Lenovo’s Australian bosses have laid out their ambitious Channel strategy, after the company announced that its $2.1bn global takeover of IBM’s x86 server business would close on October 1.
The acquisition will make Lenovo the third-largest player in the $42.1 billion global x86 server market, and the third largest in Australia. Lenovo’s global plan is to achieve $5bn revenue in this division, and higher profitability than the PC division within the first 12 months.
Lenovo Australia and New Zealand managing director, Matt Codrington, said the ANZ goals along these lines were not yet broken down, as his budget had not been determined, but added: “It will be a higher number across x86 than it was last year under IBM.”
Lenovo has already proffered $5 million to the local market to “kick-start the business out of the gate”, Codrington said.
“Locally we’re investing $5 million dollars to fuel the growth. Part of this includes the relocation to a new head office in Sydney, bigger offices in Melbourne, and opening new offices in Canberra and Brisbane to expand our footprint,” he said.
“Other than the new offices, there will be an incremental investment in our partner programmes, incremental investment in branding and marketing. It will also be for new facilities too, we’re setting up a new datacentre in Chatswood, that our customers will be able to use as proof of concept.”
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, PureApplication and PureData appliances.
“It’s important for the channel to know that we have the intention of growing those brands, as we grow the business. We have a track record of doing it – we did it with IBMs Think brand. Today, ThinkPad is the number one brand in commercial notebooks,” said Nick Reynolds, chief marketing officer, Lenovo Asia-Pacific Mature Markets.
“We’re looking at doing the same thing in our marketing and increasing our market share, building our voice in the channel and the market overall.”
The key thing that Lenovo won’t be offering is a services capability, says Tony Smith, who joins Lenovo as its director, Enterprise Business Group from IBM, having headed up the IBM System x team for the past two years.
“We don’t have an investment in a services capability, so probably one of the biggest differences here to what a competitor may offer is that it’s a great opportunity for the Channel to expand its capabilities and add value here,” he said.
“It allows them to compete much more deeply and broadly, protecting that services revenue as well.”
The key advantage Lenovo is pushing to its channel partners is its economies of scale.
“It’s certainly about the scale and resources we’re joining up with there, which will fuel the growth of the business unit. We’ve been engaging with our clients and business partners to make the transfer of business as seamless as we can,” Smith said.
We’ll be bringing a broader set of benefits and opportunities to our business partners and clients. A larger pool of product offerings, combined the portfolios of Lenovo and the x86 business, the storage business we’re OEMing from IBM and EMC. It’s a new set of opportunities that neither company has seen before.
The entire IBM x86 server team will be coming across, ensuring continuity of contact, supply and technical expertise – and future product roadmaps, which Codrington says remain unchanged for the foreseeable future.
“We’ve got a lot of innovation we’ve been working on that we’re bringing across, our work in the datacentre and a whole bunch of other exciting products that make it quite exciting. You’ll be able to run the datacentre much higher, much hotter, and with more efficient use of the its infrastructure to allow organisations to run a better business using our tech.”
No staff cuts
Lenovo said there will not be any staff cuts, in Lenovo or the former IBM x86 server team.
“We’re going to grow. We aren’t cutting any staff at all from day one. No plans there at all. The focus on the coming months is a smooth and seamless transition for the staff, and for our partners and customers,” Codrington says.
Smith says that the company is already midway through a robust hiring process to boost sales team numbers.
“All the team that are currently in place across ANZ come across. Sales and marketing, technical sales teams, and the support functions behind that. Our administration and finance team come across, so it’s a good sized crew,” he said.
“Lenovo has also been very generous to us in terms of allowing us to recruit and hire new staff, so we’ve already begun that. We’re going to have many more sales teams joining the business across the next 30 days – as quick as we can find them we’re bringing them on.”
In terms of legacy support, Lenovo will be providing renewals, and IBM will do legacy field support.
“All of the IBM badged products will be supported through Lenovo, with all the field support services through the IBM technical support services team,” said Smith.
“The warranty and the maintenance that the customer has right now will be continued. Any of the renewals Lenovo will be picking up and renewing, and back ending it to the Lenovo field support team. Lenovo will look after all the level 3 support, labs and software support, updates too. That’s all coming across too as part of the international agreement.
“There’s pretty much no change to the support infrastructure and the apparatus behind it.”
Most importantly, how will Lenovo make money when IBM had to run the business at a loss for nearly two years?
“The short word is, we’re going to scale the business,” Codrington said.
“The relationships we have with Intel and Microsoft are the biggest relationships they have. We’re definitely going to be utilising those. We’re going to be utilising partner breadth to grow the business.
“We’ll scale the revenue, and all the operational expertise and efficiencies that Lenovo is renowned for will ensure it will hold the bottom light tight as well. We’re expecting from day one for it to be a profitable business for us.”