Heather Ross is convinced she’s got the best of both worlds.
IBM’s sale of its PC division to Chinese firm Lenovo under the auspices of a partnership was finalized over the weekend. Skeptics initially dismissed the deal as Big
Blue’s admission of failure in a flagging market, but Ross sees it as an opportunity. A company veteran of 20 years, Ross was the head of IBM’s PC division of Canada and with the completion of the deal she assumes the role of president of Lenovo Canada.
Ross’s goal is to capitalize on IBM’s vast legacy in the PC business and combine it with the savvy that has made Lenovo a leader in Asia. She isn’t cowed by the sales figures of Dell or HP’s attempts to poach PC customers. “We are not here to participate, we’re here to win this game and we’re very, very focused on growth,” she said.
Ross spoke to ITBusiness.ca Monday about the transition period, keeping channel partners on board and how Lenovo will eventually branch out beyond PCs.
ITBusiness.ca: How has the transition been for IBM’s PC division since the deal was initially announced?
Heather Ross: Overall the transition has been very good. The official announcement of the acquisition was made on Dec. 8 of last year, so we have been, in a very focused manner, looking to transition this company in the most effective way possible with as minimal disruption as possible. It has gone very, very well overall.
Part of the creation of this company is taking the core personal computing division that existed and bringing into the organization all the service organizations that have sat in other areas of IBM – whether that be the people who run our channels organization, the people who handled the finances, HR, etc. It was really taking the core PC business and the services organization that supported the PC business and getting a singular company here in Canada to go to market.
ITB: How are your channel partners managing the transition? Will they still have access to all the reseller agreements and incentives programs that were available through IBM?
HR: This is a strategic alliance between IBM and Lenovo so there has been a lot of work to ensure that the transition is smooth and seamless. The business partner agreements that exist today have transferred over to Lenovo, so in essence it’s business as usual, both from a contractual perspective and from a “how do we work together?” perspective.
ITB: What’s the partner reaction been like so far?
HR: It has been very, very positive. I think the reason is that it’s been positive is that they see the PC business changing. IBM has been very focused on the provision of solutions to its customers and innovation and technology. This allows us to expand our portfolio of products which in turn allows us to expand the business opportunities available to a lot of our business partners.
ITB: IBM’s branding agreement with Lenovo is for five years. At what point will we see an actual Lenovo-branded PC here?
HR: You will see the “Think” trademark — Thinkpad, Thinkcentre. That will continue forward. We are leading the branding with “Think” because this is the product people are familiar with. You will see IBM continue for some time on the product. We’re in the process of evolution to see what’s going to come after. I don’t have a definitive answer on that.
ITB: What about your agreements with OEMs? Is that another straight-forward transition?
HR: For the most part, yes. We don’t have an extensive number of OEM relationships in Canada.
ITB: How is IBM Global Services going to factor in with the new company?
HR: Lenovo is the preferred supplier of PCs to IBM. In the context of IBM Global Services agreements, we’ll have our product as the primary product. In addition, IBM will continue to service our products for the next five years. It’s very much of a collaborative effort in terms of IBM representing our products going forward and them servicing and supporting to warrantee service as well.
ITB: Lenovo is a joint venture with IBM, but how autonomous are you as a unit? Is there any strategy that can you can pursue now that you wouldn’t have as IBM?
HR: In Canada, we are a wholly-owned subsidiary of Lenovo Group. We are going to continue to focus on servicing the marketplace that we have served well over the last number of years. That would be traditionally the commercial marketplace. What this partnership gives us is the ability to expand into other market opportunities, whether they be product-based or whether they be segment-based. What I mean by that is: if today we focus primarily on commercial, we will have the opportunity – and we’re currently evaluating it – to expand our portfolio into consumer-type products as well as mobile phones, etc.
ITB: HP and Dell have tried to capitalize on the sale of IBM’s PC division. What are you doing to fend them off?
HR: Coming into this year, the marketplace is growing in Canada and we’ve had some good growth through the first four months. Based on the “turmoil” that people were expecting, we have not found that. We are continuing to grow in the marketplace in Canada.
If you look at it, what we’ve got here is a company that has access to the global sales and service organization of IBM combined with a company that has a track record of very strong operational efficiency. We’ve got what we have in terms of IBM’s global presence and its ability to support and service our customers. In addition to that, we have the opportunity to be more operationally efficient.
In that context, we have a partnership that is extremely complementary. IBM has traditionally been very strong in the Americas and EMEA (Europe, Middle East and Africa); Lenovo has been very strong in Asia-Pacific. IBM has been very strong in enterprise and large mid-market accounts; Lenovo has been very strong in small business and consumer. IBM has been very focused on innovation, specifically in the notebook line; Lenovo has been very focused on innovation in the desktop line.
You take that complementary relationship . . . and you’ve got a very, very powerful mix.
We have thousands of patents. Lenovo, I believe, has over 1,000 patents that they have accumulated of late. So innovation is going to be something that will continue to be very, very important to us.
ITB: Do you have access to the same R&D that you would have when you were IBM’s PC division?
HR: All those groups that were supporting the PC division that have come over with us. Over 9,000 employees worldwide have moved into this new organization. That includes our research and development facilities and manufacturing. When PCD was identified as who was moving over to Lenovo, it was a broad-based statement – it was the executive network, it was the sales network, it was the manufacturing network, development, etc. It’s very much intact in terms of our ability to drive innovative product, but also have the opportunity to broaden with the Lenovo innovative products.
ITB: How will the introduction of Microsoft’s next desktop OS, Longhorn, affect PC sales?
HR: I’ll have to sit back and think about this. We have always been very, very strong in our partnership with Microsoft, but I can’t comment on the position that they’re making relative to Longhorn. The partnership has been strong and I think it will continue to be strong.
ITB: Slow growth in PC sales has been attributed to longer refresh cycles. Has there been any improvement in that?
HR: Refresh cycles have been driven by many factors, including economic factors, but also value delivery in terms of differentiation of product. I think of late as the economy has begun to increase we’re seeing some growth in the IT market here in Canada. But yes, as people begin to see economic growth and the value inherent in the technology we will potentially see a more active refresh schedule. But it’s the customers that decide and we’ll see what’s important to them.