Lenovo optimizes to gain share in a market poised for fragmentation by use case

TBR perspective

At Lenovo’s Transform 2.0 event, Chairman and CEO Yuanqing Yang (“YY”) laid out the Lenovo strategy crisply in his opening remarks, relying on multiple proof points from analyst firms in the process. The company has been gaining share in a market in the aftermath of consolidation, and it sees nothing but brighter days ahead. The source of Yang’s optimism rests on scale, a traditional lever that has pulled commodity component manufacturing to Asia for decades. How Yang believes Lenovo wins stems from the company’s supply chain best practices, where it can optimize the full stack of compute to serve the full stack of instances on the one hand and create a vast array of endpoint devices for humans and machines alike on the other.

The tight partnership with NetApp (Nasdaq: NTAP) was the biggest news at the event. The venture essentially melds the Lenovo and NetApp product lines in a manner similar to the scale advantage amassed when the former Dell and EMC merged to form Dell Technologies (NYSE: DVMT). The two companies have also created a joint venture in China, with Lenovo having 51% ownership as required by Chinese law, and plan to develop a line of storage products to meet the unique requirements of customers in China while leveraging Lenovo’s scaled manufacturing footprint in region.

Supply chain alone cannot help vendors differentiate, as many past Asian manufacturing giants have come to learn as overlapping channels confused markets and compressed middleman margins in the bygone era of transaction selling. Services selling requires an equally as deft and varied set of commercial offers to fit the financial strategies of the business entities Lenovo targets, and the seeds of these early “as a Service” commercial offering wrappers have been in flight for several years.

Commercial flexibility, while lagging the supply chain competencies, remains far ahead of the professional services wrapper commodity components required in the pivot to selling outcomes or solutions. Lenovo’s partnerships with leading systems integrators will be imperative for enterprise adoption as the business translation and advisory services increasingly relegate the compute and device acquisition to a derived decision.