Please Scroll Down to See Forums Below 
Good Friday evening, everyone. Chris Angelini here. Earlier in the week I exchanged emails with Jon Bach, president of Puget Systems, who had something to say about the recent EU ruling against Intel.
Having gone from the hardware enthusiast world to the channel world and back to the enthusiast world here at Tom's Hardware, much of what he said resonated with me. I won't steal any of his thunder, but I present the following column to you for discussion over the weekend.
System builders, feel free to chime in with your own thoughts. I know for a fact that Intel puts a lot of effort into its channel efforts, helping small system builders who would otherwise not be able to compete against the tier-ones do just that through programs like ESAA, Cluster-Ready, and Mobile Authorized Integrator, whereby it's possible to build your own notebooks, servers, and desktops on the shoulders of a grander effort. What is AMD doing to make its own products as attractive in the channel? What's the company doing to help SIs get AMD technology into notebooks? How is it leveraging the strength of its Dragon platform to help resellers build better machines?
But I'm getting ahead of myself here. Take it away, Jon.
Introduction
Last week, the European Union fined Intel a record $1.45 billion dollars, citing abuse of its dominant position in the market by giving rebates to computer manufacturers in exchange for exclusive use of Intel CPUs. While AMD celebrated the victory by showing the EU flag on its home page (Ed.: it has since been taken down), Intel is talking of plans to appeal.
We're left to wonder what this ruling will change in the industry. Will it strengthen AMD's market share with system builders and enthusiasts? As the president of Puget Systems, a boutique system builder in Seattle, WA, I'm not here to talk about the merits of competition, or what rebates are/are not ethical for Intel to offer. I'm here to talk about system builders, and why we use Intel CPUs so heavily.
Of course, smaller system builders have not received any payments from Intel to exclusively sell Intel CPUs. This is about sales volume, and that battle is going to be fought with the big OEMs. Even so, I should start by making it clear that even smaller system builders do have incentives to sell Intel products today. Intel has a channel partner program that awards marketing dollars for every Intel purchase. AMD, to my knowledge, does not. If they do, I don't know about it, and that would be an entirely different kind of marketing failure. Either way, I am surprised at how many people have confused these rebates with those the EU is fining Intel over. Rebates for sales volume are common in the industry. Paying companies to not use your competitors' products is where you cross the line to unethical.
But even these legal rebates are not why many system builders focus on Intel CPUs. In fact, in the case of Puget, we have buckets and buckets of these marketing dollars saved up because we haven't gotten around to spending them. With a limited amount of time, and countless other things to do, we just generally focus on the product first and advertising second. So why, then, did Intel receive 93.5% of our CPU sales in 2008? This number is quite typical with system builders. The way I see it, there are three major reasons:
1) Customers are not asking for AMD CPUs
I'm not talking about which CPU is faster, or which has better value. I'm talking about customer demand, which is a large part of shaping a system builder's product line. If we focused on the value segment, as some builders do, I'm sure we'd see more demand for AMD CPUs. As a boutique outfit that focuses primarily on high-performance, highly reliable computers, we simply see larger demand for Intel CPUs. We have always listed both brands; AMD just isn't selling. Could we do a better job keeping up to date with AMD's product line or with giving them exposure on our Web site? Absolutely. And if our customers wanted it, we would. If customers are asking for AMD product, there isn't a system builder out there that will turn down sales in exchange for Intel rebates.
I will say that server CPUs are an exception. AMD has done an excellent job of making its server line more "approachable" than Intel. Whereas Xeon MP processors are incredibly expensive (and are not as readily available in the channel), AMD has made it easy for system builders
to provide dual- and quad-socket servers and workstations.
2) AMD is not getting itself out in front of system builders
While we follow customer demand in general, there are also times where system builders use their expertise to sell what is best for the consumer, even when that bucks the general trend. My views on RAID are a good example. If AMD had a CPU that was compelling enough, you bet that we'd be pushing it in front of our customers. But I have to admit that I know very little about AMD's current processor performance.
Back in the day, this was very different. I could tell you all about the K6 line and its performance attributes. But after reading independant reviews of the Phenom and Phenom II platforms, and after years of near-zero demand from our customers, I have simply fallen out of touch. Our AMD rep does send us the occasional sample product, and we appreciate that. But while Intel is visiting us in person once a quarter, AMD has yet to send anyone out to us, ever. This face time is very important, as it captures the attention of the system builder and allows the introduction of numerous products and ideas. System builders are a massive sales force for any manufacturer. They work directly with end users, and as such, play a large role in shaping brand perceptions. AMD really needs to connect with system builders in a way it has not yet managed to do.
3) AMD CPUs are harder for us to ship and support
This is a big deal, and my most important point. System builders are apprehensive about shipping systems with AMD CPUs. In our case, we focus on the high-performance market, and we're known in the industry for our quiet computers. This means we use large heatsinks, and large heatsinks are murder when shipping a computer with an AMD CPU.
The bottom line is that AMD CPUs are far more likely to be unseated during shipping. When the package in transit hits a large bump, the mounts of the heatsink can flex, and the heatsink pulls away from the motherboard. The thermal paste acts to provide suction, so the heatink pulls the processor with it. What's worse, if the bump is large enough, the CPU can pull completely out of socket. When the heatsink retention pulls everything back together, it mashes the CPU pins, effectively destroying the CPU in most cases. The solution is to use a smaller, more sturdy heatsink, which limits the product we can offer.
With the innovation of the LGA socket, Intel revolutionized CPU retention. How many Intel LGA CPUs have we seen come unseated during shipping? Zero. I can tell you that we have made more than one product line decision based on this. There is nothing that kills customer confidence faster than a DOA computer, and it is even worse when we have to foot the bill (AMD does not grant RMAs for physical damage).
Where Do We Go From Here?
Notice that at no point in this column did I talk about performance of AMD versus Intel. Debate over performance and value belongs to another topic. What I'm driving toward are some of the ways that Intel is able to outsell AMD, one of which is providing system builders with the tools they need to confidently sell product. I very much value a free market and open competition, but I don't expect the EU fines alone to change anything with either computer enthusiasts piecing their own machines together or system builders handling the integration process.
What the EU ruling could do is get AMD in front of more distribution outlets, increasing their channel exposure. This exposure is only worthwhile if AMD has an effective strategy for leveraging it. Ultimately it is the connection with partners that AMD needs to improve. AMD has a good message, but they're not utilizing their partners very effectively to get this message to consumers. This relationship problem is also hindering the flow of valuable feedback to AMD, which slows improvement in some areas (such as CPU and heatsink retention).
If the EU ruling does bring AMD additional outlets, I hope the opportunity will be used to connect with those partners, learn more about their consumers, and strengthen themselves in these areas I discussed. The better AMD competes, the more everyone wins.
Intel, AMD, And Reseller Success: A System Builder Weighs In : Change Is In The Air? - Review Tom's Hardware
Having gone from the hardware enthusiast world to the channel world and back to the enthusiast world here at Tom's Hardware, much of what he said resonated with me. I won't steal any of his thunder, but I present the following column to you for discussion over the weekend.
System builders, feel free to chime in with your own thoughts. I know for a fact that Intel puts a lot of effort into its channel efforts, helping small system builders who would otherwise not be able to compete against the tier-ones do just that through programs like ESAA, Cluster-Ready, and Mobile Authorized Integrator, whereby it's possible to build your own notebooks, servers, and desktops on the shoulders of a grander effort. What is AMD doing to make its own products as attractive in the channel? What's the company doing to help SIs get AMD technology into notebooks? How is it leveraging the strength of its Dragon platform to help resellers build better machines?
But I'm getting ahead of myself here. Take it away, Jon.
Introduction
Last week, the European Union fined Intel a record $1.45 billion dollars, citing abuse of its dominant position in the market by giving rebates to computer manufacturers in exchange for exclusive use of Intel CPUs. While AMD celebrated the victory by showing the EU flag on its home page (Ed.: it has since been taken down), Intel is talking of plans to appeal.
We're left to wonder what this ruling will change in the industry. Will it strengthen AMD's market share with system builders and enthusiasts? As the president of Puget Systems, a boutique system builder in Seattle, WA, I'm not here to talk about the merits of competition, or what rebates are/are not ethical for Intel to offer. I'm here to talk about system builders, and why we use Intel CPUs so heavily.
Of course, smaller system builders have not received any payments from Intel to exclusively sell Intel CPUs. This is about sales volume, and that battle is going to be fought with the big OEMs. Even so, I should start by making it clear that even smaller system builders do have incentives to sell Intel products today. Intel has a channel partner program that awards marketing dollars for every Intel purchase. AMD, to my knowledge, does not. If they do, I don't know about it, and that would be an entirely different kind of marketing failure. Either way, I am surprised at how many people have confused these rebates with those the EU is fining Intel over. Rebates for sales volume are common in the industry. Paying companies to not use your competitors' products is where you cross the line to unethical.
But even these legal rebates are not why many system builders focus on Intel CPUs. In fact, in the case of Puget, we have buckets and buckets of these marketing dollars saved up because we haven't gotten around to spending them. With a limited amount of time, and countless other things to do, we just generally focus on the product first and advertising second. So why, then, did Intel receive 93.5% of our CPU sales in 2008? This number is quite typical with system builders. The way I see it, there are three major reasons:
1) Customers are not asking for AMD CPUs
I'm not talking about which CPU is faster, or which has better value. I'm talking about customer demand, which is a large part of shaping a system builder's product line. If we focused on the value segment, as some builders do, I'm sure we'd see more demand for AMD CPUs. As a boutique outfit that focuses primarily on high-performance, highly reliable computers, we simply see larger demand for Intel CPUs. We have always listed both brands; AMD just isn't selling. Could we do a better job keeping up to date with AMD's product line or with giving them exposure on our Web site? Absolutely. And if our customers wanted it, we would. If customers are asking for AMD product, there isn't a system builder out there that will turn down sales in exchange for Intel rebates.
I will say that server CPUs are an exception. AMD has done an excellent job of making its server line more "approachable" than Intel. Whereas Xeon MP processors are incredibly expensive (and are not as readily available in the channel), AMD has made it easy for system builders
to provide dual- and quad-socket servers and workstations.
2) AMD is not getting itself out in front of system builders
While we follow customer demand in general, there are also times where system builders use their expertise to sell what is best for the consumer, even when that bucks the general trend. My views on RAID are a good example. If AMD had a CPU that was compelling enough, you bet that we'd be pushing it in front of our customers. But I have to admit that I know very little about AMD's current processor performance.
Back in the day, this was very different. I could tell you all about the K6 line and its performance attributes. But after reading independant reviews of the Phenom and Phenom II platforms, and after years of near-zero demand from our customers, I have simply fallen out of touch. Our AMD rep does send us the occasional sample product, and we appreciate that. But while Intel is visiting us in person once a quarter, AMD has yet to send anyone out to us, ever. This face time is very important, as it captures the attention of the system builder and allows the introduction of numerous products and ideas. System builders are a massive sales force for any manufacturer. They work directly with end users, and as such, play a large role in shaping brand perceptions. AMD really needs to connect with system builders in a way it has not yet managed to do.
3) AMD CPUs are harder for us to ship and support
This is a big deal, and my most important point. System builders are apprehensive about shipping systems with AMD CPUs. In our case, we focus on the high-performance market, and we're known in the industry for our quiet computers. This means we use large heatsinks, and large heatsinks are murder when shipping a computer with an AMD CPU.
The bottom line is that AMD CPUs are far more likely to be unseated during shipping. When the package in transit hits a large bump, the mounts of the heatsink can flex, and the heatsink pulls away from the motherboard. The thermal paste acts to provide suction, so the heatink pulls the processor with it. What's worse, if the bump is large enough, the CPU can pull completely out of socket. When the heatsink retention pulls everything back together, it mashes the CPU pins, effectively destroying the CPU in most cases. The solution is to use a smaller, more sturdy heatsink, which limits the product we can offer.
With the innovation of the LGA socket, Intel revolutionized CPU retention. How many Intel LGA CPUs have we seen come unseated during shipping? Zero. I can tell you that we have made more than one product line decision based on this. There is nothing that kills customer confidence faster than a DOA computer, and it is even worse when we have to foot the bill (AMD does not grant RMAs for physical damage).
Where Do We Go From Here?
Notice that at no point in this column did I talk about performance of AMD versus Intel. Debate over performance and value belongs to another topic. What I'm driving toward are some of the ways that Intel is able to outsell AMD, one of which is providing system builders with the tools they need to confidently sell product. I very much value a free market and open competition, but I don't expect the EU fines alone to change anything with either computer enthusiasts piecing their own machines together or system builders handling the integration process.
What the EU ruling could do is get AMD in front of more distribution outlets, increasing their channel exposure. This exposure is only worthwhile if AMD has an effective strategy for leveraging it. Ultimately it is the connection with partners that AMD needs to improve. AMD has a good message, but they're not utilizing their partners very effectively to get this message to consumers. This relationship problem is also hindering the flow of valuable feedback to AMD, which slows improvement in some areas (such as CPU and heatsink retention).
If the EU ruling does bring AMD additional outlets, I hope the opportunity will be used to connect with those partners, learn more about their consumers, and strengthen themselves in these areas I discussed. The better AMD competes, the more everyone wins.
Intel, AMD, And Reseller Success: A System Builder Weighs In : Change Is In The Air? - Review Tom's Hardware
