Lenovo Enters Global SMB Server Market

The ThinkServer line is aimed at the 80% of small and medium-sized businesses who aren't currently using servers.
Lenovo on Tuesday introduced its first computer servers outside of China, taking on Hewlett-Packard, Dell, and IBM in the crowded small and medium-sized business market.

Lenovo is aiming its ThinkServer line solely at SMBs with up to 500 employees. The Chinese company believes it can lure customers from the 80% of the market not currently using servers, Marc Godin, VP and general manager of Lenovo's enterprise business unit, said. For bait, Lenovo is offering easy-to-use software as well as competitive pricing and services.

Lenovo also is banking on the strength of its Think brand, which includes its ThinkPad business notebooks. "This is a solid brand equity that's recognized today by a significant number of companies in the SMB market," Godin told InformationWeek.

This may be so, but Lenovo will be facing stiff competition from established global players, which also have strong portfolios for SMBs. Dell, HP, and IBM in the second quarter accounted for nearly 75% of the total worldwide factory revenue from x86 servers, which is what Lenovo will be offering.

"It's unlikely that they'll have an impact on those three vendors," said James Staten, analyst for Forrester Research.

Lenovo, however, could carve out a niche through white-box vendors, system integrators, and its own channel partners, Staten said. It also could find customers among ThinkPad users.

However, "it's not a big part of the market, and there's a lot of people who view their server purchases as very different from their desktops and notebooks," the analyst said.

Lenovo, which until now only sold servers in China, is moving into the United States, South American, European, and Asia-Pacific markets with three tower and two rack servers. The ThinkServer line will be available with Microsoft's Windows Server or SUSE Linux Enterprise Server from Novell.

The TS100 tower and RS110 rack servers are equipped with Intel Core 2 Duo or Xeon 3000 or 3200 processors. These machines are aimed at running simple applications, such as e-mail, messaging, and file storage, and for use as a Web server.

The ThinkServer TD100 and TD100x towers and the RD120 rack come with Intel Xeon 3000 or 5000 processors. These computers are aimed at medium-sized businesses looking to run database applications or software in a virtualized environment.

The servers' management tools include basic hardware configuration software for customers with limited technical experience and a utility for identifying, downloading, and installing hardware and firmware updates. In addition, the servers ship with LANDesk performance management tools, which enable the monitoring of one or more servers from a single console.

Lenovo also is offering services tailored to SMBs, including a 90-day trial of its priority services at no charge. The services include next-business-day warranty service, around-the-clock hardware and software phone support, and an optional four-hour on-site response.

Pricing for ThinkServers, which are scheduled to be available through Lenovo distributors Sept. 30, starts at $749, which is far from the lowest price from the major vendors. Dell, for example, sells a PowerEdge tower server for as little as $329. Lenovo, however, believes its total package of hardware, software, and services will be more attractive than rivals' offerings.

Nevertheless, price is a key differentiator in the highly competitive SMB market. Revenue growth from x86 servers in the second quarter was the slowest in 23 quarters, despite a healthy gain in unit shipment growth, according to IDC.

"Low-end volume servers, such as 1- and 2-socket systems, are somewhat viewed as commodities and experienced the most pricing pressure," IDC analyst Jed Scaramella said in a recent report.