Beyond The PC: Intel's Drive Into High-Growth Emerging Tech Markets Will Be Powered By Partners

After a year of significant restructuring aimed at positioning Intel for the future, CEO Brian Krzanich has high expectations for the chip giant's channel - explosive growth.

"Our CEO has three goals for us," said Greg Baur, Intel's vice president of sales and marketing for the Americas regional sales group. "Growth, growth and more growth." The sales charge comes more than a year after Krzanich kicked off a massive restructuring initiative in April 2016 aimed at transforming the $60 billion behemoth from a "PC-centric company to a smart, connected company that powers the cloud."

As the company kicks off its Intel Solutions Summit partner event this week, it is sharply focused on high-growth markets - namely the Internet of Things, data center and cloud as well as newer emerging technologies and markets with great potential including artificial intelligence and autonomous vehicles.

[Related: Intel Solutions Summit 2017]

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Baur, an Intel channel veteran who is charged with heading up all of the Santa Clara, Calif.-based company's partner activities and sales, sees solution providers as key to winning in those markets.

"Much like Intel's company strategy, which is evolving, we're really trying to expand and grow our channel business," said Baur. "Our technology is expanding into many different areas beyond the PC, and the channel is a big part of that. As Intel technology is blossoming into new areas, whether it's client, data center, storage or IoT, channel partners will have more opportunities to evolve and develop more solutions for their customers."

The big bet on these high-growth areas is paying off. For 2016, Intel's Internet of Things Group revenue was $2.6 billion, up 15 percent compared with the previous year, and Data Center Group revenue was $17.2 billion, up 8 percent compared with the previous year.

"What I love about the channel is that whenever we have a new technology surfacing from any of the business groups, channel partners are the ones who get it first - they drive it into the market," he said. "The channel feeds on transition, they're more nimble and can really drive business." Baur says the channel's vertical market knowledge and software and services expertise are helping power digital transformation for customers.

And partners are moving hard and fast to power the new software and services opportunities generated by these high-growth markets. The move by partners years ago to a managed services model (Intel estimates that 70 percent of its channel partners already offer managed services) has made the transition easier.

Partners, for their part, said they are seeing the payoff from Intel's restructuring efforts. Kent Tibbils, vice president of marketing at Fremont, Calif.-based ASI, an Intel system builder, applauded the company's investments in the data center as it has driven sales for ASI around Xeon processors, server boards and bare-bones systems.

ASI saw Intel server sales grow 15 percent from 2015 to 2016, according to Tibbils, who said he expects those sales to continue to grow 10 percent to 15 percent in the coming year, particularly with further innovations such as Intel's next generation of Xeon processors and its Optane memory modules.

"Intel is really innovating in the data center space … between its Omni-Path technology and Intel turnkey servers, the whole data center category is still growing for Intel," he said. "There seems to be more emphasis on the product and technology focus as a resource for partners so we are hoping for that to be a positive. This is a good thing as it gives us more resources on the Intel side."

Over the past year, Intel has doubled down on the Internet of Things with new products and platforms, including a $100 million investment in a new Responsive Retail Platform for the channel; a new Joule module built for IoT applications; and a small-form-factor Compute Card that can help partners power connected devices.

Stephen Monteros, vice president of sales at Ontario, Calif.-based Sigmanet, which specializes in Internet of Things and data center solutions, said Intel's investments in these categories have helped Sigmanet close a number of deals. Sigmanet has used Intel technology to build out its Internet of Things business and deploy solutions over the past year. Most recently, Sigmanet used Intel Wi-Fi access points - which can store, manage and distribute digital content - to plan and deploy a people-tracking solution along parts of the 21-mile Pacific Electric Trail in Rancho Cucamonga, Calif. Intel's new direction has helped Sigmanet sharpen its focus as well - not on specific products, but instead on areas of expertise, including the Internet of Things.

"I like what Intel has done around its restructuring - they're focused on business outcomes and the past year has accelerated this," said Monteros. "I think the channel is very important for Intel … their position is to enable us and paint out the bigger picture for us. I see growth in the future because Intel is allowing us to enable these technologies." Eric Stromquist, COO of CTL, a Portland, Ore.-based custom system builder and Intel partner, said that he sees
more resources for channel partners to grow their business in lucrative markets.

CTL builds Chromebooks and devices for the education vertical, and Stromquist emphasized that vertical market expertise is the channel's strong suit. And that's exactly where Intel is placing its bets, he said.

"It appears that Intel has a good go-to-market strategy now, and that's translating to their sales. They're trying to understand their channel base with new initiatives for IoT and education," he said.

Looking forward, Stromquist said he sees Intel continuing to invest in its channel around specialty vertical markets and revenue-rich spaces like the Internet of Things and the data center.

"It's challenging to get their arms around and have a channel strategy around, but we're in the middle of new processors coming to market and the IoT situation seems to be an exciting channel play for the more innovative partners," he said.

Aligning Partners Around Specialty Focuses

The Internet of Things is a key area of growth for Intel - and a market where solution provider specialization is essential for end users.

A critical part of Intel's new strategy has been to better align partners with the specific markets they specialize in, including vertical markets such as education or specific technology areas of expertise such as the Internet of Things.

"We have many different businesses that are evolving and growing - data center, IoT and client compute, for example," said Intel's Baur. "That has made our entire portfolio very broad and complex. It's really tough for one partner to be an expert in all this. Over time we've added specific focus and expertise for particular businesses." This tightened focus on areas of specialty was reflected in the cancellation this year of Intel's annual show, Intel Developer Forum, which the company has used for almost 20 years as a launch pad for new product announcements. In April, Intel said it would instead have a greater variety of smaller, "targeted" events, as opposed to one broad conference, so partners can instead attend events where they can be better aligned with their areas of expertise.

Sales Strategy Reshuffling

Intel also has been working to elevate its channel program and position partners to tap into new areas of growth. Part of this shift has meant an entire reshuffling of the sales strategy so partners can build up their skills in various segments - becoming the leaders in those specialty businesses and eventually expanding regionally to reach more customers.

"One of the things we'll really try to improve on is growing the channel at a global level," said Baur. "We want to help partners expand their business and grow beyond their local territory. The overall evolution around data center, artificial intelligence, virtual reality, 5G - all the new technology we see five to 10 years from now being mainstream we're investing in today, and I see partners being critical in integrating these technologies."

As part of this drive, the company is now offering new sales experts and field application engineers to team with partners in various specialty markets. These individuals can serve as subject matter experts to sit down with partners and talk about their strategy and as sales representatives to go into meetings with them.

For instance, rather than going to a customer and having a generic conversation on Intel's product portfolio, partners can now have meetings with customers equipped with the specialty knowledge - like memory - that will enable them to go into the next level of detail so potential customers will better understand that specific product.

"We're offering sales folks that are knowledgeable and have deep understanding of the particular verticals, segment or customer needs," said Baur. "All of these groups are very specialized to particular business units, and we thought we needed that to accelerate growth. That's been very well recognized and received by our customers." In addition to new sales specialties, Intel said it will offer technical and marketing resources for partners who need to pull together solutions in specialized areas.

ASI's Tibbils said Intel has the coverage pieces in place. "Intel has aligned resources to have customer coverage and product coverage so as a partner we will have someone responsible for our account in terms of the business relationship, and then there will be a person responsible for a product category like SSDs for all partners so this person would be product-focused for training and so forth," he said.

Sigmanet's Monteros said these specialists are crucial for channel partners who want to go deeper into areas of growth but may not have the resources or talent on staff. For Sigmanet, Intel brought critical IoT specialists and extra training to the table as the company planned out its dual surveillance Pacific Electric Trail IoT solution.

Monteros said that Intel's restructuring has resulted in partners having access to new sales specialists who can help examine and plan how partners can excel in areas of growth. "I don't have people dedicated to IoT research right now, but Intel has everything we need. For IoT, they have specialists who will come discuss what we have in mind for solutions at an in-depth level," he said. "They might bring in a camera vendor to help with a solution, or provide extra training for a vertical. We really view them as consultative to our business and then we can go drive those sales with our customers."

The Future Of Client Compute

Even while Intel is pushing more investments into areas beyond personal computing, its client compute business is still a bright spot for many partners.

Moving forward, said Baur, the company will focus its channel efforts on areas of growth within the client compute business, including products such as 2-in-1s and smallform-factor products, as well as niche markets such as the enthusiast segment.

Randy Copeland, president and CEO of Velocity Micro, a systems builder and Intel partner based in Richmond, Va., said that he has seen a sharper focus on the enthusiast space from a PC perspective at Intel.

"Intel is consolidating their efforts in the gaming and PC space," he said. "But the other side of the coin is they're continuing to innovate and march forward with their technology. So, all and all, we don't feel a lot of negative change."

Copeland, for his part, said he will continue focusing on the enthusiast space, particularly as Intel continues to innovate with new performance-packed chip technology, like its seventh-generation Kaby Lake processor, which was launched last August - as well as new graphics products, better storage like PCIe products and Intel's Optane memory module, and virtual reality tools such as Intel 360 Replay.

The chip manufacturer also built out its small-form-factor portfolio with the addition of the 5mm-thick Compute Card, which will be released in mid-2017 and helps power the next generation of Intel-based IoT devices. "Intel's products are good. I'm glad to see that their road map continues to progress and strengthen in the client compute segment," said Copeland.

Channel Is The ’Center Point'

Moving forward, Intel will continue to revamp its channel strategy to drive growth for partners in new lucrative markets. "The future is now," said Maurits Tichelman, vice president in the sales and marketing group and general manager of sales, worldwide direct and channel sales. "The more we're looking at areas of growth, the more we're reaching into new customers, and you see that the channel is at the center point of the opportunity."

To that end, the company hired a new vice president of channel sales, Ricardo Moreno, to lead the charge in further investments for the channel.

Moreno, a 16-year Cisco Systems channel veteran, will be in charge of tightening the focus on investments across Intel's go-to-market strategy, as well as channel resources and training strategies from a global perspective. "We want someone to look at how our partner program stacks up, and what could we do differently, how could we further enhance it to be more successful, using our channel partner strategy, and give them the right infrastructure and support to be a further part of the Intel family," said Tichelman.

Beyond markets such as data center and the Internet of Things, Intel will loop in its channel as the company continues to expand its portfolio.

Over the past year, the company has deepened its investments around artificial intelligence and is scaling up its research efforts around it, unveiling in March an Artificial Intelligence Products Group.

In November the company said it would invest $250 million to research autonomous driving connectivity and security, and officially lifted the curtain on the Automated Driving Group, which will research and develop next-generation autonomous driving solutions and driver-assistance connected systems.

Intel also has made strategic acquisitions to broaden its reach into these new technologies. In 2015 Intel purchased San Jose, Calif.-based Altera, an FPGA (field programmable gate array) company, to deepen its Internet of Things expertise, for $16.75 billion. And just this March, Intel shelled out $15.3 billion for connected car chip-based camera system manufacturer Mobileye, based in Jerusalem, Israel.

For Intel CEO Krzanich, these new investments are critical for moving forward as a data-driven company and continuing to accelerate innovation.

"In 2016, we took important and sometimes difficult steps to position our company for future success and accelerate our company to power the cloud and billions of connected devices," said Krzanich during the company's 2016 fourth-quarter earnings call in late January 2017.

"In 2017, I'm confident we're making the right investments to compete and win in the same segments we've already been in - but also in new areas that are poised for growth because they are flooded by data," he said. Partners are eager to be at the forefront of these new technologies as they continue to evolve.

"It's really a world of adaptation," said Martin Smekal, president and CEO of Torrance, Calif.-based Intel partner TabletKiosk. "You have to expand your staff to understand different markets and data centers. As channel partners we need to find those niche areas, and Intel's trying to enable that."