Lenovo solution providers said the departure this week of Lenovo North America President Emilio Ghilardi is yet another indication of just how tough it is going to be for the company to find its footing in the data center business.
Ghilardi stepped down as president of Lenovo's North America business after less than 18 months on the job and less than two months after the company rolled out its new ThinkSystems data center portfolio, CRN reported Wednesday. Ghilardi led Lenovo's entire North America business until April, when the company hired Intel veteran Kirk Skaugen as president of its Data Center Group. Ghilardi's interim replacement is Christian Teismann, currently senior vice president and general manager of Lenovo's worldwide Enterprise Business Segment, Lenovo said.
Whether it's Teismann or some else who eventually takes the reins on a permanent basis, Ghilaridi's replacement faces many obstacles as the company tries to muscle share away from data center stalwarts like Hewlett Packard Enterprise, Dell EMC and Cisco, solution providers said.
"When customers look at Lenovo, they see desktops and laptops. They don't look at Lenovo in the data center," said Ron Venzin, partner at Focal Point Solutions Group, an Ellenton, Fla.-based solution provider that works with Lenovo, as well as Hewlett Packard Enterprise and Dell EMC.
With the introduction of ThinkSystem, its first end-to-end data center infrastructure portfolio, -- including new servers, storage, and networking gear -- and its ThinkAgile portfolio of software-defined infrastructure in June, Lenovo is moving to cement a spot among the industry's most powerful IT vendors nearly three years after acquiring IBM's x86 server business for $2.3 billion.
But channel partners are concerned that Lenovo has not made the kind of moves needed to make its mark in the data center business.
Executives at several large data center solution providers told CRN Lenovo's lack of mindshare among U.S. data center partners, the pressure facing the server and storage markets its trying to break into, and even the current political climate are all converging to keep it from making share gains and asserting itself in this market.
Dan Serpico, the CEO of FusionStorm, No. 46 on the 2017 CRN Solution Provider 500, said Lenovo is practically invisible to data center solution providers like his company, even though it does sell Lenovo technology.
"I don't see them in the market," Serpico said. "We're seeing [multiple smaller rivals] a lot, and we're not seeing Lenovo. We might sell a couple million dollars of Lenovo a year, but I don't know anyone over there at all. I've had people from Huawei call me. I've had meetings with Supermicro. There's a genuine effort by competitors to reach out. If there is at Lenovo, I'm not seeing it, and you would think we'd be someone they'd like to go after."
A top executive at another national data center solution provider that doesn't work with Lenovo said the technology vendor hasn't made contact, even as competitors put on a full-court press.
"To my knowledge, they have not tried to reach out to us," the solution provider executive said. "And I don't think we've even come up against them in our selling environments, and we have a pretty large customer base in the Carolinas, right in their back yard. HPE, we hear from. They're pretty in tune with marketing to us on a regular basis. Once a month we've got HPE coming after us, or some of the companies that sell a storage or security enterprise product that they want us to wrap into our solutions. I'm not sure where [Lenovo] is targeting, or how they're targeting, but we're not hitting the radar screen."
One distribution executive who has worked closely with Lenovo in the public sector, said the vendor may be in for some "rough quarters" as its new executive team tries to get its data center strategy off the ground.
"I don't believe personally that Lenovo is demonstrating the same level of engagement, experience and effectiveness in its response [to the channel] that they have in yester-year," said the distribution executive, who asked to remain anonymous. "There's concern at best, and desperation at worst, from the top that there are some rough quarters ahead while they continue to work through their shift in focus. They've always had a strong SMB play, and have been consistently strong and aggressive in their sales strategy, but the strategies and support seem to have taken hits at the same time."
In the first quarter, Lenovo's worldwide server revenue declined 16.5 percent and shipments fell 27 percent while Chinese data center upstart Huawei boosted shipments nearly 33 percent, according to research firm IDC. Lenovo finished the quarter with 6.2 percent server market share, down from 7 percent a year prior. That market is dominated by HPE and Dell EMC, which together control about 44 percent of the market.
And the storage market, where Lenovo's ThinkSystem portfolio is targeted, is under significant pressure. Revenue among major storage vendors is falling as demand grows for low-cost storage being sold into hyper-scale data centers.
Lenovo's Americas sales declined about 4 percent year-over-year in its 2017 fiscal year, which ended March 31. The company said fourth quarter profits dropped 41 percent year-over-year as a result of intensifying competition.
"Data center hardware isn't really growing," said Stephen Monteros, vice president of business development at Sigmanet, an Ontario, Calif., solution provider that works with several vendors. "You've got Cisco, Dell EMC, HPE, and Lenovo is basically trying to enter the market, a market that may or may not be growing. It's not a pretty picture on paper, and it's not a pretty picture in reality. [Lenovo's] message is fairly new. I don't think they're going to be able to do anything quickly."
North America Channel Chief Sammy Kinlaw acknowledged that Lenovo has a lot of work ahead of it to break into the North America data center market in earnest and said the company is working to recruit the right partners. "It's going to take grassroots efforts… it's going to take third-party validation, which there is a plethora of," Kinlaw said in an interview earlier this summer. "It's going to take hand-over-fist climbing, much like it did when we grew the PC business. We've got to have the right products on the shelf, which we do today. We have to have the right program at the partner level. We have to continue building trust with our partners."
Kinlaw said he does in fact have a strategy for attracting larger data center solution providers to Lenovo. "There are certainly targeted lists, and [we're learning] which partners are buying us and not buying us, understanding which partners are there that we're not using and we're using our acquisition teams to reach out to them," he said.
His success rate when he gets in front of potential channel partners is high, he said. "These guys don't want to be left flat-footed. Even folks who ignored us at the onset, I think two-and-a-half years in [from the $2.3 billion purchase of IBM's x86 server business], the realization is we're not going away. As a matter of fact, we're getting better. We're getting stronger. I don't get much resistance. There's a few holdouts, of course, but overall when I knock on someone's door, they want to open it and let me in. I don't think we're getting the Heismann."
The sales strategy Lenovo is using to move from its position as the world's largest PC company to a bona fide data center power hinges on its reputation as a manufacturer of high-quality products. The company's newly formed executive team touts "third-party validation" of product quality, reliability and customer satisfaction. It also points to wins among demanding, high-profile customers, like SAP, which runs its internal SAP HANA applications on Lenovo gear, and the Barcelona Supercomputing Center, which is built on Lenovo servers.
"Why wouldn't you want to sell the most reliable, the most innovative portfolio with the highest customer satisfaction platform out there?" said Kim Stevenson, Lenovo's senior vice president and general manager of data center infrastructure, in an interview earlier this summer. "What is there to be skeptical about? Our record of innovating with partners stands alone relative to our competitors because we don't compete with our partners."
Solution providers said the thing often causing skepticism is not Lenovo's technology but something the vendor can't change: it's national heritage. While the $43 billion company today has operational centers in both Morrisville, N.C. and Beijing, it was founded in China and is widely seen as a Chinese company.
"The problem they have is not technology; It's politics," said Rene van den Bedem, chief architect and strategist at RoundTower Technologies, a Cincinnati, Ohio-based solution provider that works with several major IT vendors, including Lenovo. "It's a political issue because they're known to be a Chinese company. When I lay out OEM partnerships, when I mention Lenovo, the customer says, 'No, I don't want anything to do with that. They're a Chinese company.' The Chinese are known for reverse engineering technology. It's purely political."
The China question comes up regularly, particularly in sales to government clients, solution providers said.
"We were recently in two deals where the clients said we couldn't quote Lenovo to them," Venzin said. "These were Federal government contracts, and they said they weren't able to buy from Chinese-owned organizations."
In addition, solution providers said customers are often unwilling to make changes to their data center infrastructure unless they've been attracted by significantly improved features or technology.
"Once people decide on a horse, they don't change for one or two features," said Sigmanet's Monteros. "It has to be significant. Better orchestration, better management tools, and not just slightly better, markedly better. This is a brand new offering for [Lenovo] and you're asking somebody to trust their data center to the new kid on the block. We don’t see any reason for anyone to change horses after they've invested all this money on an architecture. It's the same price, it's not more features than what you're currently getting. Why would you make that change?"