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Intel exec on the future of Net, computing

Sean Maloney, a senior vice president of Intel, has had a front-row seat to the Internet revolution. He shares his views on the future with Michael Kanellos.

Sean Maloney, a senior vice president of Intel and director of the Sales and Marketing Group, has been with Intel since 1982, filling a variety of rolls in various countries.

He's had a front-row seat

Sean Maloney
at the Internet revolution. Here he talks about an array of subjects, including how he learned the hard way about the information-spreading power of the Internet, the future of e-commerce, information overload, the rise of browsers, security, and other topics.

Q: Tell us a bit about your background:
Sean Maloney: In the early '80s, I was a kind of incurable college dropout. I was very, very interested in software and ended up working on large mainframe systems when I was in my early 20s. I had written a paper on how you could do some stuff on mainframes using Intel memory technology. And anyway, Intel came and approached me. I started off as one of the very few employees in Europe who did anything on software.

Years and years and years later I found myself working for Andy [Grove]. I was his technical assistant in September of '94. I had been working for him for a couple of years and we then went through one of the most public baptisms of fire in the Internet. [The Pentium bug.] It was an astonishing experience to go through, because you realized that there was this huge medium that was growing very, very rapidly that had the power to get ideas across to large numbers of people very, very quickly. And whether the ideas were wrong or false, it didn't matter. They could be put across very, very quickly. I ended up kind of running that activity for Intel, which ended up with our staff.

Q: When you started looking at the Pentium bug when did you begin to realize that it had legs of its own? At first, was Intel saying: "Well, it's a problem that's not going to affect everybody?"
A: We knew fairly quickly that this was very, very unusual, because we had had plenty of errata [bugs] in processors before. There's always been errata. This is the first time anyone in the consumer space cared about it and this is an exceedingly minor bug. Yet somehow this had become huge and consumerized.

But that was kind of less interesting in a lot of ways than when we realized that the Internet was a critical factor in forming opinions and spreading information. It was when we started seeing journalists and CNN starting to reference stuff seen on Usenet because none of the mass journalists really up to that point had a clue what Usenet was. And they never looked at the Net. Go back four years--there were no browsers. Most journalists quite literally didn't have a PC, let alone have Internet access. And suddenly we realized that this medium was full of opinions, one order, two orders of magnitude faster than any medium had done before.

Our immediate lesson was from that moment onwards, you cannot ignore that medium and that that medium was going to get more and more important at setting opinions. And so we started to behave accordingly.

Q: How pervasive is the Internet now?
A: Most big businesses in almost any industry whatsoever, their information technologies now are completely driven and dominated by Internet issues. I was with a roundtable of CIOs the other day from a sprinkling of America's largest companies--and almost all of them were spending more than 50 percent of their time on Internet-related issues.

@Home stock chart Q: What are some of the main issues? Is it Y2K related?
A: No. The first issue is...I'll give them at random, actually. The first issue is supply line integration, integration backwards and forward, outwards to your customers and backwards to your suppliers.

The second issue is that the top executives of top American companies now start the day by hitting the Net. They get their e-mails and then they want to know what's going on with their competition on the Internet. And so everybody now does general market research, market information, whether you're a CIO, CEO, CFO, on the Internet. Everyone goes off and hits the medium...from 7 till 9, wham, there's all this Net traffic. So it's an opinion setter internally and externally.

Q: Where will most of the development in e-commerce occur?
A: The thing with consumer-related e-commerce is that you hit a natural limit. You are not going to get 100 percent of the people buying books on the Web. We're going to hit a certain behavioral limit, at which point people like going to bookstores or they like browsing in CD stores or they like buying their food in Safeways or whatever. That doesn't apply to business-to-business e-commerce. Business-to-business e-commerce will go to 100 percent, or approximately to 100 percent, because it is just a better, faster, cheaper way of doing business.

The analogy with business-to-business e-commerce is the way business toggled from being telex- and first-class-letter-based to being fax-based in the 1980s. It went 100 percent--people threw away the Telex machines. And what's going to happen in business-to-business is that people will throw away the fax machines. In small businesses, large businesses, any business-to-business commerce it is just better to do it on e-commerce. Will it take three years, four years, five years? I don't know, but it's everywhere--it's in every country in the world. In every geography the same thing is happening.

Q: What will Intel do to facilitate that or to capitalize on that movement?
A: The capitalizing thing is easy, because by and large, you don't do e-commerce without a PC or?some other kind of Internet appliance. That's wonderful, because that gives us an opportunity to sell some other silicon.

From the point-of-view of driving it, I think that you have to be realistic... So then, what's wrong? The first thing is we need better knowledge management. The second is that we need a faster and more robust infrastructure. And I'll come back to the third one in a second.

Let me go back to the first issue, the better knowledge management. There's no question that the most important piece of software development developed since the beginning of the computer is the browser. The browser has, in one blow, opened up computing to the mass market and removed the need for training. And it has given ubiquity of access. But there are many things that need to be improved with how Internet information is handled.

@Home stock chart We are deluged in electronic mail. The world has moved from communication by post to communication by e-mail. And what's happened is that we're ending up moving into complete information overload, and we're drowning.

Q: Traffic has geometrically expanded, it seems like.
A: Yeah, with no apparent sign of stopping. And so people are moving to the point where it's absolutely common in our industry for people just to do mass deletes on email. The outgoing side, how I go out and get information, is also nowhere near where it needs to be. When I go do a search for example, the information I get back from that search is 95 percent inappropriate, it's overwhelming frequently, and unless I understand Boolean operators, which most people don't, I'm going to get flooded with stuff.

Q: What about infrastructure?
A: We're very excited about VPN [Virtual Private Networks]. If you look at the voice infrastructure now, the voice infrastructure and the data infrastructure--once you get beyond the local access point, it's the same. Voice calls are ending up going over pretty much the same backbones. Everybody is moving towards using the IP infrastructure for everything. And so the idea of VPN is that rather than making long-distance connections, you can make local hops, and you'll get a better quality of service by doing that.

Q: How much money can people save--20, 40, 50 percent--if they switch from ordinary phone usage to a VPN?
A: Yeah, and higher. I could probably go off and dig up some examples for you if you want. But I'd say very substantial?You know, we bought Shiva a few months ago. Shiva is a VPN specialist company.

Q: In layman's terms, the advantage of VPN is that it takes you off the telecommunication lines and puts you on the IP Internet structure, correct?
A: That's correct, plus it also gives to you better-than DES encryption. So you have security of transmission?I think it's rather drowned in the public eye at the moment because of the Year 2000 issues, but when you see what Melissa did in the space of 24-48 hours or that New York Times hack, one of these days fairly soon there is going to be a successful big under-the-water body blow against someone's Internet site. And the way that you protect from that is you do some non-trivial encryption. Really, anybody who is doing 48-bit encryption has to recognize that that stuff can be broken on a Pentium II-class PC very, very, very quickly. Recent German case law or consumer case law is saying anything less than 128-bit is basically lack of diligence by the company.

Q: A lot of analysts recently have pointed out that communications could be the next big thing for Intel. It could even dwarf the growth of processors. How will this whole networking and communication business begin to manifest itself as a substantial part of the Intel revenues and profits?
A: The PC long ceased really being a computational device and really became a communications device. And obviously the Internet is what's speeding that up a hundred fold. PCs are primarily used for communications now. And so everything to do with Intel is now centered around the Internet and communications. Our client side development is really centered around optimizing the Internet experience. The server side stuff we do--the Pentium II Xeon and Pentium III Xeon, all of the development architectural work and planning is all based around how do you make better Internet servers. The whole server industry is going to be consumed by Internet issues within two years or three years.

See special report: 
When worlds collide Q: This "PC is dead" issue: Do you see the PC declining in future years as a result of cell phones, Internet access devices, and the like?
A: No, I don't. I think that what the computer industry has with the Internet is an almost infinite demand driver. You can make a case five years ago that every person should have a PC. You could make a case now that every room and every car should have some form or method of accessing the Internet. So the potential requirement for connectivity devices or computers has gone up dramatically as a consequence of the Internet.

It's not all going to get serviced by PCs...I think you're going to see more and more simple messaging devices that interface to the Internet. You're probably going to start to see some very stripped down browser appliances over the next year or so.

But I don't see them supplanting PCs, because the price of the PC has come down rapidly, the performance has carried on going through the roof, and there are now hundreds of millions of people who are used to using them and like using them.

Q: What does this imply for Intel's business model? A number of these devices are going to cost less, so you will have to make more low-cost processors.
A: I guess I would worry if we were anywhere near saturation. And as far as Internet access is concerned, we're only scratching the surface?I consider them a kind of upside potential. It would be very nice, for example, to have an Internet access device in the kitchen.

Q: The "Intellifridge"
A: Right. Let's say a screen that was in the kitchen where I could go and hit "," or at the same time I could look at my mail or I could look at my telephone messages. Am I going to want a keyboard and a mouse on that? No, not really, because I might end up tipping stuff on it. So a conventional PC in the kitchen is probably going to be a fairly unusual device. You're more likely to have just simple Web access devices there.

On the other hand, in other rooms in the house I'm absolutely going to want a full-function PC. So I think that the market potential is large enough that you want to keep a very open mind about what these access devices would be.