Every so often, an established technology vendor comes along with a good idea that galvanises the rest of the industry into looking at the way it operates.
Dell's success at implementing internet ordering and build-to-order is a perfect example and others - notably Compaq - have been forced to sit up and take note.
Without a similar revolutionising methodology, should Intel's plans to storm the lower end of the network market make existing suppliers also sit up and reconsider their position?
Certainly Intel's recent decision to enter the low end of the networking industry was reported in the technology press. So far, it seems, no publication has reported on its growth strategy. No one asked the question, preferring, as Bay Networks did, to argue that Intel 'has no heritage and can't provide the products'.
While those points are valid, the question is: who is Intel going to take share from and how? IDC forecasts a combined ethernet Lan hub and switch market worth nearly $1.3 billion by the year 2000. For Intel to succeed as planned, with even a 30 per cent share, it is either going to have to acquire a leading share of the market through acquisition or absorb the bulk of growth for the next few years.
As yet, Intel has not indicated that it intends to purchase share by acquiring a leading vendor. But this does not mean it won't. So perhaps the next question dealers should be asking Intel is how it expects to grow its share organically at such a rate, and to the detriment of others with experienced channel partners and good working practices already in place. What can it bring to the market that isn't here already?
Let's face it, the ethernet product market is well established, in many cases with commodity technology. There must be over a hundred vendors worldwide offering standards-based products which will all interconnect seamlessly. As a result, the market is able to mix and match vendors' products to satisfy requirements, and the user is oblivious to the unexciting network plumbing that sits in the wiring closet - that's if it's not mission-critical equipment.
In mixing and matching vendor's hardware, dealers and resellers have choice. But they also develop a loyalty, which may or may not be commercial in nature, which will be influenced by such things as warranty schemes, stocking policies and rebate incentives.
All of these play a part in achieving bottom line profit for the channel.
Pricing has never been more competitive. With unmanaged ethernet ports currently costing less than #10 and unmanaged ethernet switching breaking the #30 per port barrier recently, the customer has never had it so good.
A price change across the board is mostly unaffordable, unless Intel plans to lose significant amounts of money as part of its plan to grow market share. What can Intel do to change the loyalty of resellers that already think they're getting a good deal, to persuade their customers the Intel box is better, when in fact the technology is at best on a par?
'Intel Inside' is irrelevant in this instance. There is no technical superiority. Product range is limited and pricing is competitive but not leading edge. The bottom line is that all Intel is offering is more of the same, but in limited flavours.
Some of the major vendors in the low end offer upwards of 500 products to meet requirements from dealers and resellers. Does Intel believe it can achieve a dominant position with a handful of products?
The companies which produce the majority of the low end connectivity products have learned the hard way how to manage large and diverse product inventories, to keep prices moving, to market effectively and run efficient operations.
Intel's appetite to be the biggest and dominate an industry may have overlooked the strength of the smaller players.
Ernie Jones is managing director at Allied Telesyn International.
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