Inside Intel

Sophia Chew heads up Intel’s global distribution operation. CME caught up with the channel champion in Dubai to talk rebates

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By  Stuart Wilson Published  October 27, 2004

Rebate reasoning|~|chewtallweb.gif|~|Sophia Chew, VP sales and marketing group and general manager of the worldwide reseller channel operation at Intel|~|Since joining Intel in 1986 (Sophia) Lee Fang Chew has risen through the global channel management ranks and now holds the position of VP sales and marketing group and general manager of the worldwide reseller channel operation.

Responsible for the sales and marketing of branded Intel Architecture and networking products, Chew also takes care of worldwide distribution channel sales. Channel Middle East caught up with Chew in Dubai last month at a regional distributor event to examine the finer points of channel strategy at Intel.

CME: Intel recently announced it was stopping rebates on boxed processors. What was the thinking behind that particular decision?

SOPHIA CHEW: There were primarily two benefits that we were looking at. Number one, we wanted to lessen the administrative burden on the resellers and distributors for processing the paperwork to claim the rebates from Intel. Secondly, we wanted to give the monetary benefits direct to the channel by taking it up front so they don’t have to deal with a lot of administrative burden. The rebate programme had been in place for ten years. In ten years we hadn’t changed it. It got to a point where it didn’t benefit the channel.

CME: Will Intel also look to reduce the ‘administrative burden’ associated with the Intel Inside programme?

SC: Intel Inside is a co-operative marketing programme. It is a reimbursement programme and is not based on buying one product and getting the rebate. Because it is a reimbursement programme we have to go through what the channel spends the money on because it is meant to be a joint programme. As a result you still have to file the claim. It had taken about three months for any of the Intel Inside licensees — that is what we call the participants — to process claims. We have seen this reduce to six weeks and we have plans in place in 2005 to halve that by simplifying some of the processes they now have to undertake to file the claim with Intel.

CME: How will you simplify it? What steps will you put in place?

SC: We will put more people in to process the claims. That is number one. Number two we will also make it easier for people to claim through the web. Today people have to send in the paper — you literally have to clip the magazine and send it in. In future we want to make it easier to submit a claim through the web.

CME: Within this region, smaller assemblers still see claiming as an administrative burden?

SC: When the claims come in, whether from a small or big partner, we will process it on time. That will help everybody. All the top accounts will have the ability to go through the web. Now the only area where small players are different compared to big players is how often do they do this joint promotion activity. The big players will do it every day while the smaller player probably will not. So it has to balance up. The intended simplification is really to help the smaller resellers because we understand they do not necessarily have the same backbone office infrastructure. The intent is to really help them.

CME: What messages are you sending to the distributors at this conference and how do you see the distribution strategy evolving?

SC: There are a few ways that we continue to want to work with distributors. We want to build a strategy — a channel programme — that focuses not only on the top accounts, which Intel does very well, but also has a strategy that takes care of the ‘mom and pop’ shops — I call them the ‘onesies’ or ‘twosies’. We want to tell them our plan through the Intel sales centre we have around the world. Intel has approximately six in Europe alone and four outside Europe. These sales centres have an integrated approach combining web touch with a call centre and integrating with Intel campaigns. We are also working with the distributors, telling them that we have very solid relationships with top accounts but also wants to build channel breadth around the world.

CME: What has been the reaction to the role of the sales centres?

SC: It has been very good so far. The distributors that I met have said that it is the right way to go because they will not be able to handle so many resellers. Take South Africa as an example because I just met a South African distributor. There are 6,000 resellers and this particular distributor could only handle 500, and we said, 'OK, we want to help you grow to 1,500 resellers, and we want to do this together'. They are really receptive to this lead generation activity. Intel generates the sales potential and these customers go to the distributor for fulfilment. This started three years ago in the US and was really well done and that is why we are taking the concept around the world. We are not leaving this region out. This region is happening at the same time as everywhere else in the world.
||**||'Onesies' and 'twosies'|~|chewtallsecond.gif|~|"Even in this region, it is Intel to distributor and then there are a lot of middle players serving ‘onesies’ and ‘twosies’," says Chew|~|CME: Are there not still unique characteristics in this region? Even if Intel reaches out to the ‘onesies’ and ‘twosies’, do distributors not baulk at the impact serving them would have on costs?

SC: Some of these small players will deal with the local reseller. In the entire channel chain, it is not Intel to distributor to integrator. Even in this region, it is Intel to distributor and then there are a lot of middle players serving ‘onesies’ and ‘twosies’. The goal of Intel is to have the integrators wanting to buy our product. So we want to tie up with them: the ‘onesy’ or ‘twosy’ might one day be a ‘tensy’. By the time they are buying in tens and hundreds, hopefully they will be buying from authorised distributors. But the intent of the programme is to allow the smaller reseller to be taken care of now so there is a path of growth.

CME: What can be done about brokers and grey channels? We have grey product coming in from Europe, from Asia-Pacific and even from the US. What can be done to stop that or at least track it?

SC: We do track and we do monitor. Do we monitor 100%? No. But we monitor by working very closely with the channel around the world. First of all you have to understand the dynamics: how product flows, why it flows from point A to point B? There are many factors causing this flow. Product always flows from low duty to high duty. The second thing that we see happening is the flow from a stable currency to a fluctuating currency. And the third reason we notice is demand.

CME: In some emerging markets where tax and duty is a big issue, the grey channel has a valuable role to play. How do you police some channels and sometimes let some go?

SC: It really depends in the case of grey flow from low duty to high duty. Usually, the distributor is present in both places. They are present in the low duty and they are present in the high duty, so basically we work with the same distributor before the duty and after the duty. We work closely with them so that they are not penalized. Sometimes it is not as easy as said because between outside the duty and inside the duty there are a lot of multiple channels that product goes through. Sometimes the resellers will go to Jebel Ali and pick up the goods themselves. They are the ones who bring the product in. There are many ways in my own opinion for this product to really be shifted. I think the crucial thing is that there is demand creation inside the country and you also have demand creation and fulfillment outside the country. Inside the country you give a choice to customers of whom to buy from at the end of the day because there is such a big differential.

CME: What issues have the distributors been raising with you?

SC: The number one concern is definitely over profitability. We have been working for almost a year now on improving distributor profitability and there has been some improvement. Intel started looking at it in August 2003 and implementing it in January 2004. We are beginning to see some improvement. The second challenge is how do we be more cost-effective? How do we reduce the cost of doing business from logistics to credit insurance to financing?

CME: Many of the local distributors and resellers still have a choice on whether to buy authorised or grey product. What is your message to them on why they should buy authorised products?

SC: Authorised product carries with it a lot of the channel benefits. One of them is that it allows us to reach customers through training. Another point is marketing and merchandising support. You can buy from the open market no problem but it is very difficult for us to track your purchase patterns to allow us to support you better. Buy authorised to benefit from the channel programme that we have, which includes the Intel Inside programme.

CME: Some traders are serving markets where they don’t really want you to track them. Do you have to accept that in this region?

SC: We recognise the existence of this category of players in the ecosystem. If they buy from authorised distributors they will get the same training. If they buy from the open market we can’t touch them.
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