How Lenovo Plans to Crack the Server Market

Lenovo, known for laptops like the ThinkPad line, is expanding into the enterprise through server and storage products. Lenovo’s first servers shipped in 2008 for small and midsize businesses, and an Enterprise Products Group was formed this year to attract larger customers.

• Company: LenovoGroup Ltd.
• Headquarters: Beijing
• Employees: 33,000
• 2013 Revenue: $33.87 billion
• CEO: Yang Yuanqing
• What They Do: Lenovo, which acquired IBM’s PC division in 2005, claims to be the world’s largest PC vendor. It also makes smartphones, tablets and TVs. Now Lenovo is expanding into the corporate IT market with server and storage products.

Lenovo’s enterprise path is similar to that of Dell, whose partnership with storage vendor EMC was key to expanding its enterprise offerings. Lenovo and EMC established a storage joint venture called LenovoEMC last year. Meanwhile, Lenovo’s servers are being used for cloud deployments and database applications. The servers are available as bare-bones systems or can be customized with virtualization tools and management software.

Lenovo is targeting companies that don’t want to get stuck in a “particular vendor’s solution stack,” says Darrel Ward, vice president of product marketing at the company’s Enterprise Product Group.

Servers a New Twist for Lenovo

Lenovo has a strong track record in the PC arena, but it’s a new entrant in the server market, so customers have to be cautious, says Charles King, principal analyst at Pund-IT.

“No matter how well a company has done in one sector, there’s no guarantee they will be an effective player in another segment. It’s important for customers to approach the company with questions,” King says.

Lenovo also needs to fill some product holes to meet the top-to-bottom requirements of data-center customers, says Patrick Moorhead, principal analyst at Moor Insights and Strategy.

“Lenovo doesn’t offer blade servers, networking, converged infrastructure–and they go through EMC for storage,” Moorhead says. “Lenovo would need to add every one of these capabilities to be comparable to the big three,” meaning IBM, Hewlett-Packard and Dell.

Why Lenovo Can Score With Servers

Lenovo’s servers are reasonably priced, and provide users with hardware and software flexibility. That met the purchase criteria of the owner of a law firm, who now has multiple Lenovo servers running database, email and back-office applications.

“I was looking for a server that was a blank slate and didn’t have an operating system or other applications preloaded,” says the user, who asked to remain anonymous. “At the same time, [Lenovo] still made available the drivers for new as well as older operating systems.”

Large and small businesses alike are increasingly buying bare-bones servers for in-house customization. Web giants such as Facebook and Google design their own servers, which they purchase from third-party manufacturers.

Lenovo’s enterprise unit has a small-business mind-set, and it will bend more toward customer needs than larger competitors will, says Ezra Gottheil, principal analyst at Technology Business Research. The ThinkPad’s solid reputation among IT managers also adds luster.

“ThinkPad customers are potential Lenovo server customers; they already know the company and do business with it,” Gottheil says.

Lenovo’s strong supply chain in its China home base gives it an advantage over U.S.-based competitors. But whether the company is able to translate its PC success into enterprise products remains to be seen.

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