Inside Lenovo’s transition to a solutions provider

Lenovo’s resolve to reposition its business from being a supplier of datacentre hardware to software and IT solutions is well known, but that journey is far from over, according to one of its top executives in Asia-Pacific (APAC).

Sumir Bhatia, president of Lenovo’s datacentre group in APAC, said perceptions of the company as a primarily hardware supplier have changed, and it continues to invest in people and technologies like edge computing, along with capabilities such as artificial intelligence (AI) and analytics.

In an interview with Computer Weekly, Bhatia sheds light on Lenovo’s business in the region, how it is evolving to tap on growth areas like high-performance computing and what its recent cost-cutting measures mean for APAC business.

Can you give us a general sense of how Lenovo is doing across Asia-Pacific, and what are your priorities for the region?

Bhatia: We’ve had remarkable results this year and despite being in one of the most significant periods of global change and transformation, we significantly transformed our business over the past year, with record revenue numbers across the globe.

We had an all-time-high pre-tax income and beat market expectations with our fourth-quarter performance. That’s due to our operational excellence and a global manufacturing footprint that enabled us to leverage our global supply chain that wasn’t concentrated in just one specific country or region.

Also, our focus around customers really positioned us to build a sustainable business, with our flexibility and ability to change based on market demands. Now, as you know, my focus is on the datacentre group, which has seen a very positive year due to various factors, including our continuous focus on our long-term intelligent transformation strategy.

In the datacentre group, we supply equipment to tier one hyperscale cloud providers, as well as corporate datacentres. The hyperscale business has been a substantial one for us, but in the first half of the year, there has been a slowdown in that market because of overcapacity.

The non-hyperscale business, however, grew by 5.3% and our fast-moving solution-based offerings, such as software-defined infrastructure, storage, software and services, grew in the double digits.

Several years ago, Lenovo was repositioning itself as a solutions provider rather than hardware supplier. How has that journey been? Have perceptions about Lenovo as a primarily datacentre hardware supplier changed since then?

Bhatia: This has been a journey for us. I’ve been at this company for close to four years. From being a hardware supplier to where we are now has been a huge transformation and comes with a lot of focus. It’s not just about saying that we are a solutions provider – we must back it up with the right solutions for customers.

To transform from a box mover to a solutions provider, the first thing is to start with the right products. We built some world-class products that range from software-defined infrastructure and high-performance computing to our range of ThinkAgile integrated appliances and systems. All of that came with investments with the right services that go along with the solutions.

The second part is something that I’m a big believer in – people. You can’t sell solutions if you have people with a box-moving mentality. And it’s not an overnight thing and can only be done over time. While we’ve built a world-class team that can provide value to our customers, finding the right people with the right expertise is a big challenge.

On your point about whether the perception has changed – absolutely, but it’s not just perception. What has happened is that we’ve sold a lot more solutions, not just the box, but entire end-to-end offerings. We’re in a much better position than we were four years ago, but our journey isn’t over yet.

Would a key part of that be about bringing your channel partners on that same journey? Some of them might have worked with Lenovo for years and might not be in that same mindset of change.

Bhatia: Absolutely – and that’s a great question. We are predominantly a channel-first company. We’re investing a lot in specialist channels to sell our solutions. It’s important that we’re not just focused on channel partners that sell to large enterprises. Our solutions cut across businesses of all sizes, from small and medium-sized businesses to large organisations that are served by different channels. It’s a big revamp of the channels.

I’d like to zoom in on the point you made about the breakdown in business between the hyperscale cloud providers and corporate datacentres. In recent years, there have been conversations around the idea of cloud repatriation, where workloads are being moved from the cloud to on-premise infrastructure. How is Lenovo positioning itself for that and navigating the dynamics between the cloud, on-premise and hybrid environments?

Bhatia: Our belief is that both cloud and on-premise will coexist. The cloud is absolutely growing, however, as you rightly said, cloud repatriation is happening.

Let me give you an example. With the Covid-19 situation, the first thing that customers did was to have their employees work from home. So, from a capacity standpoint, many rushed to move to the cloud.

In fact, we worked with a few customers that were really tight on capacity. But at some point, they expect to move back into a datacentre and work between the cloud and the on-premise datacentre in a hybrid environment. So, hybrid is also a key focus area for us as there needs to be balance between the two.

There’s also the concept of capex (capital expenditure) versus opex (operating expenditure). Today, we have solutions that can give you a consumption-based, opex pricing model for on-premise infrastructure, so you just need to decide what you want on-premise, and what you want in the cloud.

It’s an exciting business and we continue to support key cloud vendors, but at the same time we support customers that want to bring their workloads on-premise. This is in line with our mantra and DNA of providing customers with choices.

Lenovo has announced some cost-cutting measures amid the Covid-19 outbreak. How will that affect its business in Asia-Pacific?

Bhatia: I think it’s more of a recalibration. We’re continuing to invest in key areas. For example, there’s a lot of investment in software-defined infrastructure, edge computing and high-performance computing, which is a phenomenal business for us in APAC. And our investment is not only in people, but also in in demo centres across the region though our tie-up with Intel. It’s about having investments in the right places.

Now, you talked about edge computing. I've been tracking that space for a while and there have been some conversations in the industry about the rise of edge datacentres, especially in vast places like Indonesia. How is Lenovo positioning itself to tap that opportunity?

Bhatia: We’re investing quite a lot and in fact we’ve got a pretty cool new product called the SE350, which we launched late last year. There are many use cases for edge computing in retail and warehouses where you’re going to find a lot of computing at the edge, through to the datacentre and the cloud. Lenovo is one of the only companies positioned to provide what I’d like to call “from the pocket to the datacentre and the cloud”.

I believe there is no one company today that can provide that complete solution. And it’s evolving, and in my opinion, one of the most difficult solutions because you’re going to have AI and analytics in there. How are you going analyse data at the edge and what are you going to put on the cloud? As things evolve in the next 12 to 18 months, it’s going to be very different and we’re investing there to make sure we’re at the forefront.

The public cloud providers recognise that as well and have been rolling out edge devices. How does that change your relationship with the hyperscale cloud providers, given that they are also pushing edge boxes to their customers?

Bhatia: There’s going to be a lot of edge devices, so our focus is purpose-driven edge devices. The SE350, for example, is a small device the size of a book that’s built for difficult environments. As for the relationship with the hyperscale cloud providers, we still provide great infrastructure to them and we will continue to build strong edge devices that are very purpose-driven.