Intel today rolled out an ambitious plan under which the chip giant will begin to provide data hosting, Internet connectivity, application delivery, and Web consulting services to customers. In other words, the Santa Clara, California, company will offer the sort of higher-end consulting services that many Internet service providers now market to customers, through "bit factories" consisting of thousands of servers all over the world.
The well-guarded plan, first detailed at the company's analyst briefing in New York this afternoon, represents yet another element in the company's goal of becoming a communications powerhouse. With PC prices dropping, Intel has set out on a strategy to diversify its business away from being mostly a manufacturer of PC microprocessors, moving, for instance, into networking products and networking chips.
The strategy to provide "Internet data services," the term given by chief executive Craig Barrett, represents a conceptual leap for the company. Rather than manufacture products, Intel will be essentially selling services.
Manufacturing PC microprocessors will still be job No. 1 at Intel, Barrett said. But increasingly, the company will "provide the backbone for anyone that wants to have data" on the Internet, he said. "We are going to build server farms around the world."
"Our intent is simply that data traffic be shipped and shaped by Intel silicon and services," said chairman Andy Grove.
How will this work? Under this new business, Intel will build huge bit factories consisting of thousands of servers, said Gerry Parker, executive vice president of the New Business Group, which will run the program. These servers will then essentially exist to store customer data, handle transactions between businesses, and provide capacity for "peak events," when a business may experience a flood of customer inquiry. Intel consultants will also provide services to help customers design e-commerce sites, he said.
Technically, Intel itself will not be recreating the physical connection. The company will partner will telcos and ISPs, and concentrate on data services. This, however, is a business ISPs are moving into. Intel will also resell connectivity services, Parker indicated.
By some estimates the data housing market will become a $10-to-$12 billion business in a few years, Parker said. "If you add to that some level of service, some application delivery, that adds another $10-to-$12 billion," he said.
A test center with hundreds of servers and an actual production facility that will serve customers is being built now in North America, Parker said. The first tangible extension of this will be a shopping service in tandem with Excite. Facilities will spread to Europe by the end of the year and go worldwide in 2000, he said.
Small sites with up to 2,000 servers should cost around $50 million to build while larger cites with several thousand servers will cost $100 million, Parker said.
Intel's shift into this business seems to some degree to be opportunistic. Intel can move into this market, said Parker, because it has experience in setting up huge factories all over the world. "Copy Exact" is the name of the methodology the company uses to build its chip factories. Analysts have pointed to the method as one key element to the company's success in producing microprocessors.
"We have knowledge about building large-scale global facilities," he said. "By providing content services, we can put people on the Web and then provide them with the applications and connectivity that they need."
In addition, the company next week will formally roll out an Internet Service Provider Program, a sales and training program to ally ISPs to Intel's netorking visions.
The company will also continue its aggressive push into networking chips. "We want to be the largest silicon provider to the telecommuncations industry," said Mark Christiansen, vice president of the network computing group at the company.