ORLANDO, Fla. -- At Lenovo Accelerate 2014, the vendor's partner conference being held here this week, SearchITChannel talked to Sammy Kinlaw, director of channel sales for the U.S., Caribbean and Central America channels, about how the pending purchase of IBM's x86 business and Motorola's smartphone business from Google, both announced earlier this year, will impact channel partners in the Lenovo Partner Network. Today, 85% of the company's revenue is driven by the channel.
The Lenovo brand is mostly recognized in North America as a leader in PCs and mobile devices and its reach will expand to include the smartphone and low-end server markets when the acquisitions get federal approval. In reality, Lenovo is a $34 billion company that operates in more than 60 countries and sells PCs, tablets, servers, storage and smartphones.
In his position, Kinlaw is responsible for distributors and 25,000 value-added resellers (VARs), about half of whom are active or selling and buying PCs or servers quarterly. He shared information on the growth of the VAR channel, the role distributors play and his three objectives for the year -- Lenovo's fiscal year runs April to April.
What does your partner ecosystem look like today?
Sammy Kinlawdirector of channel sales for the U.S., Caribbean and Central America channels, Lenovo
Sammy Kinlaw: The number of our active partners is growing and we're seeing 22% year-over-year growth. What's underneath that are three key things: Partners read; they know about the pending IBM x86 group purchase and want to get ahead of the news. Worldwide, Lenovo is the No. 1 PC company for three quarters running and last quarter we overtook Apple as No. 3 in North America. And, Lenovo has quality products that are price-point competitive, and many are unique, such as ThinkPad Yoga and ThinkPad Helix.
Partners have trusted us and we've shown them that we're channel-led. Eighty-five percent of our revenue is driven through the channel.
The profile of the majority of Lenovo's partners is small companies with 50 or fewer employees providing a value-add service to their customers usually in a localized geography. Lenovo also has larger partners with 50 or more employees, [but] the newer types of partners are the smaller VARs. At the same time, our revenue growth is coming from both the small and larger partners -- they're scaling equally.
Has Lenovo revisited its partner program recently to reflect the growth?
Kinlaw: It's unchanged since Lenovo Accelerate 2013, but as the number of partners has grown and revenue has grown, we're doing some self-reflection and recognize the need for operational efficiency and a good partner experience. So we have three bullet points for this year regarding our focus for the channel.
First is the evolution of an independent channel. In 2013, we focused on what we call hand-to-hand combat training, meaning our direct sales reps training the reps in the field. [The goal was to make] sure that our VARs know how to use the product; and understand the attributes of the products, the programs that support the products [and] how to position and sell Lenovo. We believe we had wild success with that. Our partners grew. Our customer satisfaction increased. All the measurements that show how a partner feels about you were positive.
So we have to continue doing what we're doing with trainings and demos and programs. It includes Web-based trainings, face-to-face trainings with our sellers to our partner sellers and webinars. We also host a Lenovo Live event and last year we hosted 50 across the country. So there are multiple avenues we use to reach our partners.
The No. 2 priority is hands-on customer experience through demo kits. There are three versions of these kits. We began with a version last year and it allows partners [to go] in a roving, mobile, fortified manner to the customer -- the client kit has five different platforms of mobile products -- and we loan it to them. It also contains marketing materials and training materials. Two thousand partners borrowed these kits.
This year we're going to refresh the client kit. We announced a server demo kit that became available in February and this week we announced an education demo kit for K-12 institutions. The education kit contains an education-series ThinkPad X140E, an 11E Chromebook offering and the Think Center Tiny Desktop. [Those are] the three platforms that we think an education institution would consider.
The third thing we're doing is making it easier for partners to do business with Lenovo. [Toward that goal] we're changing our New Customer Bonus program by moving our back-end discounts to front-end rebates. This will happen in the second half of the calendar year.
As Lenovo has more success growing in size and revenue with the channel, we have to continue to have a strong customer-partner experience and operational efficiency. A lot of our partners are small shops and they can't afford to wait. Front-end rebate discounting is paramount to our partners.
What's the role of distribution for Lenovo?
Kinlaw: Our reliance on distribution continues to grow. We challenge [distributors] as we do our [VARs]. Lenovo is distributor-led with our VAR community. They have to be in lockstep to speak on behalf of us. Distributors fulfill, configure, do pre- and post-sale support, and articulate Lenovo's programs. Partners don't buy from us directly.
Would you shed some light on Lenovo's server business?
Kinlaw: We have … one-way and two-way [servers] in the rack and tower space. Our server business within the channel grew roughly 70% year over year. We've had phenomenal success with servers, but we've been very dedicated to training our partners, training our reps to make sure our partners have the right configurations and options on the shelf to grow the server business.
Of course, we're excited about the pending x86 group announcement, but as a standalone division, if you look at what we've already done with servers, we had huge success. We're assuming that even without the IBM x86 deal closing, our server business was going to scale and grow.
At a high level, the pending x86 deal is mostly complementary products, meaning that IBM did not focus on the low end of the one-way, two-way rack and tower space we have, and we did not have the scale to grow to the data center the way that IBM does. In the middle, there's some overlap, but with any product line that's merging we'll get through that. Some products will come out, [and] some [will] come in. It will take some time, but the majority of products don't overlap.
What can you tell Lenovo partners about the Motorola acquisition?
Kinlaw: Lenovo does not sell cellular phones in North America. But we sell our smartphones in countries where 45% of the world's population resides, i.e., Indonesia, Russia, China and several other countries. So we have a very robust cell phone strategy. We're No. 3 in smart connected devices worldwide today.
Pending federal approval, [this deal] will give us a space in the mobile phone market in the Americas and instantaneous brand recognition from a trusted name.
What does this mean to Lenovo partners?
Kinlaw: Not much for the Motorola platform. Is there a convergence of partners moving to that space? Yes. So because Lenovo will go from the back pocket to the data center, yes, we're going to have products for partners selling in that space today. But could there be a convergence [of] a VAR selling smartphones to the data center? It seems to be moving that way.
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