In the first part of an in-depth interview with ARN's BRIAN CORRIGAN, local Lenovo managing director, Alan Munro, talks about life after Big Blue and changing behaviour in the education market.
Where do you see Lenovo's core strengths in the market today?
ThinkPad and ThinkCentre are here to stay for us and the brand recognition of both is very high. In fact, ThinkPad has the highest brand recognition in Australia when compared with the products of our competitors. It was in important part of the acquisition and remains an important part of our strategy going forward. But although both product ranges might have started at the top end, they really have wide applicability. Our tier-two growth rate has been great for us and the business we are doing through distribution has been picking up quarter after quarter - predominantly through the Think products.
Lenovo needs to address the PC market more broadly than IBM did. Has that been a difficult transition?
Not really. I don't know if you have talked to IDC lately but we have had good market share growth quarter after quarter. The ThinkPad range is targeted at medium to large enterprise but here in Australia, because of the high brand recognition, we have seen a lot going into SMB and even to individual users. We see significant overlap with the Lenovo 3000 range, which has also picked up in the SMB market. That gives us broad coverage of the business market.
Can we expect to see Lenovo going after the local consumer market anytime soon?
We are not currently doing consumer although we are doing stuff through retail with Lenovo 3000 notebooks going through Big W. It's working well for both of us as a test. It's a different market and we want to understand how it works now having got out of retail some time ago. We have consumer products announced in the ASEAN market and are looking to bring those products here but are not in any great hurry. We are running a pretty good business servicing customers through the partners we have so there's no real rush for the company to go into the local consumer market. There are big growth markets like India that can gobble up consumption but if we enter the consumer market here we want to make sure we do it well.
One of the trends we are seeing is in prosumer space where people within smaller organisations are using a notebook for work but then taking it home and using it for their own purposes. How is Lenovo addressing that?
We only look at the commercial market but I personally use my notebook at home and my kids use it when we go on holiday. We are already getting a piece of that [prosumer] market through our education programs. Victoria's Department of Education, which has been a longstanding customer of ours, provides notebooks to all of its teachers. The teachers pay for part of the notebooks themselves and can deploy them for personal use.
Education and government has been a strong play for Lenovo. What do you put that down to?
Focus. We targeted that segment of the market a number of quarters ago and have had longstanding success with some customers. We have gone to market directly, where partners support us with integration services, or with partners as the lead. There has been a strong partner role in pretty much all of our education and government success. We have had a dedicated team going into that marketplace and local resources to work with the customers.
In the past, many customers would be happy to have a panel of 4-5 suppliers but we have seen that number come down. Now we are seeing a number of our customers, and not just us because I think it is a market shift, standardising on one vendor with another as a backup. That has helped us and our partners pick up share because we have had a focus on that market. It isn't restricted to government and education either because we have also seen it in commercial with major financial institutions. We probably have 5-6 customers across the region that have done that in the past couple of quarters. Some had never done business with us before but had us on a panel of five that became two and have now gone with us.
I think it is down to product quality and dependability - our supply has been pretty good, our supply chain has improved and our costs are coming down as a corporation so we are passing that on to customers and becoming more competitive. All of those are base reasons why customers buy and we are getting better at those in this market. Some of it is global because we are becoming more streamlined as an organisation and getting product through the supply chain a lot quicker.
Locally, we have been investing more in our partners and have a new program as well as a new portal. We are increasing our outbound coverage of business partners by about 50 per cent. The other thing we have done here is be very clear about our direct and indirect strategy. We have said SMB is a channel play, some customers with 500-1000 seats will want to buy direct while others want to go through the channel, and our primary route above 1000 seats is direct because those customers tend to buy that way. However, when we do sell direct there are partner opportunities to provide services. That strategy has been very clear to our resellers for 4-5 years now and we haven't shifted off it. I can't remember one partner complaining in the past two years that we have gone direct against them in their customer base. That gives the channel confidence because they know they can invest without fear that we will come over the top.
Queensland Government is expected to introduce a model where it will source from the channel instead of vendors as a prime. Is that a trend you are starting to see?
I understand Queensland Government is still in the decision-making process. WA was similar because it chose partners with a significant level of investment in the local economy as the primary point of contact. It seems to be happening in certain areas but I wouldn't say it is a nation-wide trend because NSW whole of government and some of the others are still going to vendors with partners aligned to them.