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Lenovo bolsters services play with PCCW Solutions

Lenovo’s acquisition of PCCW Solutions brings sought-after capabilities in hybrid cloud and application modernisation as it expands its services footprint in Asia

In 2021, Lenovo moved its IT team into its new services and solutions group (SSG), lending its expertise to customers that face similar challenges as it does with running a large enterprise that spans 180 markets.

Like what Amazon did with Amazon Web Services (AWS), the idea was to commercialise its internal IT capabilities and fuel its transition into a services-led company.

More recently, Lenovo acquired PCCW Solutions, the IT services outfit of Hong Kong conglomerate PCCW Group, forming a new company called Lenovo PCCW Solutions in a bid to stake a claim on Asia’s $320bn IT services market.

Lenovo’s efforts to focus its resources on services have started to bear fruit. In its recent second quarter, it grew its services and solutions revenues by 26%, further improving its operating margin to 21.4%. For the first time, revenue from non-hardware-tied solutions and services also accounted for over half of SSG’s business.

Moving forward, PCCW Solutions, which has about 4,000 engineers with sought-after capabilities in hybrid cloud, digital workplace and application modernisation, is expected to be a key pillar in Lenovo’s go-to-market strategy for services.

The company has a stronghold in Hong Kong’s telecoms sector, serving as the IT services provider for HKT, the telco subsidiary of PCCW Group. It was also involved in key government projects like the Hong Kong smart identity card and ePassport.

Outside of Hong Kong, PCCW Solutions has developed a workforce management system for Singapore subway operator SMRT to schedule engineers for maintenance operations.

Ken Wong, Lenovo’s executive vice-president and president of its SSG business, said Lenovo has capabilities – such as building metaverse use cases for customers in China – that PCCW Solutions can leverage as well.

“We believe there are synergies between PCCW Solutions and us,” Wong said, adding that Lenovo is already involving PCCW Solutions in its meetings with customers, which include nearly all of the Fortune 500 companies.

While there are some overlaps in the customer base of Lenovo and PCCW Solutions, Wong said Lenovo’s approach has always been to provide choices for customers, which means it will support hardware from other suppliers in its service contracts.

“You will seldom find a customer that has only one brand of hardware,” Wong said. “So, if you're offering services and solutions that only work with one vendor’s hardware, the customer will not buy them and you're not going to win the contract.”

Even as Lenovo PCCW Solutions makes a deeper push into Southeast Asia, where some local markets and sectors are dominated by incumbent global and regional players, Wong is confident that the company has the chops to set itself apart from competitors.

That includes not only systems integration capabilities in deploying enterprise applications like SAP and ServiceNow, but also expertise in areas like hybrid cloud, from virtualising workloads to orchestrating workloads across private and public cloud environments, Wong said.

Since Lenovo PCCW Solutions was formed about two months ago, Wong said the company has embarked on a “work stream” to target top customers in ASEAN, Hong Kong and China with its One Lenovo approach that provides a full range of hardware, software and integration services.

As with any merger and acquisition, Lenovo has anticipated integration challenges that could lead to employee attrition. Wong said a taskforce has been set up to help PCCW Solutions employees better understand Lenovo and the opportunities to come.

“I was surprised that there was very positive feedback from PCCW Solutions employees about joining a global company that is diversifying its business at the same time and is serious about solutions and services which they are at the core of.

“We have good momentum so far, but we need to consistently execute because it’s going to be a multi-year venture,” Wong said, noting that if the SSG unit continues to maintain its growth trajectory, the business should double its revenue to $10bn within three to four years.

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