PC Sticker Shock: How One Partner Worked With Lenovo To 'Make It Right'

When Lenovo introduced new pricing for PCs available through distributors in early October, the result for partners like Arey Jones Educational Solutions was that "pricing went up drastically," an executive for the solution provider told CRN.

Prices increased "to the tune of 3 to 5 percent," said Peter Scarpella, vice president of operations and marketing at Arey Jones. "In our business, that really can't happen. We work on thin margins, and prices are dictated off contracts."

[Related: Lenovo's Kinlaw On Resolving Issues Created By 'Drastic Change' In The Channel Program]

For San Diego-based Arey Jones, a longtime Lenovo partner that focuses on the K-12 market, the majority of business occurs through contractual agreements, in fact. Because of that, the October change "wasn't a situation where you can go back to the customer and raise the price," Scarpella said.

After the pricing overhaul, Arey Jones faced a "little bit of shock" at first, he said.

The changes by Lenovo were aimed at restoring equality in the pricing available to value-added resellers, and Lenovo did expect that VARs with special bids wouldn't be pleased, said Sammy Kinlaw, vice president and channel chief for Lenovo's North America PC business, in an interview with CRN this week.

Under the former pricing structure, certain partners could "buy in through distribution-type programs and have a price point that was lower than legacy," Kinlaw said.

The structure was enabling some companies to resell Lenovo products online at a significantly lower price than normal, he said.

"That doesn't lead to a healthy VAR system -- for VARs being able to win on their merit, and being able to win on capability, and being able to win based off of Lenovo history and knowledge and awareness of products. And I had really to make a drastic change," Kinlaw said.

With the recent adjustments, "we've created a level playing field where partners win based on merit," he said.

However, to get here took a lot of work between solution providers and Lenovo's channel team.

"Anyone that had an end user that was at risk or in jeopardy, we've listened and worked to make sure we had something that VAR could take to the end user to keep the business," Kinlaw said. "So it's been somewhat of unique one-offs ... We had a process in the channel where folks could bring issues forward, and that's worked. I personally have gone over 200 individual opportunities, and we've resolved every one that's hit my desk."

At Arey Jones, Scarpella declined to say how much Lenovo business had been affected by the pricing changes, but said the deals represented "very sizable contracts."

"We went back and stressed our concerns with Lenovo. In fairness to them, they did a good job to make it right," Scarpella said. "They corrected the issue on our end, to get us back to where we were in terms of contract pricing."

Scarpella said that "once we voiced our concern, and spelled out what the issues were," Lenovo "solved the issues within a week."

"They got us back to where we were before the change," he said.

Ultimately, Scarpella said he understands that the moves by Lenovo were necessary, as pricing disparities in the channel had "gotten out of hand." The changes won't have lasting consequences for Arey Jones, he noted.

"As long as we have consistency, we're fine," Scarpella said. "It was challenging in the beginning, but now that we've worked through it, I understand why they did it. I think that in the long run it'll have little impact on our business."

Meanwhile, at Lenovo, Kinlaw said the efforts help demonstrate that "we're not moving away from the channel -- still 90 percent of Lenovo's revenues are driven by the channel. It would be insane as a company to risk that business."