CRN Interview: Paul Otellini, Intel

It's been more than one year since Intel famously reorganized its business around several key platforms. Working to ensure there is a channel component in each of these divisions, Paul Otellini, Intel's president and CEO, talked to Hardware Editor Kristen Kenedy about channel opportunities in the company's upcoming managed desktop initiative, called Intel Professional (code-named Averill), and mobile. He also opens up about supply problems in the fourth quarter and technology to watch at this week's developer conference in San Francisco. The following are excerpts from that conversation.

CRN: How are you integrating the channel into your new platform model?

Otellini: Every platform we are working on without exception has a channel aspect to it that we believe offers the channel an equal opportunity to grow their business along with the OEM customers.

So, as an overarching statement, we are designing products with a holistic view of our customer base as part of it. For example, the Viiv product that was just launched at CES in January had over 50 channel customers at day of launch, 19 of whom showed their products at the Intel booth in Las Vegas, along with the Sony, Dells and Hewlett-Packards of the world. This product gives integrators … the ability to not just sell more stuff on the consumer side but also have ongoing service revenue stream.

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As we move this to year to launch [the Pro] platform for the enterprise I would expect the channel to be an equal full participant in that ramp. The products will benefit their customers as well as large enterprise customers. It focuses on manageability, security, lowering cost of ownership—this is something that is music to any buyers' ears.

CRN:: In what way would you look to enable that for the channel in particular? The manageability aspect really catches my ear because that is something many VARs and system builders are talking about these days.

Otellini: I'm not going to prelaunch this thing, so I need to be careful here. But like our other products, it is a combination of software, hardware and ecosystem partners.

The hardware and software ingredients, of course, will come from Intel, as they have in the past for the channel, as will info on how to sell, and so forth. There will also be arrangements with a number of ecosystem partners that have plug-ins to it to provide some of the things like down-the-wire manageability. It will be much like we did with Viiv, where there were a whole bunch of ecosystem partners and content made available to all players up front.

CRN: How would VARs plug in to those hooks?

Otellini: We've made our product robust in terms of being able to handle a variety of modular solutions for manageability and security.

CRN: Can you give me an example of one of those solutions?

Otellini: Not without launching it.

CRN: Mobile sounds like it is also another platform you think is important for the channel.

Otellini: Starting with Centrino, but even before Centrino, we were working to enable to the so-called whitebook marketplace through the ODMs [Original Design Manufacturers], and I suspect that for the Napa launch for Centrino core duo last January—I don't remember the exact numbers—there were as many channel SKUs as there were OEMs SKUs at launch. There were over 200 SKUs in total at launch. You will see us continue to work with the industry to improve the selection and quality and availability of solutions from the ODMs, but also increasingly the interoperability of components.

One of the big issues for the channel is service. If the customer moves outside of their immediate customer base area and the notebook breaks, how do they get service? So we want to be able to use Intel—the Intel ecosystem—from both an infrastructure and local support capability for people to be able to offer, say, cooperative service arrangements. Part of that would have to include interoperability of [spare parts].

CRN: That would mean system builders would partner with each other to do service. So if someone was regional, they might partner with another solution provider in a different region?

Otellini: Yes. How do you connect an Intel partner in Thailand with an Intel partner in Indonesia? If a Thai customer travels in Indonesia, how do you get your PC fixed while you are on the road?

CRN: Is that also true for the United States—if you are on the West Coast and need to get your PC fixed on the East Coast?

Otellini: Hopefully.

CRN: Are you saying you will try to launch it internationally first?

Otellini: No. I'm just saying it is very natural for us to have these kinds of capabilities, to enable these kinds of capabilities using our network. I mean, our network isn't just what Intel does, it is what we enable around it. So this allows channel customers to take advantage of the fact that they are all off of a common base.

CRN: I think one of the things system builders have been saying about the whitebook issue is they would like to see Intel do some kind of branded whitebook initially.

Otellini: That's an oxymoron, isn't it? A branded whitebook is not a whitebook. It would be an Intel Book.

CRN: Well, something along the lines of what you are doing with your server platform.

Otellini: With the servers we enable chassis, motherboards and power supplies. We don't build them all. We don't assemble them all. And we don't do that for desktops either, by the way. I think the notebook model will likely evolve more like the desktop model than the server model because you want the volume characteristics. In servers everything is unique, right? Everything is more expensive, more robust. In PC space you want interoperability, you want cost, you want scale, economics, and you want ease of integration.

CRN: Is there anything Intel can do to maybe alleviate some of the perception from customer that whitebooks are not as good a products as branded notebooks?

Otellini: Work to make them better. I don't think the perception is one of quality. The issue today is it competitively costed, is there service outside of my immediate adjacent area, those kinds of things, which address how people use notebooks.

CRN: What I hear from system builders—and I recognize that this may not be what you think is Intel's job—but what I hear from them is that they want Intel to guarantee that there is a certain supply of whitebook chassis.

Otellini: I appreciate that, but [we] are not going to be able to tell people how to run their business. What we can do is make the market, right. The way we can do that is we can drive standards, which is what we just talked about, the interoperability and interchangeability of parts. We can ensure that we are working closely with the ODMs to have the most recent technology from Intel available as close to launch as possible, very often at launch.

That is how we built what is today the desktop business. The key change in the desktop strategy back to the Pentium days was the best technology with zero lag in the channel. Once we did that, once we were able to enable that, it really made the channel much more competitive. And that hasn't changed. I think the same business model applies here in the notebook area.

CRN: I think there was an issue in the fourth quarter—I should say almost every system builder I talked to who was a good Intel partner, whether they were really small or a premiere partner, was having trouble getting the right motherboards. I think some people really got hurt by that. Many felt like they built their business around offering their customers and Intel-branded motherboard and chipset and that they were really let down. At the same time AMD made some noise about wanting to get into the corporate desktop space. They launched their first stable image program and some other programs. I would ask you, do you think you were hurt by that and what can you do to reassure partners?

Otellini: We clearly disappointed ourselves and the investor community with the fourth quarter performance. We missed our guidance. We missed what we said we would do. Much of the reason for that had to do with exactly the problem you are describing, which was our inability to bring on third-party chipsets and motherboards to match with our processors in time to meet the peak selling season.

We brought them on very rapidly over the fourth quarter but, quite frankly, much of it happened in December—late December. As we sit her in February, now the situation is dramatically different. There is adequate third-party supply of chipsets and motherboards with both Intel with third-party chipsets on them, and there are other motherboard manufacturers with third-party chipsets on them we think to fill the gap that was left there. And you just go forward. I feel quite confident in 2006 that particular supply issue is behind us. But that didn't just impact the channel. That impacted Intel pretty severely as well.

CRN: What makes you feel confident that the problem has been solved?

Otellini: Intel is building more and we have arrangements already flowing with third-party suppliers.

CRN: What did you learn from that experience?

Otellini: Start earlier.

CRN: What technology will Intel be talking about at IDF that you think is most important to the channel.

Otellini: Dual core.

CRN: Why do you think is that particularly important to the channel?

Otellini: The channel has historically done extremely well on technology transitions. Dual core, particularly the way we are implementing it, is very easy and natural sell-up opportunity for the customer. It much higher performing machines, better thermal envelopes, motherboards are pre-existing in terms of their ability to take advantage of dual-core, and the usage models that we have been enabling. Things like Viiv and the upcoming [Pro] activity are just made for dual-core because you are using a lot more CPU cycles to do other things in the background.

CRN: Like virtualizaton?

Otellini: Or encryption, decryption of video.

CRN: I believe on the corporate side, I think some systems builders would say, I don't know if there is really any message for us to give to on the client side about dual-core right now. For their Word apps do they really need…

Otellini: You don't, but you need it for all the stuff you do in the background. It's not Word that taxes your system. It's running your security algorithms in the background, its doing the down-the-wire manageability, its running virus protection. All that stuff uses up CPU cycles, No. 1. No. 2, I don't know about your job, but more and more of my content on my desktop is multimedia enabled. I get video clips all the time, I do Webcasts at my desk all the time. The world of standard old e-mail and textual-based Word documents is gone behind us. Even PowerPoint is full of big images now from lousy clip art to stunning photographs. I think that you need to think about this in a more three dimensional fashion.

CRN: Intel recently had a sales and marketing conference here. What was the message you delivered to that team?

Otellini: The overarching message was that we have a spectacular product line-up in 2006. By our own technologists estimates, the best product line-ups we've had perhaps in a decade. In all segments. We have the factory line up. We have four 65-nanometer, 300mm factories coming online. So I told them this is the year is to take advantage of those products and that capacity.

CRN: Are you feeling more confident about road map and development cycles?

Otellini: We retooled much of our planning process and road map two plus years ago to drive more predictability. But the products coming out this year, even the midyear products, are really going back to the notion of converged-core, optimized power performance architecture across the board, consistency of software features. We will have a consistent architectural framework for software development across all of our platform products for the first time ever.

CRN: Can you explain that a little?

Otellini: All the products will have all the "Ts" enabled at the same time. So as you don't have to worry as a software developer if it's in the server or the desktop or the notebooks. It's everywhere. It all will be optimized for power performance.

CRN: What is your impression of how AMD is doing lately? Certainly they have a very focused effort on corporate this year. They have a stable image platform for the first time and they also have a VAR program for the first time. I recognize that their chunk of the market is relatively small, but their intention to go after corporate is a big way.

Otellini: Intel invented all of those things you just talked about in terms of the stable image platform and the all of the ecosystems validation work we do. But we are not standing still. So it is one of the unique advantages we have in serving the corporate market is that we provide not just the processor but most of the other platform ingredients. We provide the chipset, the logic, the graphics, the communication devices, and all the software drivers. We write them ourselves and we validation them ourselves. So we can, therefore, guarantee the persistence over time. For a CIO, whether it is a large or small company, that is a pretty critical decision. It's the most important decision you can make. And we will continue to advance the offerings there along the lines we have discussed a little bit earlier with [Pro]. We will not stay still.

CRN: There is a lot of talk in industry lately about managed services. Given your perspective as the CEO of Intel what advise would you offer up to systems builders about moving into these areas?

Otellini: These products such as [Pro] will be a godsend for that because it enables those who have a service business to do it more cheaply and more robustly, and for those who don't, enables them to enter it more easily. This really is down the wire everything. Not just fixing things but also replenishing and refurbishing software when there is a new version of X to be pushed out, you can do it down the wire remotely. You can recover from blue screens without having to send someone out. Those are all pretty amazing technologies.

CRN: We have just a few minutes left. Is there anything you want to bring up that I didn't ask you about?

Otellini: You didn't ask about our commitment to the channel? That's something which your audience may want to hear, particularly after a difficult 2005. I would just say that Intel and myself in particular remain committed to the channel. I have been involved with the channel for most of my 32 years at Intel, and I've grown to understand it pretty well. I think we have a very high degree of mutual dependency on each other. And Intel is not going to waver in our support for the channel and I would hope for us to get better and better in that year after year and watch us in 2006 and see how we do it for them.