Lenovo Intros Aggressive Channel Server Rebates In Drive For Market Share

Lenovo is unleashing a new pack of rebates especially sweetened for partners that win new customers as it aggressively advances a growth strategy centered on gobbling up market share.

The Enterprise Rebate Program focuses on Lenovo's enterprise server and storage products, and it can be stacked with other partner programs. For example, a partner that sells 10 System X3550s to a new customer at $2,089 each would get a $522 rebate under the new program, $3,133 from the new customer bonus program and $100 per unit in current product rebates, for a total rebate of $4,655.

"That did catch my eye," said Lou Giovanetti, co-founder of CPU Sales and Service, a Waltham, Mass.-based Lenovo partner. "These guys are going for the jugular."

[Related: Lenovo/StorMagic Take Aim At Dell, HP, Cisco In Drive To Be 'Lowest Cost Provider' In Hyper-Converged]

"It doesn't surprise me," Joe Lore, sales director at Lenovo partner Sunnytech. "They want to be No. 1, and they're working their way toward it."

Lenovo, which posted a 51 percent first-quarter earnings nosedive because of soft demand for PCs and smartphones, has made no secret of its desire to beat other server vendors on price. Lenovo's first-quarter worldwide server systems revenue was about $965 million, good for market share of about 7.5 percent.

"We're going to drive down our cost structure to be the lowest-cost provider in the marketplace versus Dell, versus HP, versus Cisco," Brian Hamel, Lenovo vice president and general manager, North America Enterprise Business Group, told CRN earlier this month.

Lenovo launched the new rebates about a week ago to complement its existing rebate structure, and the company says it has no plans to end the new program anytime soon.

The new rebates cover 1P/2P racks and towers, high-end racks, blade systems, dense systems, storage solutions and Lenovo's networking portfolio.

"They're aggressive, and it allows us to utilize the channel to provide aggressive pricing to an end user. We can use the rebate structure to provide the end user a discount," Lenovo channel chief Sammy Kinlaw told CRN. "We have to prove ourselves in the marketplace with channel partners just like we did with PCs. We have to show the value, the right product, the right discount structure, we have to allow it to be efficient and profitable. We have to hit it right."

Kinlaw said the ramp-up in Lenovo's rebate structure comes as Lenovo servers gain traction in the market. The company is ready, Kinlaw said, to capitalize on the market's growing acceptance of x86 platforms. Lenovo acquired IBM's x86 server business late last year, and the China-based PC giant said it would be able to leverage the size and supply chain of its PC business to drive costs down in the server division.

A recent customer satisfaction report from research firm TBR Inc. said Lenovo servers outpaced Dell's and HP's offerings.

"We're finally to a point where some of the efficiencies we've been promising are coming to fruition," Kinlaw said. "The components of a PC and the components of a server are the same, or manufactured by the same OEM. We leverage that to bend down the cost curve of servers."

"People are comfortable enough with x86 architecture that they'll buy it from the Web," Kinlaw said. "If you don't think it's already commoditized, you're wrong. The midmarket is moving to hyper-converged, which runs on reference architecture, it's standardized. We already compete in that world. That doesn't lessen the fact of how important that purchase is. We know an end user doesn't take that decision lightly."

Giovanetti said the Lenovo server sales proposition is attractive to customers, but it's important that channel partners get the timing right.

The rebates, Giovanetti said, allow partners to offer customers "an incentive to dump what they have."

"You can't be discouraged," he said. "You just have to keep chipping away. Eventually, they're going to have to listen, or take a look. That hard drive just died again, and you catch them. It's timing. If it works, they don't touch it, but we've had leads where [the customer has] had Dell for the past seven to eight years, and the new road map isn't falling into what they want to do, and now they're looking for someone else, and they're going to go Lenovo, and I didn't have to sell that."

PUBLISHED AUG. 28, 2015

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