Lenovo is working to penetrate the server market like it did with PCs. With PCs, it bought the failing IBM PC Company and effectively turned it around to do what IBM never did: Make it the market share leader. Lenovo is taking a different but no less compelling path to servers and it realizes that the market has transitioned over the last decade away from server pure play to solutions that also contain storage and networking.
I’m at Lenovo’s enterprise analyst meeting this week and while I can’t talk details, and much of what is being presented hasn’t been announced, I can talk impressions. So far, I’m impressed.
The market is undergoing multiple transitions from vendors, like Dell, that are restructuring themselves to better approach emerging opportunities, to new competitors, like Amazon Web Services, that are scaring the hell out of the existing vendors, to increasing disclosures that suggest these new web service providers are providing the NSA with information that folks thought was confidential.
This creates a lot of potential churn. With that churn comes opportunity. Lenovo plans to ride this opportunity wave.
For Lenovo, it is about targeted markets, partnering and execution. It is mostly targeting the mid-market and leaving the large enterprise to others for now. This dovetails nicely with its sales channel and current capabilities. Plus, the sales cycle is shorter in the mid-market, cutting years out of the path to credible market share. Its primary partner is EMC, which helps it complete its product offering and people from both Dell and EMC are on staff to ensure this partnership doesn’t end as Dell’s did. This should work because EMC was embarrassed at the highest levels by the Dell partnership failure and has since moved to massively improve the depth and focus on partnering efforts like this. Lenovo has studied the failure and can make credible assurances that the mistakes made on both sides of the Dell deal won’t be repeated by Lenovo as a result.
Lenovo has proven with its ThinkPad effort that it knows how to execute against a plan like this, and we are still in the early stages. It has committed to fund and continue to staff a significant effort to bring products to market, which include the significant low-end storage and cloud services it acquired from EMC. Its track record with its ThinkPad execution showcases that it can pull this off and avoid the failure that Apple had when it tried to penetrate this market.
I was close to Apple’s server failure, which occurred because it was unwilling to adequately fund the effort, build adequate advocacy, or expand the offering to a solution. When Apple brought its servers to market early last decade, it approached the market like its success was a given and assumed the fan base would assure success. However, Apple users were far removed from the IT buyers who bought servers. Most of its offerings were actually deployed eventually as inexpensive Linux boxes, and it never got to critical mass with its own platform. It didn’t help that, at the time, Apple was changing from being a computer company to a consumer electronics company, which was counter-strategic to the server effort. This effort was further hampered by the lack of an enterprise partner and no real ability to build momentum. Finally, Steve Jobs thought IT buyers were stupid. You just can’t sell a product successfully to customers that you think are mentally challenged. If you can’t understand your customers, you’ll never be able to sustain sales to them. As a result, Apple eventually withdrew the product and the effort failed.
Virtually none of the things that caused the Apple failure are true for Lenovo. The company values and knows IT, it knows the market and it isn’t dependent on fans. If its servers are deployed with Linux, that’s OK, and it has powerful partners in EMC, Microsoft and Intel.
Wrapping Up: Lenovo Should Be Able to Execute to Plan
Lenovo is in good shape to take advantage of the opportunities that the current market and vendor changes are creating. If it can create synergies between its desktop products and servers, leverage its enterprise-class partners, and execute to plan, it should emerge reasonably quickly as a mid-market back-end solutions provider. One risk remains: Maintaining the breadth from clients to servers has been impossible for both Apple and IBM, suggesting the path isn’t without risk. But since Lenovo is initially focused on the mid-market, has partners in place, and is naturally resistant to the problems Apple faced, it should weather the transition nicely.
Its recent financial report, which showcases strong growth in both the server and mobile spaces, appears to support this conclusion.