Intel makes networking a $1B business

Intel makes networking a $1B business

When Intel launched its foray into the networking hardware business it caused a lot of people to scratch their heads and ask themselves why.

Some analysts saw it as a way for Intel to diversify its revenue base, should the money stream from its microprocessor business ever dry up. But it looks unlikely - even in Intel's wildest expectations - that networking will ever come close to matching that revenue base.

According to Intel's national sales manager, Archie Wilson, selling faster networking hardware means users can get the full benefits of the Intel microprocessors. "Intel's moved into this space from the perspective of how can you get greater performance to both your servers and your desktops so there are no bottlenecks, because everything from the bus architecture on the PC through to the hubs and switches and WAN connectivity is all in place," said Wilson.

While networking will never dominate Intel's balance sheet, the company is already three-quarters of the way towards its target of networking being a $1 billion business by the end of 1998. Wilson says Intel should make that mark by a country mile.

But apart from the NIC market, where it has been battling head-to-head with 3Com, Intel has yet to make much of an impression in sales figures.

Where it has shown up is in the minds of resellers. This year's IT Channel Trends Survey, conducted by Inform Business Development, showed Intel coming in third in the top 12 rated network hardware manufacturers, behind 3Com and Cisco respectively. Intel also came in at number one when it came to brand advertising for networking hardware. Whether or not this was a reflection, or was influenced by Intel's microprocessor advertising, it still represents significant branding.

"The sentiments that we get from analysts and the reseller community show they used to see three premium brands - Cisco, Bay and 3Com," said Wilson. "They now see four - the fourth being Intel."

Intel is now looking to capitalise on that reseller mindshare through beefed up reseller programs. Rather than pitch the products to anyone currently selling Intel chips, it has created the Premier Partner program to help guarantee that its message gets through.

"It's more a focus on giving these guys a better break on Intel technology, plus some fairly targeted incentives," said Wilson. "We still have Intel's philosophy that anyone can resell the product, but we focus more energy and activity and resources. In return, they've made a fairly significant commitment."

That commitment means agreeing to levels of business and maintaining a set number of trained engineers.

Premier Partners include such companies as Praxa, Senteq and Ipex. "We've tried to go to companies where there's as much complementarity as possible, so that we can minimise the overlap," said Wilson.

"I think the thing that unites them all is they can see competitive advantage by being close to Intel, and understanding Intel's technology roadmaps. And that's quite a big differentiator for them, to go into a customer saying we'd like to talk to you about your desktop platform three to five years out."

For NSW-based partner PowerLAN much of the attraction lies in the well-respected Intel name, said managing director Theo Baker. "I think it's an opportunity to forge a relationship," said Baker, "and then leverage that relationship and then obviously attract more customers.

"I think the attraction of the Intel relationship is that you get direct support. We can seriously attack things like Intel LANDesk and have the appropriate support behind us."

The next challenge for Baker is in adjusting the thinking of his customers. "Users typically have a brand that they wish to purchase. What we've got to do is determine if we want to push the Intel product. Our philosophy is, as long as the product's sound, then we're prepared to push that product."

Baker believes many customers still see Intel as a processor organisation, or possibly as a network card organisation.

"I think it's just a matter of communicating to users that there's a bigger picture than just processors, and how serious they are in the networking space. But generally I think it's been well accepted."

The benefits

Also in the Premier Partner ranks is Melbourne-based Southern Cross. Business development manager Mark Kalmus said for his organisation also the relationship is a strategic decision. "Intel's got a lot of the desktop space and good brand recognition," said Kalmus.

"The other reason is, in terms of differentiation, everyone sells Cisco and Bay and so forth. So it gave us a different slant on things going into a client site."

Wilson said that reaching out to resellers has meant a change in Intel's thinking. "Historically Intel's approach to networking was pretty much the same as microprocessors, which was a very broad channel. That only works when you've got a very high market segment. Hence we've turned the model on its head, and we've focused our activities."

Wilson said that while its networking products still pass through a distribution layer, the focus for Intel is further downstream. Hence, its aim is flawless account management in each of its 80 or so resellers.

For those resellers not in the Premier program is the Intel Solution Partner program, a regional program to actively engage with these Intel solution partners and pass on information about Intel's network branded product technology, management technology and videoconferencing.

But the emphasis is not on networking for networking's sake. "We're now leading with our core strength, which is microprocessors," said Wilson.

Wilson said Intel's networking messages are very much tied into its processor related technologies, such as Desktop Management Interface compliance. "So everything you see about Intel's network infrastructure products or manageability products relates to the connected PC or to the managed PC concept," said Wilson.

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