Channel changes force Intel’s hand

Had it not been able to cut a deal with The Atlantis hotel in Dubai, Intel’s Solution Summit (ISS) might not have gone ahead this year. In the end, EMEA partners were glad it did. Andrew Seymour was there to hear the vendor’s plans.

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Channel changes force Intel’s hand Steve Dallman says Intel is trying to drive a tighter relationship between ODMs and local PC assemblers.
By  Andrew Seymour Published  May 29, 2010

To those who assume that the likes of Dell and HP keep Intel's business ticking over from one quarter to the next, it might come as a surprise that the channel is actually still pretty important to the CPU vendor.

In fact, if you listen to the company's senior management, the channel is collectively Intel's biggest customer, or to put it another way: the revenues that are generated from channel sales exceed those that come from its largest multinational vendor.

While Intel's partner base caught the impact of last year's economic downturn full in the face, the vendor can still count on a hearty throng of assemblers and integrators to push its products out into the market.

"There has been some consolidation, but when we look at our total membership it has remained incredibly flat in the multi-hundred thousand or so," reflected Steve Dallman, VP and general manager of Intel's worldwide reseller organisation.

There are around 225,000 Intel partners globally to be more accurate, with 50,000 of them based in EMEA. Of that EMEA figure, 500 hold ‘Premier' status on its partner programme.

What the numbers don't indicate, however, is the pace at which the dynamics of Intel's channel community are changing.

It wasn't long ago that the typical profile of an Intel partner was a local PC builder that used its CPUs during assembly. Not anymore though. Partners are now responsible for developing anything and everything that features a chip, be it an ultra-light PC or a sophisticated electronic medical device.

On top of that, the amount of ‘pure integration' that is carried out locally has fallen due to assemblers sourcing full or partially built systems from ODMs in the Far East.

Sell-through rate
Such seismic shifts in the landscape provided the basis for several major channel announcements at ISS. For starters, Intel now admits the time is right to recognise channel partners for the "technology sell-through" they do, regardless of where the integration takes place.

"Most of you are moving to solutions and in some cases it maybe a system that is manufactured by somebody else, but if you are a technology partner selling it to the consumer or the enterprise we want to make sure we start recognising you and your sales people for selling through any Intel technology," said Intel's director of sales and distribution for its reseller channel operations in EMEA, Maurits Tichelman, to the 400 or so partners in attendance.

Intrinsic to that is the launch of the Channel Authorised Manufacturing Programme. It has been running in pilot phase for the past year, but has now been formally rolled out as Intel seeks to facilitate stronger relationships between partners and ODMs.

Dallman outlines why the programme is so important to the future of both local integrators and its own channel operations: "When mobile started up, the channel didn't really jump onto the bandwagon right away, but interestingly when netbooks came out - which was more of a difficult thing to integrate because the CPU had to be soldered down into the boards at the manufacturing point - they have really done pretty well," he remarked.

"So we said we need to go get with the ODMs and really work together and start looking at them differently. The difference is we used to look at them as a customer because they bought components and assembled them and now we are looking at them to a certain degree as a channel. They buy components, they assemble, but then they ship them somewhere. And the people they ship them to are the ones my sales guys are calling up," said Dallman.

A key advantage of the initiative is that it will allow Intel to act as a "matchmaker" for partners and ODMs, smoothing out a relationship that has often been sticky for both parties in the past.

"We are actually working together to figure out what the demand is and what Intel needs to do from a pricing standpoint to keep them competitive," said Dallman.

"Perhaps somebody might have trouble getting delivery or there is a quality issue - we now have people in Taiwan that we can call who will run down those issues. I think we have got a pretty good result in that the volume going through those guys is growing pretty rapidly, much faster than the market," he added.

Barebone orders
For Saudi Arabia-based PC builder, Fourth Dimension, the creation of the Channel Authorised Manufacturing Programme is welcome news.

The small form factor specialist builds between 300 and 350 machines per month, and says it will now be recognised for the Intel CPUs that it effectively purchases when it places barebone orders with ODMs.

"This will help us because the ODM will be able to report the purchasing orders to Intel, which will show Intel that we are working and that we need their support," explained Abdulrahman Al-Kayali, executive manager at the hardware manufacturer, which offers solutions based on a variety of Intel processors, including Core i3 and Core i5.

To further reinforce the point that Intel is now willing to recognise the role that partners play in influencing the sale of systems that feature its CPUs - regardless of whether they have actually integrated them or not - it has introduced the Intel Technology Provider (ITP) certification. It is designed to ensure that sales people who work for its channel partners are recognised for their expertise and understanding of its products.

Small and nimble
The use of CPUs in all manner of systems and devices these days is leading Intel to urge partners to develop incremental revenue streams by working with new industries and application providers. One organisation that has sat up and taken notice is UAE outfit Sky Electronics.

It continues to build a range of systems including Atom-based mobile devices, gaming PCs and workstations. Managing director, Manoj Thacker, says the company has even expanded into the digital signage and kiosk markets.

He believes that as long as Intel gives partners early access to new products, the channel will prevail. "As a channel we will always have new things from Intel to play around with. It depends on how big the window is - do we have six months, one year or two years before the MNCs can take over? As a small company, the more new things we have, the more attention we can grab from our partners and our customers."

That sentiment is shared by Pascal Karam, general manager at Lebanese hardware assembler CTServ. It claims to control 70% of the local server market, but says it is imperative that Intel continues to furnish the channel with the latest technology.

"With the new capabilities that Intel has provided we are able to build a real solid storage solution," said Karam. "Storage solutions had always been a total monopoly for the MNCs, but now we are able to provide, sell and support successful storage solutions through the channel."

The last word goes to Intel's sales manager for the Middle East, Sven Beckmann, who insists the channel must continue seeking the opportunity to lead in the market.

"They have the local touch, they understand the needs of the customers on the ground and they can do the service and support," he explained. "The larger customers have obviously got large inventory build-ups and products to move whereas our channel is nimble and small and able to react to niches."

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