Commercial business contributes 45% revenue to Lenovo India

Intro: With the focused approach to grow in the commercial business, Lenovo continues to be one of the top 3 PC brands in India. Through their protect and attack strategy, which has been a long term formula for success has helped Lenovo drive record market share of 19.6% for Q1 FY14/15. In conversation with ITPV, Rahul Agarwal, Executive Director, Commercial Business Segment, Lenovo India tells about the go to market strategy for India.

What are the trends forming in commercial notebook business?

• Miniaturization is emerging as a new trend in the enterprise space, as the device components are getting smaller.
• Enterprise customers using 2in1s (E.g.: Helix, Yoga) have not migrated to windows 8 as yet. Until then we do not see traction in touch screen devices

As per our channel survey Lenovo is on number 2 position in commercial notebook market what steps you are taking to be a leader?

• We have a very strong product portfolio in the enterprise segment, which is second to none. The ThinkPad, which is our flagship commercial product, is the #1 in its category globally.
• We constantly strengthen our offering by introducing new form factors, and adding innovative, advanced and award winning product features.

What are your offerings for Enterprise mobility?

• Starting from a commercial range of tablets with enterprise grade security, premium and mid-range ultraportable notebooks, and multimode devices such ThinkPad Yoga and Twist; we have products for every customer need and specifically for a mobile workforce.

What is the USP of your enterprise offerings?

• We are seeing heightened interest from our enterprise customers across verticals, in new form factors such as ultraportables and hybrids. In keeping with this, we launched the ThinkPad Twist, focused on our SMB customers, ThinkPad X1 Carbon, which is a premium business segment ultrabook, and the ThinkCentre TINY, which is the world’s smallest desktop PC and one of the most energy efficient full featured desktops.

How do you look at Enterprise channels? How do you make sure your partner moves up the value chain?

• Our channel structure is driven by the need to foster a core channel partner network in India. The profits our partners make go hand in hand with our own profits.
• By establishing an effective channel strategy, Lenovo has been able to increase channel engagement, thereby boosting growth and profitability
• We maintain an open communication with our channel partners that helps them in garnering feedback from end-consumers

What is the present focus of Lenovo?

• Lenovo continued to expand its lead as the number one PC maker for sixth straight quarter in Q1 FY14/15, with 19.6% market share for the quarter in the world according to IDC.
• Lenovo ranks number 3 in the broader PC (PC and tablet) market, and number 3 in smart-connected devices (which covers PC, tablet and smartphone) globally. In India, we are one of the top three PC brands.
• Our “Protect and Attack” strategy, which has been our long-term formula for success, has helped us drive record market share. It consists of protecting our strengths in the core PC business and driving profitability, while attacking faster growing Mobile, Enterprise and Ecosystem/Cloud businesses.
• While PC has always been the core of Lenovo’s focus, we want to be leaders in the PC+ area. We see a “PC+ Evolution” rather than a “Post PC Revolution”  in which the PC remains central to the digital lives of millions of people and businesses

Which are the cities where Lenovo sees more potential for commercial business?

• The commercial business is the largest business vertical at Lenovo and contributes a substantial share to Lenovo India’s revenues.
• We have recently revamped our commercial channel structure in an effort to expand our canvas and cater to a wider base of customers in the enterprise segment
• This is a pan-India based approach which will enable us to reach out to maximum possible markets including Tier 2 and Tier 3 cities. However metros will continue to remain at the core of our focus

Which are the potential verticals?

• While the global market for commercial PCs has seen muted growth in the last few quarters, we expect that demand for commercial PCs in India will continue to be strengthened by strong investment from the government and education vertical in the current fiscal.
• Furthermore, we are seeing heightened interest from our enterprise customers across verticals, in new form factors such as ultraportables and hybrids.
• We believe that the new government’s initiatives in the technology sector can change things for the better. We plan to capitalise on this opportunity to build our business in the commercial space

Where is the growth coming from for Lenovo?

• Our commercial business is the largest revenue contributor (about 40-45%) for Lenovo India, with a current market share of 23.5% (as per IDC AMJ 2014).
• Our investments in innovations continue to drive growth through differentiation. For example, Lenovo is a clear leader in defining the new “multimode” PC space, with products such as Yoga and Helix.
• Additionally, we are witnessing a tremendous growth potential in the commercial tablet segment owing to the proliferation of mobile devices at workplaces.
• Lenovo’s investments in Motorola Mobility and IBM servers are pillars for future growth

What is your go to market strategy for commercial business?

• Lenovo’s commercial business in India has been a key strength and part of our ‘Protect’ strategy. Our success in the commercial business is a result of constant strategic changes across five verticals in India; Global, Very Large Enterprise (VLE), Large Enterprise (LE), Government and Education. All of these have led to the company’s growth, each performing better year on year
• Extending the Protect and Attack strategy to our commercial business, we plan to protect our strengths in the VLE and LE segment and attack new prospects in areas like Government and Education

With various laptop manufacturers launching the two-in-one products, what is your take on it? Will you be coming up with any such kind of products?

• In the commercial space, the 2 in 1s are mostly priced above 50,000 INR, the pricing of these devices are always higher than regular i5 notebooks with similar hardware configuration. As a result, the 2-in1s have not been adopted at an increased rate.
• However we are currently witnessing a steady growth in demand for 2-in1s due to need of mobility at workplace. We believe that the pricing of these devices will gradually come down with more adoption.
• We have been heavily investing in R&D to create a product portfolio which boasts of innovation and at the same time meets the requirements of our customers
• A reflection of our R&D work can be viewed in our achievements. Lenovo has won 61 awards at CES 2014, and has 6,500 globally recognized patents, nearly 5,000 of which are patents for invention. Lenovo invests approximately $625M in R&D globally, and has about 3,500 R&D engineers strategically placed around the world

Kindly comment on your Brand pull and customer marketing initiatives

• Lenovo’s flagship enterprise brand – ThinkPad – remains the number 1 brand in India and globally. Over the years, we have been continuously enhancing the features of the ThinkPad, with ongoing innovation, better design and improved performance.
• Our recent Outthink campaign outlines some of the day-to-day situations that an enterprise user is likely to face, and how ThinkPad has the extra edge to circumvent them. For example: Business users are more likely to spill beverage/water on their laptop than people who use laptops for private usage, hence Lenovo introduced spill-proof keyboard for business users in ‘Think’ range of products. Similarly, business users are more prone to drop their laptops as they carry them for meetings/travel, and Lenovo’s ThinkPads are equipped with shock resistant hard-drive with a unique magnesium alloy roll cage that protects the HDD from falls and bumps, preventing any damage to the critical components and data.
• Lenovo has conducted a survey among its users and potential buyers to understand their decision making process for buying enterprise laptops. It also helped the company to evaluate the top critical scenarios where a regular enterprise laptop may fail.

What are the reasons of slow growth in commercial PC market?

• Currently the growth in the commercial space is primarily driven by company refresh cycles (especially large IT companies and private BFSIs). These refresh cycles are primarily driven by the Windows XP deadline
• The traditional desktops market has become fairly slow as alternate form factors are gaining market share. As a result, we are witnessing more traction in the ultrabook and convertible segments

What are your future expectations and how much your business is affected by delays in purchases?

• Last quarter IDC predicted the commercial market to grow close to 10-12%. In-line with this prediction, we expect a definite increase in the PC demand from VLEs (Very Large Enterprises) and LEs (Large Enterprises)
• We expect an increase in the volume of PC sales especially in the BFSI sector for the next few quarters. We believe the demand from BFSI sector will contribute to almost 50-60% of the total volume