Lenovo Group, the world’s top personal computer maker, is trying to remake itself by venturing into software and services as margins on hardware have become razor thin, the head of the group’s Solutions & Services Group (SSG) said.
Ken Wong, president of SSG, said in an interview with the South China Morning Post last week that Lenovo is trying to turn itself from a supermarket with the best ingredients into a chef that can process those materials into ready solutions for clients.
“I think Lenovo in the past 10, 15 to 20 years, we’ve been providing the best ingredients for you to cook: the A-5 Wagyu beef, the best Himalayan mountain salt, the purest water. But we didn’t cook for you,” said Wong. “We gave you the best ingredients with your PC, your server and your phone.”
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“But now with SSG, we’re coming in and saying that … we can also help you to cook whatever cuisine you need,” said the 47-year-old at Lenovo’s headquarters in Hong Kong.
Lenovo, which accounts for 24 per cent of worldwide computer sales, last month posted an almost 120 per cent jump in first-quarter profit to US$466 million as revenue rose 27 per cent to US$16.9 billion year-on-year. The company’s net income margin hit its highest level for several years at 2.8 per cent.
While Lenovo’s sales were helped by a surge in demand for hardware during the Covid-19 pandemic, it is now looking to compete in services against the likes of software titans such as Google and Tencent Holdings. It is also looking to take on players such as Huawei Technologies Co and home appliances giant Midea in smart cities and smart manufacturing technologies.
Lenovo said it does not compete directly against Google or Tencent.
Wong, a Hongkonger and alumnus of the University of Hong Kong and Columbia Business School, is the person behind that push.
On September 8, Lenovo expanded its IT services brand Lenovo TruScale to allow customers to buy “everything as a service”. In the same week, Lenovo told Nikkei Asia that it was assembling a war chest of about US$9 billion to invest in artificial intelligence (AI) research to supercharge its IT services capability over the next three years. A week later, Lenovo merged its IT business unit with SSG and put Wong in charge of the enlarged group.
Wong has an ambitious goal: if Lenovo can successfully compete as an IT solutions provider it should be able to double its customer base.
“The hardware TAM (total available market) is about US$1 trillion on a worldwide basis,” he said, “When we move to … IT services, this can provide another TAM of US$1 trillion.”
The global PC market, which includes laptops, shrank for seven straight years from 2012 to 2018 before Covid-19 spurred a new wave of buying as more people worked from home. Global shipments topped 300 million for the first time in six years in 2020, according to figures from market intelligence firm International Data Corporation.
But 37-year-old Lenovo wants a robust software and services business to stay relevant as markets evolve. SSG was the fastest-growing unit at Lenovo in the first quarter, expanding 38 per cent compared to the same period last year. One example of the services it offers is the option for a corporate customer to sign up for a subscription that allows it to constantly upgrade its PCs to the latest equipment rather than having to buy a new batch of boxes each time.
The company’s main rival HP is also trying to transform itself into an IT solutions provider by leveraging AI and cloud computing. HP has been promoting its device-as-a-service (DaaS) business model in recent years.
Wong is well aware of the fierce competition.
“There is definitely competition,” said Wong. “[But] if you look at Lenovo, I think we have the broadest portfolio. I always talk about ‘from pocket to cloud’, meaning from the smartphone in your pocket all the way to the infrastructure that you need to power the cloud. You cannot find any vendor in the market that can offer such a broad range of offerings.”
Wong also believes that at this stage there are more opportunities for cooperation than competition and Lenovo has found itself plenty of allies.
“We are working with Microsoft … and VMware. We are working with SAP and Deloitte. We are also working with Accenture to provide modern solutions to enterprises,” Wong said.
This article Lenovo eyes big shift from laptops to services to future-proof its business first appeared on South China Morning Post