Lenovo prepares for long-term x86 server strategy

Lenovo’s deal with IBM to enter the x86 server market may be focused on the small and medium business space, but that doesn’t mean the company is ruling out the enterprise altogether.

Under the agreement announced late last week, Lenovo will manufacture one- and two-way x86 servers based on IBM’s System x technology, which Lenovo will distribute under its own brand name. The servers will add to Lenovo’s corporate product lineup that includes ThinkPad laptops and Think workstations, which Big Blue handed over to the Chinese firm in 2004. The company also distributes IdeaPad notebooks for the consumer market.

IBM will continue to market its own version of the server line, and Lenovo will be competing against Dell and HP.

Marc Godin, vice-president and general manager, of Lenovo’s server business unit, said appealing to corporate buyers would require a deeper level of integration with enterprise management systems, and its skills and reputation aren’t as high in that space. “We can go after the entire market,” he said. “As a start, we have to focus on areas where we can indeed first and primarily differentiate ourselves and leverage our own strengths.”

Lenovo defines SMBs as companies with up to 500 employees, which also makes up the majority of businesses within Canada. He said there is a strong demand for x86 infrastructure among those customers.

“There is the organic growth of (x86) market, but there is also the fact that this architecture is growing within the overall server market, and more and more it is being seen as the right platform to bet your infrastructure on,” he said. “It is an outstanding growth market.”

Frank Gillett, an analyst with Cambridge, Mass.-based Forrester Research, said the industry is only beginning to see the full impact of technologies such as virtualization on the server market. Specifically, he said vendors are waiting to see whether the results of tools that facilitate IT infrastructure consolidation will be more demand for one and two-way servers or more robust four-way machines.

“For Lenovo, (the deal with IBM) lets them be a full-time offering,” he said. “If they have a toe in the PC space, they can now say, ‘Hey, we have some servers for you, too.’”

Forrester recently conducted a survey in which 48 per cent of respondents indicated they would likely be buying more blade servers, which Gillett noted are usually one or two-way x86 machines, although four-way models are emerging.

Godin acknowledged that Lenovo will be dealing with different kinds of purchasers depending on the customers. While buying servers may fall to a company president in the smallest firms, firms at the 500-employee mark often have structures similar to that of corporate enterprises.

“There’s a different kind of decision-making process whether you’re talking to the business owner or the IT department,” he said. “When you bring in an IT manager is when your company has reached a certain threshold.”

Gillett said Lenovo may face steep competition not only because it’s such a late entrant, but because smaller companies may lack the business continuity and failover software of larger firms and as a result may prefer more robust server hardware.

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