Lenovo Looks To Replicate PC Channel Success With Servers

Despite some downright gloomy numbers for overall PC shipments this year, Lenovo has continued its impressive streak of revenue growth and market-share gains. The computer maker overhauled its products with sizeable R&D investments and worldwide branding campaigns, but executives say a key driver for the company's growth has been its channel-centric strategy.

Lenovo has earned high marks in recent years from solution providers, who laud the company's partner support and ease of doing business. And while the computer maker certainly has a big retail presence, Lenovo's pricing protection for resellers has kept channel conflict to a minimum.

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"Lenovo definitely supports the channel," said Rob Robinson, president of Computer Upgrade King, a Lenovo parent based in Midlothian, Va. "They don't allow large retailers to undercut the channel on pricing, and other big manufacturers do, unfortunately."

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Now Lenovo is taking its winning formula for the PC market and applying it to entry-level servers. Last year the company launched an aggressive plan to build up its server business. Lenovo server aspirations gained more attention this year when CRN reported the company was in talks to acquire IBM's x86 server business.

While those talks have stalled, partners believe that Lenovo will gain share with its ThinkServer business -- with or without IBM -- just as the company did in the PC market. "Lenovo has strong numbers in the tower and rack server space," said Iris Sepulveda, sales and marketing manager for PR Computer Services in Puerto Rico. "And with the IBM business, they'd be even stronger. If it doesn't happen, they're still going to grow."

PR Computer partners with other vendors in the server market, but Sepulveda said her company is starting to do more Lenovo servers, thanks in large part to the computer maker's strong channel support. "The partner community at Lenovo is well cared for. You can feel the genuine appreciation for the partner," Sepulveda said. "We do a lot of server business with HP and they've got great technology, but they're not in the same place with partners as Lenovo."

Indeed, it's that partner mind share that Lenovo is banking on for its server growth plan this year. Kevin Nelson, executive director of Lenovo's Enterprise Systems Group, said Lenovo will use the same channel approach as it has with PCs by staying out of the professional services game and letting partners deliver on the integration and support.

"We grew our server business 76 percent last year in North America," Nelson said, "but the metric I'm most excited about is our channel engagement. It's going to grow even more this year."

Another key aspect for Lenovo's channel plan will be pricing. Robinson, who sells ThinkServers in addition to Lenovo PCs, said Lenovo is using aggressive pricing to build momentum in the channel. "Lenovo started selling servers way below cost last year because they wanted to grab market share, and it worked," Robinson said. "It's a smart loss-leader approach and it's good for partners, so I think they're going to gain more share this year."

And lastly, the addition of LenovoEMC NAS products, formerly Iomega, figures to have a positive effect on Lenovo's server push. Lenovo dropped the Iomega brand last month, a move roundly supported by Lenovo partners, and Nelson said the LenovoEMC storage line will be "very complementary" to the ThinkServer family.

Overall, Lenovo believes it can carry over the ThinkPad brand equity with partners and customers to the company's ThinkServer business. Partners agree, saying demand is high for Lenovo products. "Customers are asking for Lenovo more today," Sepulveda said, "even though they didn't even know who Lenovo was a few years ago."

And while Lenovo has aspirations of eventually moving upstream in the server market, Nelson said the company believes there is a huge opportunity for ThinkServer in the rack and tower space.

"You have four big server players that are all focusing on high-density blade servers in the high-end data centers, and they're all going after a market that's about 1 million units a year in North America," Nelson said. "But if you look at the rack and tower server market, it's a much bigger market, and that means we could get a bigger piece of the pie."