Data center News
Lenovo Partners Reaping Benefits Of New Channel Charge
Mark Haranas, Kyle Alspach
As Lenovo capitalizes on synergies between its Data Center Group and Intelligent Devices Group, its bullish goal of market-share dominance is being fueled by a strictly enforced channel-first sales model.
For DHE Computer Systems CTO Dan Hammack, focusing on Lenovo is paying off.
DHE is forecasting 90 percent growth in Lenovo PC sales this year—coming on the heels of 65 percent growth last year—and its Lenovo data center sales are “growing rapidly as well,” he said.
“The partners who lead with Lenovo’s solutions are going to be rewarded more than partners who are selling technology from different OEMs,” said Hammack, who is also a co-founder of the Centennial, Colo.-based solution provider, a Lenovo Platinum PC and Silver data center partner. “It’s a very fruitful endeavor if you put your heart and soul into selling Lenovo solutions to your customer. If you’re all in with Lenovo and you’re pushing to climb the ladder, then you get rewarded. The programs are much more significant now than they ever have been before.”
The onslaught of channel investments comes as Lenovo, the $45 billion global behemoth with U.S. headquarters in Morrisville, N.C., is pushing ahead with state-of-the-art smart devices and highly differentiated consumption-based data center offerings.
It’s a new dawn at Lenovo as the company is moving to capitalize on synergies between its Data Center Group and Intelligent Devices Group that together make up one of the broadest end-to-end portfolios in the industry. Lenovo’s bullish goal of market-share dominance is being jump-started with a strictly enforced channel-first sales model.
“We have a vision and a strategy of intelligent transformation, of being the most trusted data center partner in the industry,” said Kevin Hooper, president of North America for Lenovo’s Data Center Group. “That trust starts with being able to roll up your sleeves and engage with channel partners in real time.”
Lenovo’s data center inside sales reps and resources are pivoting toward partners while the company also is working closely in the field with solution providers to attack 10,000 named accounts. In another move to truly flex its channel muscles, the Data Center Group recently hired Nicole Roskill as its first-ever global channel chief and tasked her with enhancing programs and driving revenue worldwide.
The Intelligent Devices Group, meanwhile, is making massive channel investments such as rolling out simplified deal registration, increased rebates and faster pricing tools for partners. On the product front at Accelerate 2019 this month, the company will unveil its new ThinkBook notebook brand and a new desktop product category—the ultrasmall ThinkCentre Nano desktop.
A significant tailwind for Lenovo in 2019 is the greater synergy being driven between the two groups. With the rising tide of the Internet of Things, edge devices and 5G on the horizon, these once-separate groups can now attack the market together.
“We are working on joint solutions that leverage products available today like client devices and software-defined infrastructure to support virtual desktop infrastructure [VDI] but are surrounded by integrated value propositions and joint sales teams from both the [Intelligent Devices Group and the Data Center Group],” Hooper said. “When it comes to talking to a customer about anything where it’s mobile and communications, client to edge to data center, or machine to machine—there is always an opportunity for us to go in as a joint unit. … VDI, for example, is an absolute melding of the two sides of client devices with software-defined infrastructure to provide a level of security and maintainability for the best desktop experience within businesses. That solves a key set of problems because there’s a tremendous amount of cost associated with maintaining desktops now. That concept is absolutely where we meet both in front of the channel as well in front of customers.”
Lenovo provides Data Center Group and Intelligent Devices Group solution providers with a common partner portal, training tools, repository of materials and operating process. Both groups have launched major initiatives for delivering better vertical-specific go-to-market strategies to drive new deals for channel partners.
“We’re working together across the company to build out an intelligent, connected infrastructure for any organization,” said Laura Laltrello, vice president and general manager of services for Lenovo’s Data Center Group. “If you think about where the world is going with 5G, devices moving to the edge and more intelligence in every device, customers are going to look for the ability to connect all of these things together to create a complete solution. Lenovo has the full portfolio to do that. It’s a really powerful story to be in Lenovo right now because we have PC devices all the way through the data center to the smallest devices sitting on the edge.”
Solution providers who sell both the Data Center Group and Intelligent Devices Group portfolios say they’re reaping the benefits of Lenovo’s market momentum and revamped channel focus.
Jean-Philippe Couture, director of managed and cloud services for Quebec-based ProContact, which sells both Data Center Group and Intelligent Devices Group offerings, said Lenovo is helping to build a larger base of customers who want to buy end-to-end single-vendor solutions.
“The customer is buying data center solutions from Lenovo, let’s say some IoT as well, wrapped around a Lenovo edge server and they’ll have some users working on this from their Lenovo PCs,” said Couture. “When we come to customers saying, ‘We have an end-to-end solution for you,’ it helps us differentiate ourselves as a partner because they want one partner to call either if it’s a PC problem or a server problem. Sometimes the customer is having a problem with their laptop, but then they find that the problem really is on the server side. When they have one partner to call, that’s when the customer really understands the great value you add.”
The alignment comes at a time of roaring growth for both business groups. Lenovo delivered its highest quarterly revenue earnings in four years during its recent fiscal third quarter, ended Dec. 31, 2018, generating sales of $14 billion, up 8.5 percent year over year, while also marking the company’s sixth consecutive quarter of year-on-year revenue growth.
Intelligent Devices Group revenue increased nearly 12 percent year over year to $10.7 billion in the third quarter, while Data Center Group revenue jumped 31 percent year over year to $1.6 billion—including a 70 percent spike in softwaredefined infrastructure sales.
Lenovo became the No. 1 global PC company in 2018 with 22.5 percent share of the market, edging past HP Inc. at 21.7 percent, according to research firm Gartner. Its share of the U.S. PC market—where it ranks No. 3 behind HP and Dell—reached 15.2 percent for the fourth quarter of 2018, a big jump from 11.7 percent during the same quarter a year earlier, according to Gartner.
Meanwhile, Lenovo’s data center sales in both servers and storage are growing at a blistering pace. The company generated $1.46 billion in server revenue in the fourth quarter of 2018, representing 34 percent sales growth year over year to achieve 6.2 percent share of the worldwide market, according to IDC. Lenovo’s storage revenue also soared in fourth-quarter 2018, generating $501.8 million in sales, up 64 percent year over year, according to the research firm. That represents 3.5 percent market share.
Lenovo’s channel charge is not going unnoticed. Envision Technology Advisors, a Pawtucket, R.I.-based consultancy specialist, became a Lenovo partner just a few months ago.
“We don’t take on a lot of vendor partners,” said Karen Penticost, vice president of strategic partnerships and sales at Envision Technology Advisors. “Lenovo’s very channel-first approach is what first attracted us in this ever-changing world of channel partners. When we looked into their channel-first approach, we realized what a diversified portfolio they have. … Anytime you can bring a complete solution—whether it starts with a laptop or a PC, or storage and server—include IoT and put them together in a managed services offering, that’s what customers want. We have a huge focus on IoT and data analytics, [and] we can see Lenovo playing a big part in that now.”
One of Lenovo’s biggest bets to drive better synergy between the two groups is around the exploding IoT market. Research firm IDC said it expects IoT spending to reach $1.2 trillion in 2022, while Gartner predicts 25 billion connected devices by 2021.
As the IoT market takes off, Lenovo is ramping up investments in its portfolio to drive IoT sales in 2019—a play that benefits Data Center Group and Intelligent Devices Group businesses.
“We are going to quadruple our investment in IoT solutions and the corresponding enablement of the channel—that’s 4X,” said Wilfredo Sotolongo, vice president and chief customer officer for Lenovo’s Data Center Group. “It’s the single largest investment the company is going to make this year. It’s a corporate-level play. It’s not just what the Data Center Group is going to do, or the [Intelligent] Devices Group is going to do. No, it’s all Lenovo.”
Lenovo is building prepackaged IoT Solution Bundles that include hardware, software and services for the channel to accelerate IoT sales. The bundles consist of a variety of offerings, including servers and storage as well as PCs and tablets. Lenovo also created a Smart Vertical Group to attack the IoT market based on industry vertical.
“Every one of these use cases have either servers, storage, networking, or PCs or tablets, packaged together with unique software—some of it’s ours and some from partners—to deliver a new store experience for a buyer, or a more automated and efficient warehouse management system, or a safer city,” said Sotolongo. “There’s going to be a new evolution with this IoT play. We’re actually going to have solutions that will straddle both worlds. It will straddle the PC world and the data center world.”
IoT will play an ever-increasing role in Lenovo’s PC and smart devices arena, which is witnessing massive growth.
“We’re absolutely on fire, and I’m extraordinarily bullish on our plans for next year,” said Matthew Zielinski, president of Lenovo’s North America Intelligent Devices Group. He said that without a doubt, 2018 was “the best year that Lenovo North America has ever had.”
Partners told CRN they are seeing incredible sales growth in Lenovo products such as the business-friendly ThinkPad notebook line, the ultrasmall-form-factor ThinkCentre Tiny desktop and education-focused Chromebooks.
Electronic Systems Inc. (ESI), a Lenovo Gold partner based in Virginia Beach, Va., saw its sales of Lenovo PCs grow 800 percent in 2018 compared with the prior year, driven by a few large K-12 education market deals for Chromebooks and ThinkPads.
“There are vendor partner ‘relationships,’ and then there are true ‘partners.’ Lenovo works very much like a true partner,” said Rich Artese, CTO of ESI. “They’re willing to sit at the table to help craft the deal. They’re not afraid to sharpen their pencil when they need to to help us deliver for customers.”
That kind of growth follows a full revamp of Lenovo’s PCfocused channel efforts over the past year. Lenovo’s Intelligent Devices Group has been seeking to rebuild trust with partners following compensation changes in late 2017 that hurt profitability for some partners. During the past year, Lenovo launched its Path to Platinum program to encourage solution providers to strive to hit the highest tiers, Gold and Platinum. Those tiers require $1 million and $10 million in annual Lenovo Intelligent Devices Group product sales, respectively.
Boosted incentives such as back-end rebates and MDF, along with access to product demo units and Advisory Council seats, have been among the highlights of the Path to Platinum program. Lenovo saw an unprecedented number of partners achieving Gold- or Platinum-level revenue thresholds during the year, said Rob Cato, vice president and North America channel chief in Lenovo’s Intelligent Devices Group.
Lenovo also simplified its deal registration process and offered new tools that enabled pricing information to be delivered more quickly to partners. Ultimately, Lenovo during the past year has “put more money into the channel than we have in the past,” Cato said. Lenovo’s partner program—which was dubbed the Lenovo Partner Engage Program during the year—also brought more focus on partners’ specialties within the Intelligent Devices Group. Lenovo’s Communities initiative has targeted information delivered to Platinum and Gold Intelligent Devices Group partners based on their market focus, whether that be enterprise, SMB or K-12 education.
“We listened and then we acted upon what we’ve heard,” said Jeff Taylor, executive director of North America channel strategy and operations for Lenovo’s Intelligent Devices Group. “We changed our program. We launched an engagement initiative that frankly nobody else in our space has done with the channel, around our Communities. We’re investing at a global level around ease of doing business in the partner experience.”
Crucially, Lenovo Intelligent Devices Group executives spent much of their time on the road over the past year seeking to re-engage with partners, Zielinski said. The results have been promising: The group’s sales via the channel rose roughly 20 percent year over year during the final nine months of 2018, according to Zielinski. SMB sales—which are heavily driven by partners—surged 50 percent.
“That just speaks volumes to the complete rebirth that we’ve had with our channel partners,” Zielinski said.
Zielinski, a former AMD executive who was appointed to his role in February 2018, said he has been looking to demonstrate that there is stability in the North America leadership for Lenovo, following frequent turnover in the executive ranks in previous years.
“Obviously, Matt Zielinski is a vibrant breath of fresh air. His energy level is definitely appreciated and noted,” said Andy Jones, CEO of MCPc, a Lenovo Platinum partner based in Cleveland. “They’ve needed that for a while. That role has been a bit of a revolving door over the years. They’ve needed someone to step in, and then have the organization actually commit to that person’s vision or direction for more than a year. That looks like it’s working out.”
Lenovo’s partner focus has helped to deliver more consistent profitability in the channel, said Peter Scarpella, vice president of operations and marketing at San Diego-based Arey Jones Educational Solutions, a Lenovo Platinum partner. “They’ve done a lot to mend the fences on the issues that we’ve had. They’ve been very focused on making sure that the issues they have had before are corrected,” Scarpella said. “I definitely think they’re pointed in the right direction.”
U.S. PC shipments for Lenovo surged 22.2 percent and 23.4 percent during the third and fourth quarters of 2018, respectively, according to Gartner. Lenovo’s North America business was a strong contributor to the company recapturing the No. 1 ranking in worldwide PC sales last fall from HP, Zielinski said.
In the U.S., processor shortages from Intel hurt Lenovo’s PC shipments in the first calendar quarter of the year, Gartner reported. “There’s no doubt we left demand on the table in the first calendar quarter,” Zielinski said.
“I am becoming increasingly optimistic as the year goes on,” he said of Intel’s progress in clearing up the shortage. “I don’t think we are in business as usual until maybe late calendar Q3, early calendar Q4, to be totally honest. But what I can also say is we’re seeing some glimmers of hope. And, to be honest I wouldn’t have said that [in early March]. For the first time I can say we see improvements.”
Intel has said that it expects the shortage to continue into the third quarter.
Zielinski said that even with the CPU shortages, Lenovo has a plan to reach a goal of growing North America market share to 17 percent by the end of 2019. That will require continued engagement and investment with partners, Lenovo executives told CRN. For one thing, Lenovo will be “really doubling down on the efforts around Path to Platinum,” Cato said. “We want to make sure that there are more partners that are seeing the opportunity to grow their business with Lenovo,” he said.
In addition, a partner transformation effort will kick into even higher gear this year, Lenovo executives said. One key area is delivering content to partners in a more meaningful way through a redesigned partner portal, enhanced partner on-boarding, and improved access to data and analytics, Taylor said.
Overall, DHE’s Hammack believes that Lenovo is “more laserfocused on what their objective is” than in the past. “We’re still early in the new programs,” he said. “But as long as they stick to their word and what they’re offering their partners, the trust is being built back significantly among the partner community.”
Barrett Lamothe, senior enterprise hardware consultant at MicroAge, a Lenovo Gold partner based in Tempe, Ariz., applauded Lenovo’s increased channel engagement. “The horizon looks bright for them,” Lamothe said. “It’s refreshing to see them really re-engaging with us. Because it is a quality product. On the commercial side, you can’t go wrong with handing ThinkPads to your employees.”
In terms of products, Lenovo will be looking to continue driving PC growth with innovations such as the new ThinkBook brand. The ThinkBook laptop will offer the durability and performance of ThinkPads combined with enhanced design aesthetics from an all-metal chassis, instead of the usual carbon fiber. Lenovo is also launching a new desktop product category with the ultrasmall ThinkCentre Nano desktop—which is about one-third of the size of the ThinkCentre Tiny.
In terms of vertical expansion, Lenovo’s bets for 2019 include a greater focus on public sector customers, including state and local government and higher education, Zielinski said. “We’re frankly south of 10 percent market share with a ton of headroom” in those segments, he said. Lenovo is planning to expand its staff headcount focused on those verticals by three times to five times this year.
Partners are bullish about the future of Lenovo as a more unified company with the mission of becoming the most trusted channel vendor on the planet.
“When you have a trustworthy partner, you trust that partner from end to end whether it’s your data center or your laptops and PCs and intelligent devices,” said ProContact’s Couture. “Lenovo has an exciting future ahead, and we’re happy to place our bets on them.”