Solution providers said Lenovo channel chief Sammy Kinlaw's decision to leave the company was inevitable in the wake of fallout from program changes that are negatively impacting partner profitability on enterprise contracts.
Partners said Kinlaw, a 10-year Lenovo veteran, was put in an untenable situation by channel changes rolled out October 1. The changes -- including the elimination of some backend rebates -- have cut partner profit margins by as much as 30 percent to 50 percent, solution providers said. In some cases, the changes are making some multi-year enterprise contract deals unprofitable, solution providers said.
"Sammy is a really straight shooter who was in a tough situation," said the top vendor management executive for a large national enterprise partner, who did not want to be identified. "Lenovo has negatively impacted the ability for channel partners to make money on enterprise-level accounts, which is a huge chunk of business. I am sure Sammy was looking at the impact of the cuts over time and how that was eroding his relationships. If you are a channel chief and your company is making those kinds of cuts why would you want to be the channel chief? This business is [built on] relationships, and this was clearly impacting his relationships with partners."
Kinlaw, who took the North American channel helm in April 2015, announced Wednesday that he is leaving his position as vice president of North America channels at Lenovo on January 19 to take a position as vice president worldwide channel and OEM sales at Lexmark. He will join Lexmark on February 1.
Kinlaw declined to comment on his decision to leave Lenovo and join Lexmark.
In a statement to CRN, Lenovo emphasized that the company is committed to the channel. "We have always considered our channel an integral part of our market value," said the statement. "Ninety percent of Lenovo's business is fulfilled through the channel. The success of our partners is our success. As a result, we will continue to put the channel first. We have aligned our business to better serve our mutual customers."
Partners said Lenovo has slashed back-end payments, spiffs and program discounts in its $30 billion PC business in a series of moves that is in some cases is causing them to look at shifting business to competitors like HP Inc. and Dell Technologies.
"Lenovo has pulled away backend rebates to distributors, and it is making some enterprise deals unprofitable," said the vendor management executive. "Backend funds are getting chopped, growth incentives are gone and resellers are being left holding the bag. Anyone playing in the enterprise space with Lenovo is going to look at making changes."
Kinlaw told CRN last October that he understood the pain partners were feeling as the company reduced rebate levels on some PC lines in order to offset increasing SSD memory and component costs.
"I understand the pain that a programmatic change can cause," he told CRN. "A partner looks at a manufacturer like Lenovo who is channel-friendly as a predictable, consistent and profitable program. When I make a change like this, it upsets the environment. I'm going to own it. I understand that we've made some changes, but [partners are] going to have to change with us because everything is moving at a pretty fast pace."
A top executive for a large national solution provider, who did not want to be identified, said Lenovo's changes have eroded channel trust in the vendor. "There are a lot of negative Lenovo deals out there with distribution. The big issue here in my opinion is how can you plan on a strategic long-term engagement with a company that blows everything up without any forewarning? The No. 1 thing that VARs want out of their manufacturers is profitability. You can't just change long-term contract pricing"
A top channel executive, who has worked closely with Kinlaw, said he believes the channel veteran was "burned out" by the Lenovo channel turmoil. "I think Sammy had had it and was doing what best for him and his family," he said.
Matt Brown contributed to this story.