By Charles King, Pund-IT, Inc. June 8, 2016
Tech industry mergers and acquisitions (M&A) come in all shapes and sizes but the vast majority are modestly-sized deals that allow the acquiring vendor to expand its presence/position in specific markets or among particular customer groups. Less common are deals that transfer entire product lines or business units (BUs) from one vendor to another. Rarer still are the instances where one vendor acquires another one whole.
If one ranked the difficulty/complexity of such deals on a 1-10 scale, it’d be unsurprising to find that modest deals mostly rank in the 1-3 category while whole vendor acquisitions rate a 7-10. But rather than fall comfortably into the 4-6 slot, product line and BU deals often edge far higher up the scale.
Why is that the case? Because many carry technological and cultural integration challenges that are common in whole-vendor acquisitions without delivering those bigger deals’ business and scale benefits. For that reason, it often takes a while for product line/BU deals’ hoped-for value to appear and to judge whether or not the acquisition is a success.
That’s what makes the portfolio refresh announced this week by the Lenovo Data Center Group especially interesting. Coming about 18 months after the company closed its acquisition of IBM’s System x server organization, the new solutions, services and partnerships offers a great opportunity to consider the state of Lenovo’s enterprise goals and ambitions.
System x before and after
Within IBM, System x occupied an often odd position. The group was necessary since the company’s enterprise customers were as likely to explore, buy and deploy increasingly popular Intel x86-based servers as any other organization. But since x86 threatened traditional scale-up server vendors, System x was often the odd sibling out in a server family that also included Power Systems and z System mainframes.
That situation changed fundamentally at Lenovo. System x provided the company a ready-made portfolio of midrange- and enterprise-class servers, strong ISV partnerships (including leadership in the market for SAP’s HANA in-memory database appliances/solutions), and a solid list of satisfied customers.
Sales took a predictable hit after the deal closed, as a few nervous customers succumbed to competitors spreading FUD about the deal. But by the end of its first year of System x ownership, Lenovo was enjoying modest growth, a solid fourth place position in IDC’s overall global server rankings and third place in x86 servers, the company’s primary target market.
Lenovo System x today
So what did Lenovo announce this week? The company is delivering new and refreshed storage, networking, server and hyperconverged solutions and related partnerships that should help it continue to grow share and explore dynamic emerging markets. The new solutions include:
- StorSelect, a software-defined storage (SDS) appliance program led by Lenovo and ISV partners. New solutions include the Lenovo Storage DX8200N (unified file/block storage leveraging HDDs and/or Flash for enterprise and cloud use cases with software by Nexenta) and the Lenovo Storage DX8200C (object-based storage for large scale-out environments with software by Cloudian). The company also delivered its first mid-range storage system offerings, the V-series family of 12Gb SANs.
- Lenovo Cloud NOS, a next generation network operating system that emphasizes cloud-scale scalability, programmability and resiliency. The company also revealed new details concerning the strategic partnership it announced earlier this year, including Juniper offerings that Lenovo will resell and a new jointly published virtualized data center reference architecture.
- Refreshes of the Lenovo x3850 and x3950 X6 with the latest Intel Xeon E7-4800 and E7-8800v4 processors and up to 12TB of memory support for mission-critical use cases, including SAP HANA in-memory database applications. The new ThinkServer sd350 is an ultra-dense 2U four node system designed for demanding software-defined workloads.
- Lenovo also significantly expanded its portfolio of HX Series hyperconverged appliances with new solutions for ROBO environments (HX1000), SMBs (HX2000, with Nutanix SW), compute-heavy applications (HX3000) and storage-heavy applications (HX5000).
Measuring the success of product line/BU acquisition depends on three issues; 1) whether the acquired group continues or improves its previous pace of solution development, 2) whether it expands strategic efforts, such as partnerships with aligned vendors, and 3) how significantly it improves the financial and strategic value of its new parent organization.
The new and enhanced products and technologies announced by Lenovo’s Data Center Group delivers the goods in all three of these categories. Not only is the company pursuing expected paths with its server and appliance offerings, like taking advantage of Intel’s latest silicon enhancements, but it is also significantly expanding efforts in new areas, including storage and networking.
Lenovo is also actively growing its strategic partnerships to increase share and move quickly into promising new markets. That was also the case with System x when it was part of IBM, amply highlighted by the group’s long term collaboration with SAP. Lenovo appears to be accelerating that effort but should also gain substantial, reciprocal benefits from its relationships with Cloudian, Juniper and Nexenta.
Those partnerships also underscore the impact that the System x has had on Lenovo as a whole. Just as it achieved previously with the purchase of IBM’s PC organization, the company is using System x to step up its overall game and transform itself into a formidable, competitive enterprise-class vendor. These new Data Center Group announcements suggest that strategy is on-track and moving ahead according to plan.
If Lenovo begins to achieve anything like it has in PCs—becoming the worldwide leader in desktop and notebook sales—it could fundamentally shift the balance of global IT infrastructure markets.
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