Partners: Lenovo Faces Big Security, Integration Challenges

Solution providers Monday said Chinese computer giant Lenovo faces big security and integration challenges as it moves to integrate IBM's x86 server business now that it has finalized the $2.1 blockbuster deal, which will go into effect Wednesday.

"The challenges are big any time you do an integration of this size," said Bob Venero, CEO of Future Tech, a Holbrook, N.Y. solution provider, No. 234 on the CRN SP500. "This deal is complicated by the risk associated with the Chinese connection. This deal is going to be put under a microscope by companies before they make a decision to continue along the IBM x86 server path with Lenovo. There are lots of questions that need to be answered to keep companies comfortable from migrating off the IBM platform."

The companies most likely to go down a different path are government agencies and defense contractors, Venero told CRN Monday.

"There is a lot of chatter in those companies about the risk associated with data leakage by going the Lenovo route," he said. "There is a major difference between a deal like this and HP buying Compaq. Lenovo is Chinese-owned. That is the largest obstacle that Lenovo is going have to overcome. If they can accomplish that they will be in good shape."

[RELATED: IBM and Lenovo to Close x86 Server Deal Oct. 1]

Joe Lore, sales director of Sunntech, a Lenovo partner based in Woburn, Mass., said he doesn't see this deal impacting his current business with smaller companies up to about 25 employees, but he said it could be an opportunity for his business to grow into the higher-end space. He said there will be challenges, though, as Lenovo sets to identify itself with this new product.

"The challenges will be for them to convince the people that are used to buying the IBM-side of things that they’re going to have the same quality and reliability they used to," Lore said. "That would be the biggest challenge. ... [But] I’m glad they’re doing it. It gives me more opportunity to reach out to some newer resellers and say, ’Hey, look. We can help you with this.’ "

Lenovo is acquiring System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers, and associated software, blade networking and maintenance operations. IBM will retain its System z mainframes, Power Systems, Storage Systems, Power-based Flex servers, and PureApplication and PureData appliances.

Partners said among the unique challenges that Lenovo will face is the difficulty breaking into the U.S. data center market. Up until now, Lenovo's North American channel of 25,000 solution providers have been made up of mostly of PC-oriented partners who are going to need to up their channel IQ to include more complex server deals higher up the data center stack.

"Lenovo needs to take baby steps right now," said Chris Pyle, president and CEO of Boca Raton, Fla.-based solution provider Champion Solutions Group. "The last thing they need to do is rock the boat."

Pyle said Lenovo has spent a lot of time reassuring partners and customers that everything from maintenance contracts, to part numbers, to sales representatives will remain the same.

Ernie Yenke, president of Lighthouse Computer Services, a Lincoln, R.I.-based IBM premier business partner, said he was looking forward to better margins on x86 server sales, a better supply chain for server components, and crystal clear IT road map for Lenovo's server business.

"At IBM the x86 team was at the bottom of the stack," Yenke said. "At Lenovo, they will be kings."

NEXT: Lenovo Makes Promises Of Smooth Transition

Yenke said that Lenovo and IBM has been laying the groundwork for the acquisition for months, reassuring him and his customers that under Lenovo's banner partners and customer were better off. He said IBM's x86 team and Lenovo both promised a better supply chain, enabling them to deliver fully configured systems to customers faster.

IBM has been distracted when it comes to getting x86 components, Yenke said. Lenovo, he said, will remove any IBM speed bumps helping partners deliver x86 servers systems fast.

"I don't know why it took so long, but I do understand there were a lot of hoops to jump through from a business standpoint," he said.

JoeMertens, president and CEO of Lenovo and IBM partner Sirius Computer Solutions, based in San Antonio, told CRN he has expected this news for some time. He noted both sides have been very good at communicating and helping make the transition.

"From our perspective, it's kind of business as usual," he said. "I think we have everything we need. We don’t think this will have a significant impact one way or another.’

YangYuanqing, chairman and CEO of Lenovo, said in a prepared statement that the company's priorities are to "ensure a smooth integration and deliver a seamless transition for customers."

"By combining Lenovo’s global reach, efficiency and operational excellence with IBM’s legendary quality, innovation and service, I am confident that we will have competitive advantages to help us drive profitable growth and build Lenovo into a global enterprise leader," the statement read.

Douglas Grosfield, CEO of Xylotek Solutions, an Ontario-based Lenovo and IBM partner, said, Xylotex has been "fairly involved" with both companies in the early stages of the deal being unveiled.

"A lot of our discussions since the intent was announced to purchase the x86 server business was around, 'How will this transition differ from the previous one in terms of the amount of pain that was involved?’ And ideally, what we wanted to see was an approach where the business … [stays] intact from a partners' point of view,’ he said.

Grosfield said he'd like to see some programs stick around and include up-front rebates and co-funded marketing funding for partners. "We wanted to ensure at least out of the gate the partner programs are still in place so we wouldn’t have a steep learning curve like you did in the first transfer," he said.

TOM SPRING, SAMANTHA ALLEN AND SARAH KURANDA contributed to this story.

PUBLISHED SEPT. 29, 2014