The evolution of IT industry vendors follows different paths and strategies but acquiring companies and assets can affect that process substantially. For instance, buying products and/or intellectual property can enable the acquirer to enter new markets far quicker than pursuing organic development. In addition, acquiring companies can bolster their own reputations by purchasing a solid brand and then carefully managing product quality and customer relationships.
These benefits are understood and documented but virtually every deal encounters at least some turbulence, especially in points related to customer- and technology-integration issues. How and how well vendors negotiate those challenges are issues where IT customers and partners alike should pay close attention.
Getting to ThinkSystem/ThinkAgile
Unusual or unexpected shifts in market dynamics can also impact deals, such as Lenovo’s purchase of IBM’s System x organization. Shortly after the deal wrapped in January 2015, IDC reported that for all of 2014 global server sales had grown a modest 2.3 percent but that sales of x86-based systems grew respectably at over double that rate.
Two short years later, IDC noted considerable softening in the server market with worldwide revenues declining 4.6 percent YoY (to $14.6B in 4Q2016). In other words, at the same time Lenovo was integrating IBM’s System x x86 systems and personnel with its own strategies, products and company culture, it was also navigating a notable decline in global server hardware sales and revenues.
That resulted in some predictable turmoil, including headcount reductions and executive departures. However, the Lenovo Data Center Group’s updated portfolio, with twenty-six new and updated ThinkSystem and ThinkAgile solutions announced at its recent TRANSFORM event in New York City, demonstrated that the company’s efforts to integrate and expand far beyond IBM’s homegrown assets have succeeded.
“Failing fast” and Lenovo’s success
Lenovo’s new offerings began taking shape a year or so ago, when the company launched its newly reorganized System x BU as the Data Center Group (DCG). About six months later, new Lenovo EVP and DCG president Kirk Skaugen joined Lenovo after spending over two decades in leadership positions at Intel, including an extended period running its data center solutions organization.
Skaugen’s background and skills complement those of other Lenovo executives, including Peter Hortensius, DCG’s CTO and SVP, who led the company’s negotiations in purchasing IBM’s System x group and assets. During a one-on-one meeting at TRANSFORM, Hortensius detailed some of the strengths he believes will make Lenovo a formidable data center market competitor.
Those include DCG’s core assets and experience, formidable manufacturing skills and facilities, and its comfort in addressing and ability to support virtually any customer and application scenario. Those include cloud computing, hyperscale systems and high-performance computing (HPC), areas where some vendors struggle and even avoid.
Hortensius described the benefits that Lenovo realizes by being “legacy-free”—that is, not being beholden to legacy hardware and software platforms, or related product groups that are faltering or nearing their end of life. Legacy-free also complements another core Lenovo characteristic – “failing fast” – which Hortensius, Skaugen and other company executives highlighted during TRANSFORM.
What exactly is Failing fast? It describes Lenovo’s ability to quickly examine, experiment with and implement ideas, concepts and strategies, then rapidly discard those that fail to deliver hoped-for benefits or anticipated promises. If you consider the number of IT platforms and products that long ago stopped being vital, transformative assets, Lenovo’s “failing fast” skills that many would do well to learn and emulate.
Final analysis
Some might disparage “legacy-free” and “failing fast” as mere corporate sloganeering. In fact, that would be easy if it were it not for the goods that Lenovo has delivered in the past and the leadership the company has achieved in global PC sales and market share.
Keeping those points in mind, it would be a grave mistake for critics to assume Lenovo isn’t fully ready and able to take its efforts in data center solutions and sales to the next level. What an organization can achieve once can usually be achieved again.
In fact, the new data center portfolio and offerings revealed at TRANSFORM offer unmistakable evidence that the company is likely to do just that. Ironically, Lenovo DCG is showing that “failing fast” provides a clear path to long term success.
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Charles, this is a fabulous article. Thank you for publishing. Steve