Intel today began a trial of “softSKUing”, technology that allows silicon upgrades to be turned on by software after the chip has left the factory. Acer’s Gateway division is providing the consumer desktop trial product and 280 Best Buy stores in the U. S. provide the consumer market testbed.
For a $50 manufacturer’s suggested retail price (split by Intel, Acer, and Best Buy), a consumer buying the low-end Pentium desktop used in the trial gets an upgrade in cache memory and Hyper-Threading that boost performance by about 20%, according to Intel. The upgrade is done online using an unlock code provided on a gift-card-like point-of-sale transaction card. Either the consumer at home or Best Buy’s geek squad services can activate the upgrade card and perform the soft-upgrade in minutes. The upgrade potential could be easily extended to other Intel desktop and laptop processors, so the pilot is more a marketing trial than a technology test.
The idea of up-selling is not new. Auto dealers advertise stripped cars at low prices every weekend to get customers to come in the door. We all know what happens next — the up-sell. Until now, PCs were no different than cars on the lot. You bought what the factory made and the dealer had on the shelf. For PC retailers like Best Buy, and small systems builders overseas, having the wrong PC mix on the shelf has numerous negative consequences, starting with the need to stock many different stock-keeping units (SKU’s) at a comparatively high inventory cost.
The softSKU trial will see whether, say, one in eight consumers can be sold an upgrade on the spot. If the trial is successful, and I think it will be, the way we buy and use PCs may change dramatically this decade.
From a technology and marketing standpoint, Intel’s softSKUing hardware upgrades program is a mash-up of mainframe upgrades and the Apple iTunes store. Hear me out. For decades, IBM mainframe customers have been able to call up IBM and turn on processors to boost throughput during peak periods such as this week, the first week of a quarter when quarter-end accounting and reporting is done. The iTunes store allows consumers to buy music or rent videos.
Where Intel could easily take the current pilot program this decade is to allow consumers to go online and get a permanent upgrade (e.g., buy music at iTunes) or even rent a performance upgrade for a few hours or days (e.g., rent videos). Would you rent a CPU upgrade for, say, $4 an evening to beat your gaming friends at World of Warcraft? Or unlock your laptop for a few weeks during budget season when big spreadsheets are the norm? Thus, both consumer and enterprise PCs could benefit from the ability to upgrade-on-demand.
There’s a market opportunity here to turn the now one-time sale of a processor into a lifecycle revenue stream, newly found money for Intel and its partners.
Fact is, most processor chips are born today able to run at high-end performance levels. Most get performance-reduced at the factory to meet market demands for a wide range of price and performance profiles. So the potential exists for Intel to unlock these more-capable chips to do more at little technology cost. The technology to securely deliver upgrades will be field-tested in the current trial. So, I guess all we need to talk about is the price of the upgrade?
The blogosphere absolutely hates the idea of buying a processor with unlockable potential performance upgrades. But these ranting people have little to say about the electronic speed governor commonly found on most automobiles. I reject the Internet mob’s argument that Intel should sell a $1,000 worth of extreme microprocessor performance for $100. That’s a sure way to kill the golden goose of technology innovation.
So, if the Intel pilot is successful, look for a broad range of upgrade opportunities with the 2012 generation of desktop and laptop processors. Whether Intel and its partners create a lifecycle revenue stream model built on soft upgrades will unfold later in the decade, or not.