Aggressive Channel Moves: Lenovo Has A Fire In Its Belly For New Enterprise Business

Lenovo, the Chinese PC juggernaut, is breaking out a new 2015 playbook and is turning up the heat on its enterprise business, said Chris Frey, vice president and general manager of Lenovo's North America commercial business.

"We bought IBM's server business not only to bring that business to customers, but also because there is more margin than in the PC business," Frey said. "Clearly, the server business is super strategic and critical to our success. We are going to be very aggressive in the market to grow that business quickly."

Frey, who last month was promoted and is now in charge of Lenovo's SMB, large accounts and channel business, said Lenovo has a new fire in its belly with a go-to-market enterprise mission to drive new System x and ThinkServer sales through the channel.

[Related: Lenovo Channel Chief Q&A: Chris Frey On 2015 Partner Imperatives]

"With the consolidation of the SMB business with the large account business underneath me, the channel can continue to expect Lenovo to focus on driving business though the channel and driving profit dollars through the channel and rewarding them for not only the SMB business, but all the business that goes through the channel," Frey said.

Frey said Lenovo and channel partners are now driven and incented to acquire new customers to create new opportunities and revenue streams. "Partners can expect Lenovo will be addressing these goals across all product segments and markets," he said.

To juice Lenovo's partner community, Frey said, it has extended a new customer bonus program to System x resellers. Starting this week, he said, Lenovo began offering a 9 percent back-end or front-end rebate.

Since System x was spun out of IBM, Lenovo is taking a more aggressive approach to the market, said Bill Boyle, director of sales at Dynamix Group, a Roswell, Ga.-based Lenovo partner.

"We have seen Lenovo winning more deals against Dell and HP," Boyle said. "There is excitement in the marketplace around Lenovo. People have a sense that Lenovo is taking System x down the same successful path that they did ThinkPad. This is a re-energized company and customers can feel it."

Driving Lenovo's competitive edge is its aggressive pricing, reliable supply chain and close ties to key industry partners such as Intel, Boyle said.

"Yes, when Lenovo took over IBM's System x business some customers balked and took a look at alternatives," Boyle said. "But the majority stuck with Lenovo. The message we are hearing from Chris [Frey] and the Lenovo leadership is, winning deals in the channel is priority No. 1. Clearly, partners are aligned with that message and leadership."

NEXT: What Percentage Of Lenovo Business Is Enterprise?

Lenovo Monday reported its first earnings reflecting its $2.3 billion purchase of IBM’s x86 server business. The company said PCs now represent 65 percent of revenue compared with 24 percent of revenue from its mobile business and 9 percent from enterprise.

"Lenovo's goal is to be No. 1 in PCs and servers," Frey said. "We are going to continue to make sure we are doing what's right for our customers and what's right for our partners. Our channel strategy does not change."

Lenovo's overriding challenge now, say partners, is digesting IBM's employees, hardware and partner programs into a single offering. To that end, Frey said, Lenovo is well on its way to its goal of becoming "one Lenovo, one channel," as he often describes his integration goal.

"The integration as it relates to the channel is about 75 percent of the way done," Frey said. "By April, which is our new fiscal year, we will be 100 percent integrated across all platforms. What I mean by that is people, programs and partners will be 100 percent integrated on April 1."

The next goal, Frey said, is put the pedal to the metal when it comes to growth.

"Right now in North America we continue to grow," Frey said. "We are at a record share in 10.4 percent for PCs. We expect our PC business will continue to drive share and scale," he said.

To accomplish those goals, Lenovo's North America priorities are multipronged. "We have to continue to grow the lines of business: consumer, retail and business," Frey said. "But we have to continue the focus on SMB and large account business and public sector business, in which we have had strong and good results in the past."

Lenovo's success in the enterprise market, wrote Christian Perry, a senior analyst at research firm TBR, relies on the customer perception of consistent performance and reliability at the lowest cost. That pricing edge, wrote Perry, will create a pricing structure that displaces HP and Cisco in some long-standing enterprise accounts.

"Lower pricing will make System x available to a large segment of the midmarket that did not consider the portfolio previously due to the perception -- and in most cases, reality -- of premium pricing," Perry wrote.

While partners say System x sales have been strong when it comes to 2U racks, if Lenovo wants to elevate its game it needs to sell against companies such as Cisco with its Cisco Unified Computing System and offer more sophisticated infrastructure management tools.

"Ultimately, where we are all headed is needing management and control over sprawling systems," Dynamix Group's Boyle said. "Cisco UCS brings that to the deal. Lenovo will continue to succeed, but will need to bring a little more to the table as it moves up the enterprise stack."

For its part, Lenovo said it continues to deepen its software partnerships.

"As our relationship with vendors relates to partners, we want to let partners do business with us or any other manufacturers that they are comfortable with," Frey said. "We want partners to do business with whoever is meeting their technology needs. We will not dictate who they should use. For example, we are not in the software business, so we have strategic relationships with VMware. On the storage front we have relationships with IBM and EMC as well having our own storage solutions."

Wrote Perry: "If Lenovo continues to deepen its software partner relationships and trains its sales force and partners successfully to sell its broad range of servers, it will challenge HP in x86 revenue and units sold as early as 2016."

PUBLISHED FEB. 4, 2015