Can Lenovo become the top UK corporate PC manufacturer?

Can Lenovo continue to grow to take on HP and Dell in the corporate arena?

Can Lenovo continue to grow to take on HP and Dell in the corporate arena? Jenny Williams investigates

The latest PC sales figures released by analyst Gartner showed Lenovo grew its market share by 31% between 2009 and 2010, the strongest growth among the top five PC suppliers worldwide. Its PC shipments grew 33% year-on-year compared with an industry growth rate of 9.7%, with shipments rising 43% in western Europe.

Glen Williams, executive director for enterprise at Lenovo UK, told Computer Weekly that Lenovo plans to continue expanding its corporate business in the public sector, through Microsoft Windows 7 refreshes and with small businesses customers.

"Our vision is to become the PC supplier of choice in the corporate space," says Williams.

As well as buying IBM's PC unit in 2005, Japanese news reports suggest Lenovo could now acquire a majority stake in NEC's PC division to boost its PC business. But can Lenovo become the UK's top manufacturer for corporate PCs?

Rapid market growth

Eszter Morvay, research manager at analyst IDC, says Lenovo is now the third biggest player in western Europe's large enterprise segment behind HP and Dell.

"Lenovo is one of the fastest-growing suppliers. When you look at [western Europe] market share in terms of growth between 2009 and 2010, Dell and HP had stable market share at a third of the market each. Lenovo went from 12% to almost 15.5%," she says.

But while Lenovo is growing, its market share is still half that of HP and Dell. Morvay says the company faces a tough fight with HP and Dell, both of which have a large share and customer base.

But Lenovo's recent focus on gaining SME and consumer customers could help its continued growth in the corporate sector. "As it gets bigger, it can leverage more in economies of scale and be more aggressive in competition with HP and Dell," says Morvay.

Ranjit Atwal, principal research analyst at Gartner, says Lenovo has managed to steal some business from HP in the UK because the IBM ThinkPad branding gives it an edge in the PC market.

He believes Lenovo is benefiting from investing in sales in the channel and corporate PC upgrades despite purchases slowing as organisations consider tablet devices.

Tablets will change the PC industry

However, Atwal believes Lenovo will have to adapt its approach to the professional market to sustain such rapid growth. He expects the market to shift as PC suppliers launch tablet devices and compete directly with non-PC suppliers.

"The way businesses purchase professional PCs, over time, won't be about hardware. It'll be about delivering applications on hardware and how they deliver solutions," he says.

Lenovo needs to be more dynamic. "It is still achieving good results in the UK, which says something given the dominance of Dell and HP. If it can beat them in UK, its ability to beat elsewhere is looking quite good," he adds.

Clive Longbottom, services director at analyst Quocirca, says Lenovo has failed to offer a strong tablet device in competition with other PC manufacturers, which may hinder its future growth.

"When Lenovo took over the ThinkPad range, it had a good installed base and loyal users. But problems with the quality of its goods has lost it a few people," says Longbottom. "With its consumer and SME range, they weren't cost or performance competitive. It has a bit of a problem - although everyone sees it as IBM, it's not."

Quality problems

"HP had cost and quality problems. Dell had quality problems and ceased to be as competitive. Lenovo has been floating there. Machines are sluggish, the support isn't solid," adds Longbottom.

"Users will say it does the job, but it isn't a Sony Vaio. Employees will end up sourcing their own machines and using Lenovo as a doorstop somewhere."

In response, Lenovo's Williams says, "We are constantly investing in research and development to improve the performance, reliability, manageability and security of our products. Our failure rates are a third less than our competitors'. This significantly reduces the total cost of ownership, which is key in the corporate space.

"We have grown very quickly in the past quarters, so now we have to keep the momentum up. We cannot be complacent, because we know our competitors will chase us closely."

Lenovo may be the fastest-growing PC manufacturer, but it will need to survive the anticipated shift in the UK PC industry - as will its rivals. As businesses consider new devices and alternative form factors, Lenovo will need to step up its product offering to keep pace with its record growth.

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