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Lenovo wants to move away from shipping boxes

After admitting to being addicted to market share, server supplier Lenovo is changing tack by focusing on customer experience and new areas such as software-defined infrastructure

This article can also be found in the Premium Editorial Download: CW Asia-Pacific: CW ASEAN: Juggling in the cloud:

Lenovo may not be the biggest supplier of servers used in datacentres, but it hopes its renewed focus on customer experience and new growth areas will help the Chinese company carve out a bigger slice of the Asia-Pacific (APAC) server market.

That message was reiterated several times by Lenovo datacentre group’s senior vice-president for worldwide sales and marketing, Roderick Lappin, at a recent roadshow in Singapore.

“Some 12 to 18 months ago, we were very much about x86 volumes and we were addicted to market share,” said Lappin. “But today, rather than try to ship boxes, we’re focused on understanding our customers’ needs and ensuring we’re delivering solutions that bring more value.”

Lenovo had admitted its mistake of selling servers like it had been doing with PCs when it acquired the x86 server business from IBM in 2014. Lappin said the company did so to leverage its strengths in procurement and supply chain, but “that has turned out to be quite a mistake”.

During the first quarter of 2017, Lenovo’s server revenues fell 16% from the same period in 2016, according to technology research firm Gartner. With a market share of 5.8%, Lenovo is in fifth position in revenue terms behind HPE, Dell-EMC, IBM and Cisco.

Efforts are now underway to align Lenovo with the needs of an evolving server market that is increasingly being shaped by the exponential growth of data and cloud computing, which has changed the way servers are put together and deployed.

“Every single employee at Lenovo is now focused – and paid in bonuses – on customer experience, not just revenue and profitability,” Lappin said. “We also don’t have any legacy to protect and sell, and we really want to understand our customer needs through our ecosystems of ISVs [independent software vendors] and partners.”

Without making direct references to rivals Dell-EMC and HPE, both of which had undertaken several mergers and acquisitions of different IT suppliers in recent years, Lappin said: “There’s no legacy in our thinking, which means we’re free from the shackles of legacy infrastructure.”

Citing industry figures, Lappin said spending on infrastructure hardware – which comprises segments such as high performance computing (HPC), private cloud, private non-cloud and hyperscale – was worth $80bn in 2016, and will grow to $93bn in 2020.

He said Lenovo is investing in all segments of the server market, including private non-cloud infrastructure hardware for which spending will decline by 4% between 2016 and 2020.

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“While that market is growing at -4%, the reality is that it still makes up 40% of the total market,” Lappin said. “It’s a $42bn addressable market for us, and we’ve got an opportunity because our share is small.”

Clement Teo, principal analyst at Ovum, however, told Computer Weekly that in a fairly competitive server market, Lenovo should go after growth areas such as software-defined infrastructure, which is expected to grow at a compound annual growth rate of 10% between 2016 and 2020.

Even as Lenovo remains keen on selling traditional infrastructure hardware, Lappin said a disproportionate amount of research and development (R&D) investment is being made by the company in software-defined infrastructure, as well as the HPC and hyperscale segments.

Sumir Bhatia, vice-president of datacentre group at Lenovo Asia-Pacific, who was previously from Dell-EMC, said the company has hired experts – including those in artificial intelligence – from outside the organisation, and retraining its channel partners and staff on new IT areas.

Lappin said: “Two years ago, we were just a hardware machine. Now, I have 40 people just focused on putting together curriculum and executing training across geographies to ensure we stay abreast of industry trends and what Lenovo is addressing”.

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