Roger Benson: “We think the time is ripe for corporate refresh”

Intel’s Benelux country manager explains why IT decision makers should […]

September 15, 2010

Intel’s Benelux country manager explains why IT decision makers should now consider investing asap again, in the interest of their organization’s competitiveness.

Roger Benson tours Luxembourg and meets the local press as every year. His 2010 message is clear: if 2009 was a challenging year for Intel and the IT industry, business PC demand and consumption will grow again this year. It is now the time for Luxembourg companies to refresh their data centers.

 Roger Benson, how would you define 2009 and 2010 from the IT point of view?
We saw a drop in Q4 2008 in terms of IT spending. In 2009 we faced what I would call a ‘depressed growth rate’, compared to 2008. So it was flat or in some cases down in many markets, as the finance management and many companies often took control of spending in many parts of the business. IT was one of those affected segments.
Regarding 2010, we start to see an optic, however it still remains a longer-term bigger acceleration that we anticipate at some point. And we know that IT managers in many cases want to refresh. And that they are looking for the arguments enabling them to position to their CEOs and CFOs on why doing it now.

Hence, we help them making their business more competitive. And in many cases it can actually save them money by investing now, instead of waiting. For instance you have a lot of support costs that come at a result of maintaining an ageing data center or an ageing fleet of client PCs. And those support costs really start to grow significantly after the third, fourth or fifth year of use.

What is the amount of these support costs for organizations?

A survey released in 2009 by Wipro PSA, on cost of money spent on support in year one, two, three and four show that companies are spending 375 dollars more in Y4 than in Y1. The study was conducted through interviews of managers from over hundreds firms across Europe and North America, in 15 different sectors.

Does corporate refreshment also applies to data centers?

In data centers you have another factor, which is energy consumption from a cost point of view. These facilities hold corporate databases and are business information centers. When you put a lot of information together and it takes space, you are managing the density of your servers in your buildings.

Hence, you want to make sure that these edifices are energy efficient from a formal management point of view. You want to make sure that you have your energy costs under control. This year we launched a couple of Xeon products, such as the Xeon 5600 and the Dual Processor DP as well as the Xeon MP with a for 4 way-systems in a bulk.

What do these latest products concretely offer?
As a comparison, data centers that were implemented five years ago include 15 servers. Now with the Xeon 5600 one single server does the same work, get the same job done than 15 five year-old servers. One saves up to 93% energy consumption as a result of that consolidation. So that is one choice. Now the other choice is to replace the 15 old servers with 15 new ones and make a straight forwards-refresh. In this case you will give yourself a 15 times-higher performance. And you still save on energy costs by around 8 percent.
It is then about cost and space savings…
Hence, both alternatives are economically very attractive. And will give you a dramatic energy and space savings consolidation as well as a dramatic performance gain.
IT managers can trade off between those two vectors and position to their CFO and CEO how they can help their business to be more competitive as well as saving money. This is the primarily message: we think the time is ripe for corporate refresh!
Which clients and sectors do you address in Luxembourg with this message?
We don’t isolate anyone. As a matter of fact we saw a sharp drop in the finance sector at the end of 2008 and banks were the first to face it. So it was a very quiet period as far finance IT is concerned in 2009. In 2010 it started to pick up again, as many banks have implemented new business and new financing strategies: it is good for the economy and it is good for the IT industry.
How do you position more specifically towards the finance industry?
We recognize that Luxembourg is tightly integrated with the finance sector. And we know that many of these finance organizations are refreshing both their clients and services right now. And those that haven’t begun so it is in their competitive interest to invest sooner rather than later.
Financial transactions need to be secured and to be fast: these two criteria are essential. Therefore halving out the technology directly impacts your competitiveness in the finance sector.

Do you think that these organizations are ready to take the step?
Indeed we are happy to see that it started, though we think that there is some more distance to go in terms of really driving that refresh. The other point we see is the companies’ decision to transfer their European headquarters to Luxembourg. Some place their data centers here as well. Because of either tax rule or Internet content download, it is attractive for firms to have their data centers here, where there is a big data center community.

Are you considering as well to move your European Headquarter to Luxembourg?

I think that you have to look at Intel’s history. Our group counts already two European HQs. Historically, we have been split between Intel’s Field Sales Offices in Swindon (UK) and Munich (Germany). It made sense to settle there because of customers’ proximity, airports access… We also have a logistics hub in Amsterdam. Could we change those? Potentially yes. But I would not say that we considered moving up recently. We try to look at the efficiency of our sites and what I have seen of our sites strategy there is not anything on our horizon planned. So I would say it is not an option.

What does Luxembourg represent for Intel’s activities compared to other countries?

All of our customers and all of the countries we cover are important. We don’t regard any more particularly than the others. We know that there are some centers of competence and excellence regarding certain sectors, given the economic base and the region.
So Luxembourg is important for the finance sector point of view. Luxembourg is important for being a hub for large data centers and Internet download and transactions. So that is one of the prospective we view of the Grand Duchy as a value to Intel. We also regard Luxembourg along with the Benelux and Nordic countries that my team and I support.

How do Luxembourg’s customers differentiate compared to the other markets?

The markets we are covering are the most technologically advanced regions for a consumer usage point of view. We have there a high degree of Internet penetration, PC ownership, not only per households by also per capita. So you kind a get an early adopter dynamic in these countries. Hence we are always keen to try our latest released technology both with consumers and IT decision makers here in Luxembourg.
We are seeing an interest in our latest core products and consumer core i5 processor with Turbo Boost technology and IT. On the client side, vPro is our platform for business customers that goes with mobile and desktop, so you can see PC with corei5 processors and vpro technology. So that gives you a whole array of advantages that businesses need. And indeed we expect Luxembourg customers to be very interested in these because of their inherent energy efficiency, security and manageability.

How did “depressed growth rate” of IT markets affect Intel’s activities and results?

Overall, 2009 was a challenging year for Intel, and the financial sector was a piece of that. And it was not only finance; many economies slowed down. What we found out was that enterprise spending was flat to down, consumers continued spending as well as the public sector, as governments wanted to provide stimulus to keep the economy going and growing.
So finance was not a very limiting factor for Intel. And this year, we have a very strong first half. We posted a worldwide result of 10.8 billion dollars in Q2, with 67% gross margin. First semester 2010 for Intel Benelux was consistent with the strong growth dynamics.

How do you see the coming years?
Furthermore and regarding the whole IT industry, Gartner sees a global consumption growth for 2010 of 19.2 percent. If you look at Western Europe more specifically it predicts a 19.6 percent-growth for Q2 this year versus Q2 last year. It means that demand is still out there. It has until now been driven more by consumers than businesses. Business has however started but there is still a way to go for us in terms of supporting these business clients and on data center refresh. That is why we are so strong with that message.

How will the purchase of McAfee by Intel impact and reinforce your presence and business in the Benelux and in Luxembourg?
There will be no impacts for the moment, not only in Luxembourg but also anywhere. Actually the acquisition is subject to the regulatory approval. Our application for it we won’t get any answer until some time the first quarter of 2011. Until the go signal the whole project remains static at some point. 

What will you do then?
We still have some ideas of what we expect to happen afterwards. We can only say that with McAfee, we intend to run an independent business within the Intel family. We have a precedent for this with the takeover a year ago of Wind River, a software company. Their focus is on operating systems through embedded applications. Which is a little bit different to McAfee as corporate customers are using their security software solutions for enterprises IT. But we have shown that we can make an acquisition and preserve the goodness of what this company has, while still being part of Intel’s family.

Interview by Marc Auxenfants

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