HP grapples with Lenovo acquisition of IBM's x86 server business

HP tries to bolster its relationship with IBM customers and partners while Lenovo's acquisition of IBM's x86 server business awaits approval.

While Lenovo waits for federal approval for its acquisition of IBM's x86 server business, Hewlett Packard hasn't wasted any time putting itself in front of IBM customers and partners. Just last week the vendor's Project Smart Choice website went live, as did its latest direct attack on Lenovo.

From a partner perspective, Project Smart Choice is a set of partner programs and activities for HP/IBM and exclusively IBM partners to walk them through the business proposition and the benefits of making the transition to grow their business with HP, according to the vendor. There was a soft launch of Project Smart Choice at HP's Global Partner Conference 2014 in March.

HP knows the pending Lenovo acquisition of IBM's x86 server group is about more than buying commodity hardware. "The thing that's really frightening [for HP] is that with the sale, Lenovo is getting IBM people, channel, services and Adalio Sanchez, the general manager in charge of that business who has an incredible track record," said Dan Olds, principal analyst and founder of Gabriel Consulting.

Sanchez and a few other people, he explained, brought back IBM's Unix systems from the dead with the RISC System (RS)/ 6000 Power more than a decade ago. "Today, they own the market. Sanchez knows what he's doing," Olds said. The Lenovo acquisition includes approximately 7,500 IBM employees worldwide that will transition to Lenovo.

The thing that's really frightening [for HP] is that with the sale, Lenovo is getting IBM people, channel, services and Adalio Sanchez.
Dan Oldsprincipal analyst and founder, Gabriel Consulting

With the purchase of IBM's x86 server group marking Lenovo's move to the big stage -- the data center -- HP wasted no time touting its enterprise prowess in the marketplace. The day after the news of the Lenovo acquisition in January, Chuck Smith, vice president of strategic growth and business development with the Enterprise Group at HP, was put in charge of Project Smart Choice.

"We've been actively working with selected VARs [vaue-added resellers], distributors and end customers around our message and brand, which is very much linked to our enterprise strategy and group and where we're going," Smith said.

For IBM partners, HP put in place a fast track for certifications via the Smart Choice program and has done a lot of work to integrate it into its PartnerOne program. This enables IBM partners to participate in PartnerOne points and programs out of the gate.

"Given their revenue position with IBM, we grandfathered them in at a certain level, and then within about 12 months they must complete certifications, meet business goals, ensure that they have the appropriate resources, etc.," Smith said.

HP also put in place product offers for the select IBM partners, demo units, and promotional and new business opportunities, as well as marketing and customer access around HP positioning that partners can leverage, he added.

HP has targeted 100 IBM partners globally and is actively working with about 45 to date.

Smith said HP looks at IBM's shedding of its x86 server business as an opportunity. While Lenovo may be a formidable competitor in the PC space, the vendor's capability to deliver more complex solutions in the data center is yet to be seen.

"That's our messaging, and we're taking advantage of the timing -- the uncertainty for IBM customers as to what the portfolio will look like, the global support, the integration capability, and whether Lenovo can be a true enterprise data center player," he said.

That's the same kind of talk that was out there when Lenovo purchased IBM's ThinkPad business back in 2005. "I'm sure the competition is spreading information about what customers should think about, and you can understand that," said Jay Parker, Lenovo's president of operations in North America, at Lenovo's Accelerate 2014 partner conference earlier this month.

"That being said, we do business with over 70% of Fortune 500 companies in this region and have extensive relationships with customers and partners," he added.

Lenovo also let IBM partners know that on Day 1 of the x86 group acquisition, they become Lenovo partners and can continue to sell servers. "Their business is not at risk as a partner selling IBM," said Parker, adding that the move should stabilize some of the fear and uncertainty about how the channel strategy will play out.

There will be a transition period. Given that the IBM deal hasn't closed yet, the only thing Parker was able to comment on is that Lenovo will do the appropriate thing so IBM partners can continue to sell and make money selling the products.

Olds expects that IBM x86 customers will want to hear what the soon-to-be ex-IBM/new Lenovo partners and team have to say. "These partners will be offering the same IBM technology that's bulletproof and that customers love, but now with Lenovo economics behind it. That's a very powerful story," he said, especially since the x86 business at IBM wasn't viewed as a very valuable part of the company, given the vendor's culture that's built around big money systems such as the mainframes and Unix boxes.

"This Lenovo story is going to make the x86 server business a lot more interesting and competitive," Olds said.

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For IBM x86 server partners: Will you consider shifting allegiance to HP following the Lenovo acquisition of the x86 server business from IBM?

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