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Lenovo channel to see focus on PCs, services, data center

Lenovo's North American channel chief points to premium PCs, hyper-converged technology and services as some of the key opportunities for the company's channel partners.

ORLANDO, Fla. -- Channel partners looking to get a grip on the direction of Lenovo need to look no further. Sammy Kinlaw, North American channel chief at Lenovo, shared the vendor's five strategic goals for 2016: PC growth, premium PC opportunities, data center growth, growth in key vertical markets and services.

SearchITChannel talked to Kinlaw at the opening day of Lenovo Accelerate 2016, the Lenovo channel partner forum. Accelerate runs May 9 to 11.

Let's talk a bit about Lenovo's channel focus at a time when the global PC market is declining.

Sammy Kinlaw: To your point, we know that the PC market is declining at best, and yet, if I look at our last fiscal and our TopSeller business [preconfigured systems that are in stock at distribution and ready for immediate shipment], our revenue through our commercial channel was up 8% year over year and our total revenue through the channel was up 15% year on year in a market that's flat to declining.

What's even more interesting is that when you look at it through units sold, they're up 33% year on year. So, think about that ... The first question I would think is, 'Why or how can that be?'

We're thrilled with revenue growth and systems, but the average price per system sold revenue has decreased -- and that's based on the success of Chromebook. So, we have a joint strategy with PCs: Growth overall is important, but we also want to capitalize on the opportunity that's in front of us for premium PCs' growth. The reason we think that we can gain premium PC growth this year is two reasons: One, because of Win10 opportunity; and two, because of the Skylake processor change from Intel.

What that's done for us is drive a proliferation of premium products that we've been able to develop and announce ... Things like the ThinkPad X1 Carbon and the ThinkPad X1 Yoga. We've got triple the number of ultra-portable devices available this year than we had in our last year. And that's all based on technology changes from our supporting players, Microsoft and Intel.

Also, the K-12 vertical was our biggest and fastest-growing in our last fiscal, which began April 1. We had 99% growth year over year in the channel. Today, we announced two N Series laptops specifically designed for K-12 institutions: The N23, which is Windows 10-based, and the N4 Chromebook.

Have you made any changes in your partner program? What are the opportunities for the Lenovo channel?

Kinlaw: I have five channel opportunities for the year: PC growth; premium PC opportunity based on Win10 and Skylake -- they're more expensive, higher price-per-unit products, things like X1 Carbon, as an example; data center growth; growing our key verticals, i.e., education K-12, healthcare, [small and medium-sized businesses], and workstation opportunities in verticals such as oil and gas and digital production, CAD/CAM, for example; and services.

Last year, we paid partners on services and they accrued about 1.5 points on the back end, and we're moving to five points.
Sammy KinlawNorth American channel chief, Lenovo

Services have not been a focus for us in the past. I have not talked about services on stage at Accelerate to date, but I'm going to talk about it tomorrow. And I'm going to talk about increased coverage for Lenovo reps in the channel, and I'm going to speak about increased back-end monies that we're beginning to pay our channel partners -- as an example, last year, we paid partners on services and they accrued about 1.5 points on the back end, and we're moving to five points.

What types of services are you referring to?

Kinlaw: Maintenance services, selling extended warrantees or if they sell accidental damage protection.

Could you talk more about data center growth?

Kinlaw: We've spent a year in acquisition mode, and on this stage last year, I promised the partner community a One Lenovo statement. That vision has become a reality, so we're done with acquisition and we're into execution. And there are three areas of execution that we've made good on: We promised One Lenovo in terms of partners, so if you were a System x partner, you could now sell Think; and if you were a Think partner, you could now sell System x -- all products, all the time, all partners. I also promised one process, and that meant one process to order through distribution. And I promised one process for special bids opportunities for our larger engagements -- you go to one place to get it. And finally, I promised one click -- if you were a partner and you needed information on products last year, you had to go to one website to go down the server path for System x and go down one path for Think. Now, you go to one site.

So, one process, one click, it's all combined now, so everything we committed to we brought to fruition.

So that brings me to your question and why data center is important this year ... It's important because we're looking to change the dynamics of the data center ... We've expanded our ecosystem of software and hyper-converged players, so we've added Nutanix as a partner, Red Hat, SAP and, most recently, we announced Juniper as an ecosystem partner.

Why would data center be important to this audience? Based on third-party validation, Lenovo is the most scalable, the most reliable, and that's based on ITIC. Also, if you look at TBR, we're the No. 1 in customer satisfaction for System x or X86 architecture. Back on changing the economics of the data center, we believe we have a clear strategy for data center economics, and we're surrounding ourselves with those leading ISVs to usher in software-defined.

Our ultimate goal is to deliver Cloud economics to businesses of all sizes. We're always going to look at industry leaders in software-defined and consider, 'Do we need to be a partner?' We're not partnering with everyone, but we're certainly partnering with who we believe are the industry leaders who are changing the landscape of how our VARs sell end users data center opportunities.

Give me an example of how Lenovo is working with Nutanix or Red Hat or SAP or Juniper?

Kinlaw: Look at Nutanix -- they're the industry leader in hyper-converged. They have the majority of share of wallet in the hyper-converged. We've jointly worked with them on a Lenovo-Nutanix appliance that's cobranded. We believe it allows us to compete with Cisco and [Hewlett Packard Enterprise] with a partnership that these folks do not have and we do. We announced the partnership in December 2015, and we started shipping our first partners in March.

So, what's the opportunity for partners?

Kinlaw: All of them will have access to these products. Selling hyper-converged and software-defined is newer to most of these VARs. It's a new opportunity, a new way to go to market and a new approach to the data center versus rack, tower, adding traditional storage. You've got to look at the holistic picture of how you can implement, the cost savings that are associated with it, [and] the timeframe shortens when you're looking at software-defined. So, it's a new approach and, frankly, a large portion of training at Accelerate is around software-defined, how you partner with Lenovo on software-defined, what does our ecosystem of partnerships look like? ...

We're already getting wins on the board, but we understand that there will be a timeframe for people to get comfortable selling the offering and the technology. The window of opportunity is huge and our pipeline has been fantastic. Now, we just have to build the pipeline and close the deals.

Selling a box still isn't where partners are going to make their money today ... It's still about the services around the sale. So, what is Lenovo doing about services?

Kinlaw: So, we know we have to pay our partners on the hardware we sell, and we want to reward them for growth and customer acquisition, and then it goes back to the services discussion that we talked about earlier. It hasn't been a revelation for us, but it's something we didn't have last year when we acquired System x, and we knew we had to make a change.

So, I have to pay more if a partner sells a service, they collect on the service and that means basic accrual monies, such as the 1.5 going to five points, and then I've got to pay them SPIFFs -- the SPIFF program is huge and has been around Lenovo for several years. We pay on PCs, pay more on premium products and we're paying more on services than we ever paid before.

How will you get the Lenovo channel up to speed on services?

Kinlaw: Our partners are savvy, and do they know how to sell services? ... Yes. But I do recognize that, as we move ahead, I'm going to put more emphasis on trainings, so they understand how to marry our services specifically with the hardware we're selling. So, you bring up a key point in that we had less emphasis on it last year and we're going to double down the emphasis this year. As a matter of fact, we have a whole suite of trainings that we'll be offering through the course of this year.

Next Steps

Read about Lenovo's move to court other manufacturers' VARs.

Learn about Lenovo developments in human-machine interaction.

Gain insight into Lenovo's x86 business.

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