Channel Chief
“Focus on solutions and services”
 On his recent visit to India, Steven J Dallman, Intel’s Global Channel Chief, spoke to Dhaval Valia, Executive Editor, CRN, about the global trends in PC computing and Intel’s plans for the country
How has the global economic downturn affected the PC market?
At the beginning of the year, IDC had predicted an almost 9 percent decline in PC sales from 290 million units in 2008 to 265 million units by the end of 2009. However, in June, it revised its projections upward to 275 million. Again in September IDC upped its PC sales projections to 287 million units for 2009, just a shade below last year’s shipments.
Thus, from a negative growth projection at the start of the year, we may actually see flat growth for the PC market, which to me is significant. If you look at the wider scenario, auto sales worldwide dropped by 30 percent. More significantly, mobile sales, which have been growing robustly throughout the last decade, witnessed a 5 percent drop this year. Flat growth for the PC market is therefore good in one of the worst recessions the world has ever seen.
It suggests that PCs have transitioned from being a nice-to-have gadget to a must-have productivity tool. PC demand in 2010 looks bright. As per IDC’s latest estimate, PC sales are projected to touch 320 million units in 2010. This represents 11.5 percent growth, which is quite healthy.
What according to you are the factors that have driven PC demand in a tough global economy?
The growth has been largely consumer-driven. Demand from businesses has lagged. The growing popularity of netbooks and nettops has also played a role in driving demand. In India particularly, nettops have seen good traction, and the country has emerged as the largest nettop market for Intel.
Interestingly, the netbook, which was supposed to bring affordable mobile computing to emerging markets, hasn’t met its goal.
When we launched the Atom processor, our objective was to make mobile computing devices more affordable. We were expecting netbooks to sell in the sub-$200 range, an affordable price-point for emerging markets. However, the average selling price (ASP) for netbooks has been around $400.
In our estimate, most of the netbooks have gone as a companion PC (a second PC), and been bought by mature users rather than the first-time users we had in mind.
From a channel perspective, what is interesting is that in several countries we have seen smaller system builders assembling and selling white netbooks, many of them in emerging markets.
Does this mean that netbook building-blocks will be available in India soon?
Several of our ODM partners are already selling netbook kits in other countries, including emerging markets. One reason they may not have brought their building-blocks to India is the lower ASP here. However, if any Intel partner wants to import these building-blocks from the global ODMs, Intel will surely help them to set up or overcome the logistics.
Netbook assembling is much easier than building notebooks, and this could act as a trigger for Intel partners to participate in the netbook growth story with their own brand of netbooks.
During your current visit, what is the sense you got about the impact of the slowdown on the channel business in India?
Over the last several months I have been globetrotting to countries such as Italy, Turkey, Venezuela and Thailand. What I found interesting is that while partners in many of these countries are trying to remain in positive territory, Indian resellers have been talking about an average 15 percent growth rate, which is fantastic. But obviously they are not happy because they were expecting 50 percent growth.
What I also find interesting about Indian partners is that they are always concerned about their future. They are skeptical about their business. I think it is a healthy skepticism. Thinking and planning for the future is critical to success.
What I have been telling most of our partners in India is to focus on solutions and services rather than just box-selling. India is a country of small and medium businesses (SMBs), and there are many businesses with unique customer requirements. For instance, one of our partners has developed a solution for diamond cutting and polishing. Also, partners will have to provide managed services, including remote infrastructure management and cloud services.
The other thing we have been urging our partners to do is to focus on refreshing PCs. Worldwide, there are more than 300 million PCs that are more than three years old. There are 30 million servers using single-core processors.
We have done a ROI study which demonstrates that by refreshing from single-core Xeon servers to quad-core servers, customers can expect a ROI within eight months. Over the past several months we have been trying to ignite the PC refresh market, and we are well on our way to achieve the target for this year.
Intel recently launched Core i5, the mainstream processor based on Nehalem. How have you enabled channels for this new line of processors?
The first desktop processor on the 45nm Nehalem architecture, Core i7, was introduced in the market last year. Core i7 is meant for the high-end workstation and gaming PC market. With Core i5 we are bringing the Nehalem architecture to the mainstream desktop. Core i5 becomes the first sub-$200 processor in Intel’s Nehalem-based desktop lineup. We believe that the channel is going to lead with Core i5. The motherboards cost a lot less. You’ve got fewer chips and chipsets on the board. The bang for the buck is incredible.
In India we started shipping the Core i5 in September, and many of our partners are already selling desktops based on the new processor. As you know, the channels have always led the technology transition compared to large OEMs. For instance, if we look at the cumulative shipments for Core i7 from Q42008, channel volumes have been almost 60 percent more than those of large multinational OEMs. We are expecting the same for Core i5.
What in your view are the factors that will drive growth for channel partners in future?
Growth will come from multiple avenues. India remains an under-penetrated market both from a PC and Internet point of view. The government is targeting 500 million Internet users, 100 million broadband connections and 100 million broadband-enabled devices in the country by 2012. This target is several times the current penetration levels. As government initiatives to drive adoption intensify, there will be huge growth in the demand for PCs, servers and networking equipment. This represents a big opportunity for channel partners.
The other avenue is the SMB space. There are millions of SMBs in India, of which a large chunk still don’t own a PC. They will obviously have to adopt IT sooner rather than later. |