Feeds

Intel CEO confronts OEM grumbling around direct chip sales

The Google Conundrum

The essential guide to IT transformation

Along similar but perhaps more controversial lines, Intel designs some motherboards for Google, adhering to those same low-power chip, lower-end memory and lower-end disk boundaries. (Otellini also serves on Google's board, which could prompt suggestions that the search company receives unique treatment.)

"Google has been an Intel customer since day one," Otellini said. "They bought through distribution. They bought from a local board manufacturer in Mountain View. And now they buy them directly from us because they are a large enough customer.

"Why in the world should we not sell to them?".

On one hand, Otellini makes, we think, the right point. Google and other independent-minded large service providers have shown no interest in having a server vendor hold their hands. They posses the technical know-how and resolve to tackle data centers on their own, and bringing in a company such as HP, Dell or IBM just ads a layer of unwanted baggage - and cost. A company such as Intel provides the most direct route to satisfaction and a productive business.

Just doing our job

Still, the strategy seems rather risky for Intel during more competitive times. HP, IBM and eventually even Dell all brought AMD inside when Opteron stood as the dominant x86 server processor on the market. Should AMD get its act together again, these server vendors may remember losing out to Intel on a couple of direct deals and decide to angle more of their purchases and designs toward Opteron.

"HP or Dell act in their own self-interest," Otellini said. "They also are going to buy the best products they can at the lowest prices they can. Our job is to try and meet those needs, just like our competition's job is to try and meet those needs."

There's some room for argument over whether a company such as Google or another service provider counts as a potential customer or a competitor to a server vendor. Otellini, however, contended that the cases we presented would have the direct purchasers stand as competitors. In such cases, it's not Intel's job to figure out when a "competitor" of a server vendor deserves chips. It's only Intel's job to the sell chips, Otellini said.

"If a company decides to be in a certain business, is it another company's job to judge that?" he said. "Yes or no? I don't think so."

You have to wonder if questions around Intel's direct business will grow in the coming years should the mega data center and cloud computing build out continue as some pundits predict. Companies such as Google, Amazon.com and Microsoft have started stepping on the toes of HP, IBM, Sun and Dell by offering access to processing power, storage and software online. Should these companies fell that the all-out model used by Google makes the most economic sense, they may turn straight to Intel and AMD rather than server suppliers.

While you can understand the server and PC maker's gripes around Intel's direct model, the vendors seem to gloss over the fact that Intel's removal from the direct market would only result in AMD trying to snatch up the available business. And so the difficult game of placating customers/competitors will continue for Otellini. We'll be sure to send him a balancing bar to help navigate the tightrope and perhaps some get well soon cards for the server crowd. ®

Boost IT visibility and business value

More from The Register

next story
Pay to play: The hidden cost of software defined everything
Enter credit card details if you want that system you bought to actually be useful
Shoot-em-up: Sony Online Entertainment hit by 'large scale DDoS attack'
Games disrupted as firm struggles to control network
HP busts out new ProLiant Gen9 servers
Think those are cool? Wait till you get a load of our racks
Silicon Valley jolted by magnitude 6.1 quake – its biggest in 25 years
Did the earth move for you at VMworld – oh, OK. It just did. A lot
VMware's high-wire balancing act: EVO might drag us ALL down
Get it right, EMC, or there'll be STORAGE CIVIL WAR. Mark my words
Forrester says it's time to give up on physical storage arrays
The physical/virtual storage tipping point may just have arrived
prev story

Whitepapers

Top 10 endpoint backup mistakes
Avoid the ten endpoint backup mistakes to ensure that your critical corporate data is protected and end user productivity is improved.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Backing up distributed data
Eliminating the redundant use of bandwidth and storage capacity and application consolidation in the modern data center.
The essential guide to IT transformation
ServiceNow discusses three IT transformations that can help CIOs automate IT services to transform IT and the enterprise
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.