Channel program changes at Lenovo North America last fall delivered a hit to profitability for many PC partners, but new leadership is seeking to re-establish a commitment to partners amid what the executives are calling a massive market opportunity.
Lenovo North America executives used the Accelerate 2018 partner conference in Las Vegas this week to pursue "trust rebuilding" with solution providers while promising partner-friendly investments aimed at capturing share in the PC and data center markets.
[Related: 10 Key Takeaways From Lenovo Accelerate 2018]
Matthew Zielinski, Lenovo's North America president for its PC and smart devices division, joined the company in mid-February from AMD -- while the channel chief for the division, Rob Cato, is also new. Zielinski told CRN that "we spent the last 13 weeks really diagnosing and dissecting the business, to really chart out a strategy that I believe is a winning one."
As part of that, "we'll invest in channel partners that are going to be disproportionately invested and committed to us [compared with other vendors]," Zielinski said.
First, though, the company's new leadership has needed to address last fall's program changes, which affected the pricing for partners available from distribution as well as certain incentives such as spiffs.
Zielinski reported that he's had many conversations about the changes since starting in his new role, saying he hasn't spoken with a partner "that hasn't at least brought it up." Lenovo executives previously said the moves were necessary to restore equality in the pricing available to value-added resellers because some partners were able buy products through distribution programs at unfairly low prices. The result, however, was to increase pricing by several percentage points for some partners, which has been an issue for businesses run on thin margins.
Of his current efforts with partners, "it's a trust rebuilding exercise," Zielinski said. "I know we did some things in the latter part of last year that have been discussed as I've come on board. Talk is cheap. And we want to make sure when we sit here at Accelerate next year that we are truly the most trusted partner like we have been in the past."
That, he said, is "just going to take a bit of time and a commitment and proof that we're going to do what we say we're going to do."
Cato agreed, saying that a top focus for Lenovo is to "start building back some commitment and trust back into our ecosystem with our partners."
For starters, Zielinski is committing to the company by relocating to Lenovo's North America home base of Raleigh, N.C., Cato noted. "He wants to be the guy that's going to lead us back and be here consistently," Cato said. "He's building a place in Raleigh. We haven't had a president in Raleigh for a while. So I think that is also a commitment he's making not only to Lenovo but to our channel partners also."
"There's been a lot of changes. There's been a lot of inconsistency. And I think our channel partners have been lacking a little bit of clarity from Lenovo," Cato said. "So for us it's about making sure we get back to that clarity."
The market opportunity for working with Lenovo is significant, Executive Vice President Kirk Skaugen told partners during Accelerate 2018.
"Despite the fact that it was a transformation year for Lenovo, we hit a top-line three-year growth high in the third quarter of $12.9 billion," Skaugen said, with more than 80 percent of revenue from North America coming from partners.
"What I can tell you is I think this year is going to put that to shame," he said.
In the company's PC and smart devices division, for two consecutive quarters Lenovo has been outpacing the market in revenue, Skaugen told partners. Gaming and workstations are now both $1-billion-per-year businesses for Lenovo, and workstation "could be easily $2 billion here very, very quickly," Skaugen said.
Meanwhile, Skaugen said he's aiming to prove that the data center business "is on an unstoppable growth trend," with every geography closing the recent quarter with double-digit revenue growth. Going forward, Lenovo expects "far greater than market growth" in data center, he said.
In particular, Lenovo has some important differentiators with its ThinkAgile line of software-defined offerings, Skaugen told CRN. "Lenovo is not encumbered by the status quo," he said. "We're not trying to protect a legacy business. So we can move very aggressively, whether you're talking about Nutanix or vSAN or Azure Stack."
Partners who spoke with CRN at Accelerate 2018 said the changes from last fall were challenging, but they are optimistic about Lenovo's strategy and leadership.
The changes "kind of threw me into a tailspin a little bit, to the point where I considered bringing on another OEM to fill the gaps," said Mark Sanchez, CEO of Loganville, Ga.-based CommQuest.
That adoption of another vendor never ended up happening, and now Sanchez doesn't believe it will be necessary. "I told them I was considering it, but I never moved on it," he said. "They know me and know I'm loyal to the brand. And I don't think all of their [partner] base is like that."
After hearing the message from the new leadership at Accelerate, "I'm starting to get some better feelings," Sanchez said. "And by what they're saying in the near future -- about wanting to invest in those who are really making an effort to push the product -- I feel like I'm one of those. They've said, 'Yes, good things are coming and we think it's going to really benefit you.' So those kinds of statements make me feel better about the direction of where things are going."
Dan Hammack, co-founder and CTO of Centennial, Colo.-based DHE Computer Systems, said he is also optimistic about working with Lenovo even after a tough stretch.
"I think that we see the light at the end of the tunnel. Initially, we didn't think so. ... But now that the dust has settled, we get it," Hammack said. "There were some programs in place that were very generous for the partners, and DHE was able to capitalize on many of them. While they've pulled back on some of the programs, the other OEMs are doing that as well."
Hammack noted that while the Lenovo leadership has shifted, his representatives at the company -- channel manager James Van Dyke and regional channel director Ryan Mathison -- have been stable and have provided consistent communications about the changes. Ultimately, "the changes Lenovo has made are quite positive. Sometimes you've got to shake things up to make the entire program work better," Hammack said. "Right now, it's good. Right now I'm positive on Lenovo from all angles."
Stan Wysocki, vice president at Houston-based Mark III Systems, said that Lenovo hit a "reset button" when it brought in Skaugen, an Intel veteran, about 18 months ago. "I think [the move] was needed," Wysocki said. "I didn't expect anything to change overnight. But I think they're in the right place. You look at a lot of the key wins that they've had -- winning back accounts that they had lost over the last couple of years. That shows a lot."
Zielinski said that for any partners that still feel "burned," he is committed to turning things around.
"The way that I would repair that relationship is by making sure that we use my introduction as a bit of a rebirth, and show that there is no more volatility," he said. "That volatility is behind us, and we have a much better recipe and a much better plan. We're already executing on that plan."