CRN Exclusive: Lenovo Channel Chief Kinlaw On Evolution Of PC Market, Data Center Battle With Dell EMC And HPE

What's Next For Lenovo's Channel?

Channel Chief Sammy Kinlaw says Lenovo's business with small- and midsize-business-focused solution providers grew 40 percent in the second quarter, and the company is getting ready to ramp up new programs designed to push partners into selling services and to establish its own PC-as-a-service business.

Lenovo rolled out its "Partner Sold, Partner Delivered" services program to partners in the spring, and Kinlaw said success with the 21 partners in the pilot means the program will be offered more widely beginning in January.

The global PC company's data center strategy, which revolves around partnerships with hot software vendors like Nutanix, Cloudian and Nimble Storage, will not change as executives figure out how to drive those products into large accounts and keep prices low enough to compete with Hewlett Packard Enterprise and Dell EMC.

Kinlaw spoke with CRN after Lenovo reported second-quarter sales declines across its business units and revealed another round of changes to its executive ranks, moving former Data Center Group chief Gerry Smith into a role as executive vice president of the PC and Smart Device Business Group and hiring former Intel executive Kirk Skaugen to head the Data Center Group.

Here's what Kinlaw had to say about Lenovo's position in the PC market, as well as the evolution of the company's data center battle plan.

How is your data center strategy changing?

It's a number of different things. I've spoken to you about hyper-converged and our association with SimpliVity and DataCore, and that open strategy continues. We continue to announce appliances; we just had an announcement with Cloudian on a lower-cost offering for storage. It's delivered as a pre-configured appliance. Those types of things is where we're proliferating. Our association with industry leaders like SimpliVity or DataCore or Cloudian or VMware or Nutanix is not going to stop. Converged infrastructures are proliferating. With that, we just announced a converged data center infrastructure play called ThinkAgile. We've partnered with Nimble Storage on different formats based on the System x server.

When do you think your strategy of partnering for data center solutions will begin to bear fruit?

They are bearing fruit for us. Those strategies are our growth engine. Servers are a door-opener for me. My server business is growing, but it's growing on the heels of these offerings. My SMB business is growing. We're still refining strategies in that large, corporate opportunity. We've got a new leader in [the Data Center Group]. We have to make sure that the programmatics are there. The way we get partners turned on to many products is through spiffs. At the beginning of October, I made every VAR available for spiffs. I used to only do small VARs, but now every VAR of any size can receive a Visa debit card from Lenovo and make $10,000 per quarter. It's about programs, channel coverage and the right product.

Do you think those efforts put you on even footing, or in a competitive posture with HPE or Dell EMC?

We're already priced at or below what they are on-shelf. I certainly know the competitors' offerings. It's a marathon, not a sprint, but my strategy with the channel has remained true, and I ask them to think about that when they're choosing a manufacturer, whether it's PCs or servers. If they partner with me, I'm not looking to take their end user direct.

The PC market, where Lenovo is strong, has been tough. What did you see in your fiscal second quarter?

Continued growth in the PC market. The goal is to grow profitably, to grow through the channel, and the realization of that strategy that we've had in place for quite a while now is still yielding results. In North America, we've got our largest [market] share that we've ever seen, 15.4 percent, and you look at the market and it's flat to declining and when you see we grew at 15 percent year over year, that's good stuff. It's working. From premium to Chrome to desktop, those are all highlights, and workstations. Partners can package their services around that and we're not competing with them. My strategy in North America with channel on the PC side is the biggest highlight. I'm proud of it.

How successful has the 'Partner Sold, Partner Delivered' program been?

It's proving to be very good. My plans are to announce it more widely – I still have a limited number of partners in the pilot phase – I'm going to widen it by a big amount in January. I can't tell you how many exactly. It allows me to sell more services. It allows partners to sell services and then perform the services in a noncompetitive way.

Where are you seeing partners gaining traction and having success?

When I look at my biggest success from the quarter, there are a few things I think you'll really find interesting. My average spend for a value-added reseller who bought from me last quarter increased by 40 percent year over year. So we had a dramatic increase in the revenue that a partner was spending with us. That's really a large number. Usually any type of double-digit growth is massive, but when I see those kinds of gains, that tells me the programmatic direction we've taken, the product we put on-shelf at distribution, our coverage model is really working.

What's hot?

Education products were the biggest thing followed by desktops. That's certainly unusual in a market that's declining. Desktops, Chrome products were up and premium products were up, like the X1 Carbon and the X1 Yoga, those are the two biggest drivers.

Are certain types of partners driving that growth?

When I look at the types of partners that grew the biggest, mid- to small partners had the biggest gains. Our small to midsize partner revenue growth was 40 percent. Customers are looking for specialization. Customers are looking for expertise and direction, and those guys do those types of things for their communities. They're experts. That doesn't discount the fact that my big houses were up. My CDW business was up double digits.

How are you getting out in front of changing customer behavior, changing buying patterns?

You do have to ask a lot of questions because buying patterns are changing: where you get it, how you get it and how you consume it. I presented at your [IT Best of Breed] conference and I got to do a roundtable with 10 VARs, and what came out of that was that most of those VARs told me they're looking for ways in which they can use PC as a service. Customers are interested in consuming technology differently. From the right-hand side, you've got software-driven demand for networking, storage and compute, the whole world of software-defined. And then on the left, there's PC, and end users are beginning to consider: 'Hey, I need a PC, I need it to work, I need it to be up and running and I want to pay a subscription fee to have it consumed.'

How can you help solution providers play in that market?

That means Mr. VAR, you sell me the subscription and you keep it up and running. How do I participate in that market? Certainly my competitors are offering some channel and direct plays, which compete with the channel. I'm not looking to go down that path. We're looking to build out a PC-as-a-service offering that will be through the channel. I'm asking lots of questions of my VARs, of my end users. I'm also looking at the industry to make sure that what I come out with is channel-first and that I can ensure the success of it. We have partnered with Ingram Micro. They recently announced a PC-as-a-service offering, and we're a manufacturer that they've partnered with to get the product to VARs. We can get to that market today through distribution, and we've got to consider how we can go about offering our own PC-as-a-service program.