Lenovo's Counting On Hyper-Converged To Drive Growth, Beat Competitors

Already in the midst of an aggressive play to be the lowest-cost enterprise vendor, Lenovo says it is intensifying the attack on the competition by focusing on achieving double-digit growth in the hyper-converged infrastructure market.

In an interview with CRN, Chris Frey, Lenovo vice president and general manager of commercial sales, said the Chinese PC giant is counting on significant new relationships -- particularly its recently announced partnership with Nutanix -- to drive scale in its server business.

"That is the future of the server landscape," Frey said. Lenovo, he said, is taking "a big, broad brush into hyper-converged. That's where the growth is going to be for some time."

[Related: Lenovo Cites Hardware, Channel Strengths In Bid For More Partners]

"We expect this business will accelerate into double-digit growth once the appliance is announced in calendar 1Q, 2016," Frey said. "Customers are very intrigued about the technology and about how quickly they can deploy this technology. They want to understand. For the channel, it's in its infancy stage like the cloud was years ago, but they're intrigued by it because the customers are. We think it will be adopted quickly."

Lenovo's partnership with Nutanix is likely to spur rapid growth for both companies because it combines Nutanix's strong footprint in the hyper-converged market with the large installed base and credibility of Lenovo's System X server line, according to Krista Macomber, an analyst at research firm TBR Inc.

Nutanix also has a partnership with Dell, and Macomber noted that in order for Lenovo to contend with Dell, as well as Hewlett Packard Enterprise, it'll have to focus on software-defined as those industry stalwarts ramp up their own efforts. The company will also have to come to grips with the end of its reseller agreement with EMC once the data storage giant is acquired by Dell next year, Macomber said.

The Nutanix partnership is also of significant importance to Lenovo's earnings. In its second quarter results, released Thursday, Lenovo reported a loss of $714 million as a result of its ongoing restructuring, which includes the integration of the System X business and the reorganization of the Motorola Mobility business.

Lenovo reported quarterly revenue of $12.2 billion, a 16 percent increase over the same period a year ago.

Macomber said Lenovo appears to be well-positioned to ensure the continuity of its System X business, which it acquired from IBM last year, and align its enterprise business to take advantage of growth in hyper-converged.

"Navigating a complex and cooperative data center landscape to maximize strategic alliances, and refining its go-to-market approach to embrace business outcomes and more comprehensive data center architectures, are critical to Lenovo sustaining above average data center growth on the global stage," Macomber wrote in a research note.

That growth, Frey said, should be a boon for the channel.

"More than 85 percent of our business in North America goes through the channel, and as we continue to scale our business, there's more revenue going through the channel, more services, and that's a profit multiplier for them," Frey said. "Their services around our products is a win-win for the channel and for us."

PUBLISHED NOV. 12, 2015