Intel puts faith in resellers

The chip maker targets the channel as the it looks to increase market share in the SME sector.

Intel used its Solutions Summit in Budapest this month to reaffirm a commitment to the channel and demonstrate its focus on three key market areas: client, networking and server technologies aimed at small to medium sized enterprises (SMEs).

Mark Whitby, Intel's regional director for northern Europe, insisted that channel support is essential for the chip vendor to gain market share.

"Resellers can support us in these areas because of their ability to integrate servers, desktops and communications technologies," he said.

According to Amanda McGonigle, European sales director for the vendor's reseller channel, Intel was unaware of the channel before 1991 and used to rely on multi-national original equipment manufacturer (OEM) partners and tier-two white-box manufacturers.

"We had been working with OEMs for years and we did not even know about the reseller channel. We really got going in the channel when we launched our boxed microprocessors in 1995," she said.

The chip giant now has 60,000 partners and sees build-to-spec suppliers as one of its main routes into the SME space.

System builders now account for 39 per cent of Intel's total processor sales, and this is set to increase as the channel dominates in the SME market.

Increased investment

"There is no reason why this [channel] should not account for half of our total sales," said McGonigle. "We are going to increase our investment in the channel over the next year and we want to double the number of products going through the channel over the next five years."

McGonigle explained that Intel will improve the way it contacts its resellers electronically by developing its website and introducing email distribution.

"Through this we can give resellers some technological flavour and talk about what is coming up in the marketplace," she said.

Intel currently partners with its channel on two levels, depending on a company's skill set. Intel product integrators build PCs and notebooks as white boxes, while top-tier Premier partners are accredited in a wide range of technologies with the ability to provide full IT systems.

The company's strategy is to encourage its channel partners to take on a bigger share of the SME market, while its OEM partners, such as IBM, Compaq and Dell, dominate the corporate arena.

McGonigle maintained that the SME space is the domain of the channel, and that it had come into its own during the IT slowdown.

Whitby agreed that the strong sales figures of Intel's partners have reaffirmed the vendor's belief in the channel.

"The SME market has been sheltered and has continued to grow," he said. "Resellers are taking a larger proportion of the overall Intel business and we anticipate this trend to continue when the economy picks up."

Local support

According to McGonigle, a key advantage of a localised channel partner is that it can provide build-to-order machines and add a support package on top.

"The key is the local support and specific customisation. They don't just build the system to order but take the time to understand customers' needs and provide the complete solution," she explained.

Gordon Davies, commercial director at Intel UK Premier Partner Compusys, pointed out that 60 per cent of its business is Intel-related and that most of its customers are SMEs.

"We have a presence in Leeds, Bristol and Aylesbury. Small businesses prefer to deal with local suppliers and do not want to be anonymous customers," he said. This is what small customers become when dealing with large OEMs, he added.

Tom Kilroy, general manager of reseller operations at Intel, wants channel partners to be on a level playing field with OEMs such as direct vendor Dell, by opening up the Intel Inside branding to more partners.

He stated that Intel will be investing heavily in its CCAP branding programme, a co-marketing scheme that enables funding for the partners wishing to use the Intel Inside brand in their advertising. Its aim is to create more licensees that can put the brand on their own products.

"We are expanding the budget to expand the number of licensees and doubling the spending on the CCAP branding programme. We want to dig deeper into the channel to reach more customers," said Kilroy.

However, Davies warned that in the past it had proved difficult to take advantage of the programme because of its strict rules and regulations.

"Part of the reason that made it difficult was because Intel expected a mirror image to the tier-one OEM advertising. But we do not sell off-the-page," he said.

Davies added that Intel has now removed certain administrative problems and inappropriate rules to increase partner access to CCAP funding.

"It has now taken off the shackles and [has fewer] rules because before it was an administrative nightmare," he said. "Intel now realises which market we are in, so now we can be more flexible."

SUMMARY:

• Intel reaffirmed its commitment to reseller partners at its recent Solutions Summit in Budapest.
• The vendor has pledged to increase investment in the channel and to double the number of products going through it in the next five years.
• Intel values resellers' local knowledge of SME customers' needs.