Lenovo's North American President Jay Parker Talks Channel
The Future Is Now
It hasn't taken Lenovo long to become an industry powerhouse. In July, it overtook Hewlett-Packard to become the world's No. 1 PC maker. Not bad for a company founded in 2004 when China's Legend bought IBM's PC division and opened up a North American beachhead in Morrisville, N.C.
Jay Parker is president of Lenovo North America. He is responsible for $5 billion of business in the U.S. and Canada. The five-year Lenovo veteran was promoted to his current position in February. His responsibilities include Lenovo's commercial channel and retail sales, marketing, and product management for the Idea and Think brands.
CRN caught up with Parker in New York during the launch of Lenovo's Yoga Tablet. He talks about testing the waters on Lenovo services, channel strategy and early success with its server business.
What's the percentage of revenue that goes through the channel versus direct?
We do between $5 [billion] to $6 billion in North America in revenue. We have 25,000 partners in North America. Eighty percent of our business here goes through the channel. That is business created and fulfilled by the channel or large companies. And sometimes we have large corporate accounts that are fulfilled through the channel.
Where do you go with 80 percent? Where does Lenovo want to be in 2014?
We continue to invest in the channel. That 80 percent has been growing over time. About four to five years ago, when we embarked on this very definitive channel strategy, it was about 60 percent.
Who spearheaded Lenovo's channel strategy?
There was a time, over a different management, that Lenovo as a strategy wanted to pursue the direct business. We figured out that wasn't the right model to reach market. Neither was it a model we could execute properly.
The decision to go build a business around the channel came down directly from our CEO [Lenovo Chairman and CEO Yang Yuanqing (pictured)]. He was the architect of our channel strategy in China. He took that channel strategy and made it an initiative across the globe.
What is your channel philosophy?
Our philosophy is to roll out simple programs to make them consistent over time and to make them lucrative for the partner. We want to give them an opportunity to win business for us. And that's what they have done.
We have outgrown the market for 18 quarters in a row. Almost all that growth is coming from the channel.
As your competitors transition from selling commodity PCs to services, Lenovo is doubling down on client PC, tablet and smartphone sales. Is this a sustainable model?
We're not confused about who we are. We are a PC and device company that also includes tablets, servers and any number of products we may launch over time. That is where our value is and that's where we make our money.
I believe others in the market are confused about who they are and what they want to be. So that is our proposition to the channel, when it comes to services solutions and more complicated sales, is we lean on our channel to do what it does best. We believe that's the value that they bring. If we can give them the best device with the best feature set, the best price, best quality and they can combine it all with their offerings -- that's when they can win in the market.
The PC market is still a $200 billion market, and we are only a 17 percent share. We have plenty of room for growth. And now, as we extend into tablets, smartphones and servers, there is even more upside for us. We don't feel the need to encroach upon what the commercial channel is good at nor do we think we could at this point.
What is the most exciting aspect of the Lenovo channel right now?
I'd say the biggest thing we are doing right now is hand-to-hand combat. The idea is this: A lot of companies come to partners and they talk about making money with programs and not about the technology. The partners are forced to be program jockeys. We see this as a gap at the seller level.
So we have done a tremendous amount of training and have developed what we call combat kits. These are kits with Lenovo products in them. This gives partners access to new technologies like Helix and Twist and Tablet 2.
Now Lenovo partners can give their customers something to touch and feel. That helps them tell the Lenovo story. It's important to make sure our partners aren't just program jockeys.
What are the biggest Lenovo channel challenges?
The biggest challenge is [that] the PC market isn't growing. Partners are having great success right now with their PC business. But in some cases, not all partners are seeing the same success in their PC business. That's a challenge.
We are hearing a lot about diversifying into solutions and services, and bringing more value to deals. We are glad to have them do that, as long as those are Lenovo devices that they are selling.
Is Lenovo planning to introduce any new channel programs in 2014? What can your partners expect?
We'll tweak it here and there, but there is not much news here. We will continue to work closely with partners. And we will continue to meet one-on-one with them. But our partners know what to expect from us. It's not very complicated. They understand how they can make money with us. We are very clear and concise with our messaging.
It's the very nature of companies like ours to want to continually change things. But sometimes with the channel, when you have 25,000 partners, change is your enemy. We have found a lot of success in being very predictable. We'll continue to do that.
Our goal in North America is to outgrow the market by 10 and 20 points. We have outperformed the market for 18 straight quarters. We believe we can continue to do that. Our partners depend on that growth.
How common are channel conflicts within the Lenovo program?
We see very little channel conflicts. You can't do business through the channel without having conflicts at some point. We are very cognizant and precise with our pricing and our programs. We do not give advantage to one partner or the other.
When a deal goes sideways what typically goes wrong?
Very rarely do we see deals go sideways, but when we do it tends to be one partner has chosen to use their program money to focus on one large deal. It's not that they are getting anything unique or have a program advantage. They are choosing to spend a disproportionate amount of their program money on one deal, which creates the illusion or perception that they have some type of advantage when they don't.
In June, Lenovo introduced Lenovo Reach, a cloud service. Can you give an update on the program and what your hopes are for the service?
It's very early for Lenovo Reach. It's almost a beta program. The idea is that you can have a single sign-on and shared storage across multiple devices. It'll be available to consumer and commercial customers. But it's not widely available right now. We are probably a year away from a full-scale launch.
It's an experiment to see what value we can bring beyond the device. We acquired a company, Stoneware, last year. They have unique cloud capabilities. They have a product called LanSchool that allows us to sell in education in a lockdown classroom environment. We are experimenting on how we exploit and how we bring value to these devices in a bigger way.
Can you give us an update on your partnership with EMC and LenovoEMC?
We entered into a joint venture with EMC for a few different reasons. For one, it gives us access to server development and more technical development. Now we are able to co-sell storage and servers with EMC. They get access to our business in China and we get access to their business in mature markets.
We entered this enterprise market about four years ago with the advent of servers. So now the bigger story for us is our joint venture with EMC brings us systems management architecture as well as storage. Our server and storage business has grown triple digits this year. We are starting to become relevant, and we believe it's a big growth area for us.
Any interest in making more acquisitions in the server and storage space? Are you still looking at IBM?
I definitely can't comment on IBM. Right now we are pretty happy with our organic business. We always look at strategic acquisition opportunities across all of our business.
We are happy with what we are doing in servers. We are growing at triple digits, have an expanding portfolio and have a joint venture with EMC. We are succeeding both in the channel and in the SMB market and moving up the stack in the larger corporations.
I'm happy with where our server business is out. Right now we don't have any acquisition plans, nor could I comment on any.