In the second part of an in-depth interview with ARN's BRIAN CORRIGAN, local Lenovo managing director, Alan Munro, talks about vendor consolidation and SMB strategies.
We have seen a lot of consolidation in the local PC market during the past couple of years. Some vendors have gone away while others have made very specific market bets. Can we expect to see Lenovo make any niche plays?
Not necessarily niche but we have watched that consolidation accelerate as well because the major vendors are more competitive, faster to market and are passing cost advantages onto customers. All of those things mean that if you want a really aggressive price you don't necessarily have to go to a B-grade vendor. All of that has probably driven the smaller vendors into niches because they can't compete across a broad range. We are a major vendor with a broad range.
What does consolidation mean for the local PC builders?
I think they have found it challenging across many segments of the market whether its education, government or corporate. There's no doubt they are under pressure but there are opportunities for those guys as well in high-end gaming machines. That's an area I would think they are strong in.
SMB is the big focus this year for most vendors across all areas of technology. What is your SMB strategy in the next year or two?
SMB has provided our growth during the last 12 months or even more. We started focusing on SMB a couple of years ago and have since separated our transactional business from our relational business. David Nicol is leading the transactional team focused on SMB so we have a dedicated P&L in that area. It is extremely important and we have recruited a number of additional partners to address that market. We now have about 650 resellers buying through distribution and have tiered them according to their importance to us. The top-tier has a lot of face-to-face resource; we are co-marketing with them and directly incentivising them to sell our products. Our coverage of that tier-two channel will continue to increase and we are investing right now because that transactional business is a key strategy for us not just here but worldwide. The model we are basing it on is a successful one Lenovo used in China, which really drove the growth there around SMB. We have taken that model and are executing on it well now.
What do you think are the keys to being successful in the SMB market?
The channel is the critical piece so again it comes down to consistency. You need great products that are competitively priced and easily available through distribution. The relationship with the tier-two reseller is so important and we are marketing heavily to encourage SMBs to buy our products. That creates a pull through as opposed to old distribution model of vendors selling in and pushing it out. We are creating drive in the market and working with our distributors on a daily, weekly, monthly management system. The distributors have really grabbed hold of the transactional model because it is working well for them. It's not about loading up masses of stuff and having a big sale. That's good for us because they can get dependability on price, they know the products and they know what's coming through. We are transitioning things regularly as models become end-of-life so we are not stuck with old stock in the channel. Partners have a very clear view of where we are going.
There was a while there where we went through a mad price rush. Do you think that has calmed down now?
Yes, but the price of technology continues to fall. It is getting more competitive but that is good because it keeps you on your toes and makes business exciting. You are motivated as a vendor when you have strong competitors around you.