Lenovo enriches partner margins in the SMB

When Chinese vendor Lenovo bought the PC business from IBM Corp. (NYSE: IBM) five years ago this May, 15 per cent of Lenovo’s sales in Canada were to small and medium-sized businesses. Five years later that share has doubled to 30 per cent, and Lenovo is launching a number of channel initiatives aimed at continuing to grow that SMB market.

Lenovo has made a lot of progress in the SMB space over the last year said Jay Mcbain, director, small and medium business, Americas at Lenovo. Recognizing that SMBs have different product needs than enterprise or consumer buyers, Lenovo has launched a line of SMB-designed products including its latest, the 14” and 15” ThinkPad Edge notebooks, as well as purpose-built servers and workstations.

In addition to products, Lenovo has also substantially revamped its partner program over the past 12 months, said Mcbain.

“We were seen as a little difficult to do business with, with over 20 core programs,” said Mcbain. “Now we have six core programs, and advertise the ability to make up to 20 per cent margin selling SMB-class systems from Lenovo.”

Those margins are on the hardware sale alone and don’t include any services that partners might bundle with the sale. Mcbain said Lenovo reaches those margins through a number of stackable programs, including discounts based on volume, on choosing top or target product categories, new customer bonuses, other functional discounts and a program offering up to 40 per cent off limited purchases for internal use.

Mcbain said Lenovo is putting more money than ever into volume delegation. Instead of a special bids desk taking queries and returning prices in a few days, with delegated pricing if partners have an opportunity for five or more notebooks or desktops they can take another three per cent off their price at distribution, which they can either take as margin or pass on as a discount to the customer.

Delegated pricing, the internal purchase discount program and other marketing initiatives have all been carried over by Lenovo from last year, but new for 2010 is Lenovo’s top seller rebate program. Applying even to entry-level products, Mcbain said partners can receive an additional $10, $20 or $30 of funding per unit sold.

“Partners can take that to the bottom line, pay it as a spiff to their sales people, pass it to the customer; they can do anything they want with the funding,” said Mcbain. “When units are selling for less than $600, it becomes important. It can mean five per cent more margin.”

Noting that partners can stack all these programs and really build their margins, Mcbain said it’s Lenovo’s goal to really address the profitability challenges of SMB-focused partners and make Lenovo a profitable business for them.

“Partners have taken the brunt of (lower PC margins), we recognize that, and with these programs we wanted to make sure they have the ability with (ThinkPad) Edge to make good margins on the backend,” said McBain.

The 13” ThinkPad Edge launched last year, and in late March Lenovo added the 14” and 15” models to the Edge family. With configurations starting at US$699, the models offer Intel Core i3, i5 and Celereon processor options, VoIP features including a high resolution camera and an HD LED screen, and multimedia features including DVD/RW, VGA and HDMI out as well as a 7-in-1 multicard reader.

Mcbain said with the Edge family Lenovo recognizes that for most SMB customers, their work laptop and home laptop are one in the same, so the device needs a blend of consumer and business tools and capabilities.

“It’s a bit of a balancing act, but that’s really the definition of an SMB. Someone who runs an SMB is a jack of all trades, so when we build products into the SMB we need to do same,” said Mcbain.

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Jeff Jedras
Jeff Jedras
A veteran technology and business journalist, Jeff Jedras began his career in technology journalism in the late 1990s, covering the booming (and later busting) Ottawa technology sector for Silicon Valley North and the Ottawa Business Journal, as well as everything from municipal politics to real estate. He later covered the technology scene in Vancouver before joining IT World Canada in Toronto in 2005, covering enterprise IT for ComputerWorld Canada. He would go on to cover the channel as an assistant editor with CDN. His writing has appeared in the Vancouver Sun, the Ottawa Citizen and a wide range of industry trade publications.

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