Since the close of its acquisition of IBM's System X business on Oct. 1, Lenovo is keeping its word to its U.S. and Canadian channel partners and is following through on what Lenovo is calling the One Lenovo, One Channel strategy, which promises a unified partner strategy for System X and Lenovo business. Partners asked the company to meld the two as quickly as possible, and less than two months later things are getting done, according to the vendor's North American channel chief, Chris Frey.
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Back in August when Frey, vice president of North America commercial channels at Lenovo, spoke to SearchITChannel, he couldn't say much about the then-pending IBM System X acquisition. Now he's able to and described enthusiasm expressed by the partner community -- both Lenovo and IBM partners. He also shared Lenovo's plans for the System X business and the opportunity for its partners.
Prior to the System X acquisition, Lenovo had 11,000 channel partners in North America selling products on a regular basis. With the System X acquisition, the number of IBM partners brought on board is around 1,000. Some of those partners were already Lenovo partners, but some are high-end IBM partners that Lenovo previously had no interaction with.
According to Frey, partners believe that Lenovo has a good channel strategy and a solid supply chain, which allows the company to deliver products quickly and at the best cost in the industry.
"Then combine that with the System X business from IBM -- they've always had wonderful innovation, great technical expertise and support -- and we see a very synergistic relationship for the channel as we adopt our channel-first strategy here," Frey said.
Lenovo's One Lenovo, One Channel strategy is critical as the vendor increased the number of products available for partners to resell, Frey said, and he delved deeper into what that means.
One important order of business following the System X acquisition was to solidify on a single distribution model. What that means to partners is that they can go to any of the distributors that resold ThinkServers to get Lenovo System X and vice versa. Prior to the acquisition, the only distributors the two product lines had in common were Tech Data and Ingram Micro. System X was also distributed by Avnet and Arrow and ThinkServers via Synnex, D&H and ASI.
"It's now an open model, and partners have choices in terms of where they want to buy the technology: legacy Lenovo or legacy IBM System X distributors," Frey said.
The next channel-related action that Lenovo took was to create a single "coverage model." What that means is that Lenovo System X reps and PC reps will jointly call on business partners inside of their geographic area. "That gives us a very effective overlay coverage model where the PC rep will own the business partner or the account and the System X brand specialist will overlay technical expertise to the channel and the PC rep will make sure that they're engaged and introduced in that manner," Frey explained.
Another issue was compensation. "We in the North American group are the first organization in the company to have the System X sales reps are on our commission structure and sales plan inside of our Lenovo system. So the PC reps and the System X reps in the channel are both compensated on reselling ThinkServers and System X servers," Frey said.
Finally, the vendor grandfathered some of the programs that had not yet expired for the System X resellers and began consolidating the partner programs.
Going into Lenovo's new fiscal year on April 1, 2015, the company expects that all programs will be integrated, simple, consistent and predictive. "Partners will know how to make profit and not need a calculator," Frey said. And, he added, "Partners will see that by leveraging the scale of our product portfolio not only can they leverage their top-line revenue growth but they'll be able to leverage our bottom-line profit contribution to the business partner."
With the System X acquisition, the typical Lenovo partner is able to sell higher in the stack while the IBM resellers can sell lower in the stack as it relates to lower-end servers and PCs.
In response to a question about the continuing rivalry among vendors to win new partners, Frey said he believes in letting the company's actions and results speak for themselves. Lenovo is the No. 1 PC manufacturer in the world, with 85% of product sold through its channel partners, a stat that has been consistent for the past four years. He also noted that Lenovo doesn't have a services organization that's out in the market competing with its partners.
"My view of an end-to-end channel-friendly company is one that does business with the channel, through the channel and is dependent on the channel; one that doesn't compete with them directly or on the Web, and one that is complementary to the solutions they're providing customers versus deciding when they want to play with them and when they don't," he said.
Earlier this month, Lenovo posted its second-quarter worldwide results for the period that ended on Sept. 30. The vendor outgrew the market (for the 22nd quarter in a row) with worldwide revenue up 7% at $10.5 billion. The company also achieved a record-high PC market share of nearly 20% and became the top vendor in the PC-and-tablet category.
In North America, the company also saw about 7% growth, with 1% improvement on gross profit, for a total of about $1 billion in revenue, a high for Lenovo, according to Frey.
In North America, the number of partners reselling the ThinkServer product line was at an all-time high, said Frey. And the SMB business was up 20%.