-box builders. Where are they telling you the hot spots are?

Dallman: I think what's happened is that SMB and corporate are coming in and buying the mainstream boxes again. The 1-U and 2-U are very big. Clustering seems like something everybody's interested in. One gig over copper has gotten to a price point that's very practical, and it increases the bandwidth of the server.

CRN: How about white-box notebooks? A lot of white-box builders I used to talk to wouldn't go near that market because of the complexity. Has that changed?

Dallman: It's still really complicated, and I think it's a lot more difficult than the classic desktops. But it's something that has to happen. We're starting to see more awareness. A couple of years ago, we started doing the white-box notebook, [called the white book, and we went rushing out to all the resellers and said we're starting to do this, rah, rah, rah. The problem was the manufacturers who were supplying chassis for that market were supplying non-sexy chassis. They were big and clunky. It was all the stuff that was left over from the previous generation, and it made it extremely difficult to sell. In addition, the peripheral manufacturers really had average selling prices that priced these guys out of the market. It failed. But we believed we really had to get this going.

From an Intel standpoint, we believe that a robust white-box market is very healthy. We also believe that more and more companies are going to go to a mobile solution. Some people have coined it the mobile desktop. Maybe it's not the small, thin portable, but it's definitely something a guy wants to carry around the building from spot to spot. Again, wireless comes into play. So we kind of retrenched our strategy, and now we started to work directly with some of the chassis manufacturers, giving them some enabling dollars. We're bringing them over to North America, showing them the potential of the market and trying to train them on how to get into the channel. They are just so OEM-centric. I mean way overboard: The customer buys at 12 weeks lead time; when you ship it, you own it. They don't know anything about returns, restocking or anything like that.

We're also adjusting the price of the mobile CPUs for some of the early integrators, and we'll work with a few [systems builders to help us understand the methodology and learn the best-known methods and the price points. After we get that done, we'll start expanding it. White books are very much a solution sell. One of the guys who used to work for me said there's margin in mystery. There's a lot of mystery in wireless and notebooks, so there's a real margin out there

CRN: What type of price drops are you talking about for the integrators who are willing to build white books?

Dallman: We've put some enabling dollars into it. So rather than saying it's 15 percent less, we'll give them some additional CPUs to put into their systems. It's big, something like 2,000. It's one of the largest seeding programs we've ever done.

CRN: What are you doing to take the mystery out of white book building and integration? Are you helping them build up their infrastructure?

Dallman: We've done a lot of white book mobile training, and we're going to be doing a lot more of that this year and make that part of the Intel channel conferences. What they did on the last one was bring in three or four manufacturers' chassis without the hard drives, without the CPUs, without the floppies and had a class "How do I build A Mobile PC." In some cases, they got to take them home with them. The white book market really gets into building up the solution: Do I want one battery or two? What kind of hard drive? There are lots of choices. I think people view them as a much more personal thing than a desktop. People get very emotional about their laptops. They want them customized and tuned, what level of security do I put on them? That's a huge area of growth for resellers.

CRN: You talk to a lot of solution providers everyday. What are some of the unique business strategies or solutions they're deploying to beat back the rotten economy and the widespread downturn in corporate spending?

Dallman: One of the things is the creativity a lot of the systems builders and resellers bring to the market. Unlike some of the big manufacturers, the systems builders actually sit across the table from the customers, look into their eyes and find out what they really want. So I think they give the person the performance and price points [the customer is looking for and in a quick manner.

The systems builder channel market is 40 percent of Intel. That makes them our largest customer. When you're our largest customer, you're considered our most important customer. The other thing they're doing is bring to their customer the latest state-of-the-art applications. I don't think anyone ships a PC without software on it. So the systems builders are upgrading those solutions; a lot of them are into databases and trying to make their customer more efficient. My vet just got some PCs, and I asked him who installed them and he said some reseller down the street. There's veterinary software out there. The vet clearly didn't want to load software on the machine, he didn't want to run the cables underneath the counter. It always gets back to the solution: They install a wireless hub, they put the printer in there and give the guy the whole solution.

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