Lenovo Eyes More Server Growth Through VARs

While Lenovo gains share in the PC space in North America, it's also making gains in the rack server space and plans to begin offering EMC storage products through VARs next year, said Kevin Nelson, executive director of Lenovo's Enterprise Systems Group.

The company's server revenue growth through the channel increased 76 percent from fiscal 2012 to fiscal 2013 and saw its channel market share increase from 1 percent to 6 percent from January 2012 to January 2013, Nelson said, citing numbers from The NPD Group.

"We grew faster than Cisco [Systems], and they get all the love. Our rack business is going really well. It took longer to get going, but this February and March are the two best months ever, and I have full expectation for even more share as exit quarter," Nelson said from Synnex's Varnex conference in Orlando on Tuesday.

[Related: PC-Related Stocks Fall After Worst-Ever Q1 Shipment Reports ]

Sponsored post

Only a small percentage of Varnex members sell Lenovo servers, according to a show of hands in the air when asked by Nelson. The company aims to change that, quickly. At the show, Lenovo offered Varnex members attending the conference the opportunity to purchase one ThinkServer RD630 for $299, more than 90 percent off the suggested retail price.

"Here's the deal. I'm a startup, but I'm a startup within the first or second largest PC manufacturer in the world, with an incredible amount of backing," Nelson said. "We have had a strong server business in China for the last 20 years. We have some of fastest servers ever, some of the quietest servers ever," Nelson said.

Kris Shoemaker, a marketing and development executive at Eleven Consulting, a Waterloo, Ontario-based solution provider, said the $299 special perked up the ears of every VAR in the room. "We are a value-added reseller, so if there's some value we can add by bringing something new or interesting to the table, then we're going to do it," he said. "If we evaluate the product, let's call it a seed product at that price, if it's something we can plug into our offerings, then it makes sense [to sell it]."

Trevor Brown, business manager of TronicQuest Technologies in Miami, had a conversation at Varnex with a VAR who received an award for selling the most Lenovo servers, which convinced him to further study the products. "He said they're pretty good. We haven't started selling them, but it's something we're definitely looking into," he said.

Mark Ashe, computer manager at Mega Computers, a Portage la Prairie, Manitoba-based solution provider, currently sells Lenovo servers, which he said have at least one big advantage over the competition.

"They're quiet. That's a good thing. [If] you stand behind three or four or six servers running full bore, it's going to eat at you. But they're quiet," Ashe said. "We like the service behind them, and it's just getting better. Every time we go see them, they have something new for us."

NEXT: Leveraging EMC Relationship To Sell Servers

Business Continuity Technologies, a Las Vegas-based solution provider, started selling Lenovo servers just a few months ago but has had some good traction, said CEO Lester Keizer. "They're very aggressive. Being the No. 2 company, they want to be No. 1, so they're very hungry," he said.

Customers unfamiliar with Lenovo servers quickly drop their apprehension when they're reminded that the technology was once IBM's, Keizer added.

"We had a school district looking at a server upgrade. They had no idea who Lenovo was. As soon as the superintendent heard IBM, it was 'Yeah, OK. We're fine with them. You're the trusted business advisor. Does the stuff work? Is it OK?' They went with our recommendation," Keizer said.

Paul Benson, president of Virtual Communication Specialists, an Athens, Texas-based solution provider, said his company needs Lenovo as much as Lenovo needs them.

"With all the consolidation in the last 10 to 15 years, we need new players in the market to give more competition, more variety," Benson said. "I'm not sure they're going to be a huge player for us, but they're definitely going to be in our portfolio."

To attract server customers, Lenovo plans to leverage an agreement it signed with EMC to resell some EMC products through the channel, probably by next year, and to leverage some of the Iomega portfolio it now jointly owns with EMC.

"The first question I get when I meet with partners is 'What's your storage strategy? All customers want to ask me about storage. We are opening some design centers around the world together [with EMC]," Lenovo's Nelson said.

As part of the agreement, EMC pledged to buy servers from Lenovo. "They used to buy $800 million in servers from Dell a year ago. They're going to integrate them and sell them to the market. Dell bought two storage brands, so that didn't sit too well with EMC," Nelson said. "We're probably going to sell EMC products next year. I want to get the server business a little bigger before we focus on storage."