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Can Lenovo evolve from a PC maker to a data centre innovator?

Can Lenovo evolve from a PC maker to a data centre innovator?

Tech giant focuses on post‐PC identity with data centre and commercial PC transformations.

Lenovo is focusing on a post-PC identity, following a string of data centre and commercial PC transformations.

Revealed during Transform - the company’s commercial business-focused event - Lenovo clarified its go-to-market strategy for its Data Centre Group (DCG), outlining how it plans to compete more aggressively against industry rivals Dell Technologies, Hewlett Packard Enterprise (HPE), Cisco and Huawei.

To demonstrate change, the Chinese giant showcased its new DCG leadership team, bolstered by former Intel executives Kirk Skaugen and Kim Stevenson, who have combined to transform the vendor’s approach to the data centre market.

But despite the shift towards the data centre, the event also showcased the importance of Lenovo’s PC and Smart Devices (PCSD) segment to the company’s overall value proposition, illustrating the new emphasis on commercial PC services in the division’s long-term financial and go-to-market strategies.

“Lenovo is focusing on its post-PC identity with data centre and commercial PC transformations,” Technology Business Research analyst Stephanie Long said.

From the perspective of DCG, Long said the changes outlined at Transform in many ways jump-start Lenovo’s new go-to-market approach.

“While there were many additions to DCG hardware and software offerings announced, at the core of these changes are go-to-market and portfolio alterations that reinvent how Lenovo will target its customers and address its customers’ demands,” Long explained.

“The reinvention of its server brand, along with hardware enhancements across DCG, creates a foundation on which Lenovo can strengthen its solutions-oriented approach, earning new customers and reversing DCG revenue and profit declines in the process.”

New-look data centre portfolio

According to Long, a revamped DCG portfolio helps Lenovo close some of the gaps between it and its strongest competitors.

“Unifying its server brands and data centre supply chains will enable Lenovo to craft a stronger value proposition that supports its nascent entries into hyper-scale, hyper-converged and other next-generation infrastructure markets,” Long said.

In addition, Long said a redesigned DCG global channel program will further enable the vendor to transition its existing portfolio solution to meet modern demands.

“Lenovo is bringing this redesigned DCG portfolio to market to prove to its customers that it is the most trusted data centre vendor in the industry - and not through cost-cutting and marketing strategies, but rather through innovation,” Long said.

Yet despite the drive, Lenovo is late to make many of these data centre changes relative to competitors, especially Dell Technologies and Hewlett Packard Enterprise, vendors Long believes are “well underway” with overhauls to respective infrastructure and data centre portfolios.

While the moves are a positive sign for the company overall, Long said the rate of Lenovo’s transformation must accelerate further, in a bid to offset challenges stemming from stronger, larger competitors in the data centre markets coveted by the vendor.

“Lenovo maintains an advantage over many of its peers, however, by being based in China, as Lenovo’s brand strength in what is arguably the world’s largest IT market provides the company a large addressable market for servers, storage, networking and commercial PCs,” Long added.

“But despite this regional advantage, commoditisation is amplifying the challenges of differentiating from competitors at a hardware level.”

As a result, Lenovo, similar to many of its peers, is pivoting to a strategy that intends to create differentiation via software and services offerings.

Delving deeper into the data centre portfolio, Lenovo has made changes across three core areas, revamping organisational structure, portfolio and branding divisions.

The aim? To cement the vendor’s position as a trusted provider of data centre products and solutions.

“With that, DCG has been focusing on addressing the increased requirements and demands associated with data centre transformation,” Long said.

Delivered during Transform in New York, the DCG group unveiled a refresh of its data centre portfolio, bolstered by updates across server, storage and networking products.

To further augment portfolio refresh efforts, DCG is also rebranding the ThinkSystem and ThinkAgile brands.

Specifically, ThinkSystem will encompass server, storage and networking products that DCG is targeting for what it refers to as future-defined data centres.

A significant part of the new ThinkSystem brand is the integration and standardisation of the former IBM x86 servers and the former ThinkServer line, as well as the standardisation of core component designs such as power supplies and fan trays.

“By standardising server components across its server product lines to increase manufacturing efficiencies, Lenovo will be able to more efficiently manufacture these servers while benefiting from cost savings due to economies of scale,” Long explained.

“ThinkAgile is the brand that DCG is bringing to market to target next-generation IT for software-defined infrastructures. There will be overlap in branding, however, as ThinkAgile will leverage server and storage products from the ThinkSystem brand.”

During Transform, Long said there was “significant emphasis” on the fact that Lenovo’s storage and networking businesses are not “bogged down” by the negative impacts of legacy hardware on revenue and profitability.

“Because Lenovo’s presence in these markets has been historically small when compared to peers such as HPE and Dell Technologies, Lenovo has the opportunity to simply build out its portfolio for the modern era without balancing modern solutions with legacy attrition,” Long added.

“As a result, many of Lenovo’s storage and networking announcements emphasised the roles of software and service in their creation and the added value these software and service assets will add to its overall infrastructure portfolio.”

A change of PC approach

On the flip side, the future success of Lenovo’s PCSD group will be determined by the vendor’s ability to create new levels of customer experience within the commercial space.


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