Lenovo DCG and the Benefits of “Failing Fast”

By Charles King, Pund-IT, Inc.  June 21, 2017

IT industry vendors evolve in different ways and for different reasons but corporate acquisitions can affect that process substantially in both expected and unexpected ways. For example, purchasing new products and/or intellectual property can enable the acquirer to enter unfamiliar markets far quicker than if organic development were pursued.

Such deals can also substantially bolster the buyer’s reputation, especially if it purchases a solid brand and carefully manages product quality and customer relationships. But virtually every deal encounters at least some turbulence related to customer- and technology-integration issues. How and how well a vendor negotiates those challenges should be points of interest for IT customers and partners alike.

The Road to ThinkSystem

Deals can also be substantially impacted by unusual or unexpected shifts in market dynamics. Lenovo’s purchase of IBM’s System x organization is a good example of this kind of situation. Shortly after the deal was completed in January 2015, IDC reported that for all of 2014 global server sales had grown a modest 2.3% but sales of x86-based systems grew at over double that rate.

Just two years later, IDC noted that the market had softened considerably with revenue in the worldwide server market declining 4.6% YoY (to $14.6B in 4Q2016). In other words, while Lenovo was working to integrate IBM’s System x x86 systems and personnel with its own strategies, products and company culture, it was also navigating a notable decline in hardware sales and revenues.

That sparked some not unexpected 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 this week at its TRANSFORM event in New York City, demonstrated that the company’s efforts to integrate and then proceed far beyond IBM’s homegrown assets have succeeded.

I intend to take a closer look at some of Lenovo’s new offerings in an upcoming Pund-IT Weekly Review but for now I’d like to focus attention on the strategic thinking highlighted at TRANSFORM.

Why cultivate “failing fast”?

It’s reasonable to say that 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). But about six months later, DCG’s leader was replaced by new EVP and president Kirk Skaugen who joined Lenovo after spending over two decades in leadership positions at Intel, including an extended period running its data center solutions organization.

Skaugen’s experience complements that 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, Hortensius noted some of the strengths that he believes will make Lenovo a particularly formidable data center market competitor.

Among these are DCG’s core assets and experience, formidable manufacturing skills and facilities, and its comfort in addressing and supporting virtually any customer and application scenario. That extends to cloud computing, hyperscale systems and high-performance computing (HPC), areas where some vendors struggle or even avoid.

Hortensius noted the benefits that Lenovo has realized by being “legacy-free”—that is, not beholden to supporting legacy hardware and software platforms, or related product groups that are faltering or nearing end of life. It also complements another core Lenovo characteristic – “failing fast” – which Hortensius, Skaugen and other company executives noted at various times during the TRANSFORM event.

Failing fast refers to Lenovo’s to rapidly examine, experiment with and implement ideas, concepts and strategies, and quickly discard those that are incapable of delivering potential benefits or achieving their anticipated promise. Considering the number of IT platforms and organizations that stopped being vital, transformative assets long ago yet are still supported by vendors and customers, “failing fast” is a skill that many would do well to learn.

Final analysis

It would be easy to disparage “legacy-free” and “failing fast” as mere corporate sloganeering if it were it not for the goods that Lenovo is delivering and the leadership the company has achieved in global PC sales and market share. In other words, it would be a mistake to assume Lenovo isn’t fully ready and able to take its efforts in data center solutions and sales to the next level.

The new and updated data center offerings revealed at TRANSFORM offer unmistakable evidence that the company is on the right track. Ironically enough, Lenovo is proving that “failing fast” provides a clear path to long term success.

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