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by Rajen Kumar

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Apr 2012

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Interviews

Mr. Rajiv Rao says, “Getting Closer to Customers – Lenovo's Strategy"

SME WORLD Bureau
Oct 2011

Experts opine that the “growth engine of Indian economy” must be fully encouraged to achieve the stable Gross Domestic Product (GDP) growth trajectory. For this to happen, it is imperative to create a comprehensive, conducive environment to incubate SMEs and facilitate them to thrive on Indian soil.

A steady shift is being witnessed in the adoption of IT by Indian SMEs, recognizing the importance and value of IT for boosting their business productivity. This is a clear indication that computers are an integral component of an SME's IT enablement cycle. Quite naturally, the PC market in India is on an upswing, one key factor being the keenness with which SMEs have consciously started investing in IT. Needless to say, most IT companies are queuing up to offer an end-to-end IT solution for SMEs and address their IT requirements from a long term perspective.

Indian SME segment is fast becoming lucrative for both computer hardware and software providers considering the steady investment made by the enterprises towards upgrading their IT assets compounded with the steady progress in the Information and communication technology (ICT) arena. There are selected few branded players competing in the hardware market. A laptop earlier considered to be a luxury item has now become a necessity not just for professionals but for students too.

Lenovo is bullish on the Indian SME segment and has embarked on a multi-pronged strategy to ensure deeper penetration. With plans to significantly increase its market share in this segment, Lenovo has instituted a clear strategy for growth and is gunning for enhanced profitability by investing in all key areas - products, brand, channels, services and deeper retail penetration in key growth markets. They are focusing on serious retail growth in the tier 3-5 markets considering this is where a bulk of the SMB segment exists and propagates. They are trying to get their channel/ partnership mix right for mutual growth and sustenance of its specific product lines.

Leading this growth strategy in the SMB segment for Lenovo is Mr. Rajiv Rao. He has considerable exposure to this sector considering his strong prior assignments with competitors Dell and HP. An alumnus of the prestigious REC, Surathkal and IIM Kolkata, Mr. Rao has 18 years of experience in the broad spectrum of Sales and Marketing function across different sectors.

SMEWORLD had the wonderful opportunity of interacting with him to understand the “Getting closer to customers” strategy of Lenovo India.

Q. Please provide us a brief overview of the IT investments made by Indian SMEs specifically in the hardware segment. What kind of growth do you anticipate in the SME segment in India?

With regard to the IT investments, Indian SMEs are leveraging on technology to facilitate business functioning. SMEs seldom have an explicit IT strategy and most often the decisions are taken by the business owner rather than any CXO or any other strategist. Also, SMEs consider these IT investments to last for a longer period as they have people and budget constraints. With tighter budgets, companies opt for remotely managed information technology services (RMITS) which will enable them to reduce costs. With the advent of competitive pricing the demand is picking-up. As per AMI-Partners' 2011 India Managed Services Study, the opportunity for RMITS will increase by a healthy 23% (CAGR) through 2015.

IDC forecasts the SME laptop market to grow by over 20% annually from 2010-2014 and SMEs are likely to spend more than $125 billion in 2011. There are around eight million SMEs in India and of these, 1.7 million have PCs. The SME sector offers enormous opportunities and is considered an essential employment-generating sector in any country. SMEs form close to 99 per cent of all business entities. As per analysts and industry experts, the SME market has been growing at a rapid speed, resulting in increased demand for PCs. We witness great demand from SMEs across the regions and hope to see aggressive growth in future.

Q. What are the factors critical in pushing the IT expenditure?

IT has transformed the way SMEs' work today and most of the companies are deploying IT services. Their main focus is to build integrated multi-product IT solutions like cloud computing for their businesses which would enable them to have fret-free computing.

Although price pressure is the major constraint, the SMEs have started realizing the need for robust IT infrastructure which would enable them to attain operational efficiencies, employee productivity, cost containment, and network security and competitive edge over peers. This has led to an increase in the IT spending amongst the segment. SMEs want tailor made products that cater to their unique requirements and essentially seek practical solutions with rapid return on invest.

Some of the critical factors pushing the SMEs spending for IT in 2011 are enhanced networking efficiencies and robustness, increased customer interface and mobility, enhanced resource management and maintenance of records and business analytics.

Q. What type of items are more in demand – desktop/ workstation, laptop, servers etc? Is there congruence in this trend with similar segments in BRIC nations and other advanced countries? How do these items help in improving efficiency and overall business productivity?

As per the trend we observe in the market, Notebooks are available at a competitive price and are becoming the form factor of choice among SMEs across all countries. According to an IDC analyst Notebooks are in principally high demand and are one the fastest-growing categories in terms of SME ownership. IDC projects the form factor will surpass desktops in smaller offices, with 4.7 million SMEs expected to be using notebooks by 2015.

Desktops and notebooks contribute to the majority of the IT spending followed by networking and servers. Server deployments are another trend among midsize firms, which will be motivated by declining prices of entry-level hardware to virtualize, upgrade and consolidate their environments.

Also, these products enable SMEs to increase their productivity by focusing more on business goals and worrying less on infrastructure needs.

Q. Has there been a shift towards laptops due to ease of mobility supported by cloud computing?

We are surely witnessing a shift in the markets tilting towards laptops. This shift is owing to the user benefits and ease of computing provided by laptops. The next era of IT ecosystem will be led by cloud computing and SMEs are surely benefited with the services and solutions offered by cloud computing.

Globally, nearly one-third of SMEs have adopted cloud computing technology and another 35 percent of SMEs plan to use the cloud in some form in the next year. Storage and backup solutions are the most heavily used cloud applications with 71 percent of SMEs using the cloud in this way. Similar trend is catching up slowly even on the Indian soil.

As per AMI Syndicated Annual Research, trend in Indian SMEs indicate that the adoption of SaaS which is still at a preliminary stage is a key platform of Cloud Computing. Also, some analysts opine that almost 20% of the adoption of SaaS is observed within the MB segment - since this segment is more advanced than the traditional SMEs.

Q. How according to you is the digital media impacting how SMEs function?

With increasing competition, it is fundamental for SMEs to engage in effective marketing to improve sales and build new business. SMEs are not armed with deep pockets, therefore exploring a route like advertising would not be their choice. This brings SMEs open to the trend which is most talked about in the recent times – The Digital Media. Today, we see a lot of interest from SMEs to associate themselves with the digital media. This allows them to easily connect with their stake holders and be on par with their peers.

For SMEs, it is indeed a value addition, they can absorb fresh business ideas from various discussion forums that discuss products and services, customer interests, feedback, better connect and reach among the target audience . Consumers, today read reviews of the products available on the web to make buying decisions. Being actively on digital media will enable SMEs to increase their business proposition and add value to their businesses.

Digital media has almost become like a prerequisite for SMEs. The ones who adapt to this trend strategically are bound to emerge more successful and profitable in coming years.

Q. How much percentage of the total sales of Lenovo is contributed by the SME segment?

Lenovo has its businesses divided into three key segments — the relationship or the enterprise segment, consumer segment and Small and medium business segment. We have outlined an aggressive strategy for the segment and have recently launched an exclusive prouduct range to cater to the specific needs of the SMEs who cater to 10 per cent of the total sales of Lenovo.

Q. What are the key pointers in Lenovo's strategy for the Indian SME segment in terms of market, channel and products? How does Lenovo plan to meet the future demands of the SME segment?

We have outlined a specific strategy to address multiple market segments within SMEs with our wide range of solutions. We aim to grow 3X the market and double our SME market share by 2012. We intend to cater to the addressable SME market with persistent approach to SOHOs, SBs, MBs. We are also focusing on increasing our channel base across cities and are creating an unparalleled reach to close to 500 retail touch points over the next fiscal year, which includes over 300 retail outlets and close to 200 resellers and VARs. We presently have over 500 exclusive retail stores in India and our aim is to expand it to a total of 1000 by 2012.

We have recently introduced an exclusive range of products which include ThinkCentre Edge 91z, ThinkCentre Edge 71z, ThinkCentre Edge 71, ThinkPad Edge E420s (SSD), ThinkPad Edge E420, ThinkPad Edge E420s (HDD). We wish to keep up with the growing needs of the SMEs and continue to innovate products for them constantly.

Q. What kind of support network is being provided by Lenovo for the crucial after sales service?

For Lenovo, quality of service has always been an area of focus to ensure better turn around time (TAT) and customer delight score (CDS) resulting in customer satisfaction. Currently our coverage is complete for Tier-1, 2& 3 cities and rapidly expanding for Tier-4, 5, & 7 cities. We have all our engineers trained and certified by Lenovo who are thoroughly conversant with technology and specially our products. Lenovo has started taking its service delivery to next level by providing more of "remote take over support" for all its customers. Lencare (Lenovo care), a dedicated support team to manage non technical escalations, has been deployed to help its customers.

Q. Do you foresee a churning in the competition scenario of branded players in the Indian SME segment? And what will be the probable outcome?

SME is an exciting and one of the most promising segments today. Like Lenovo, there would be other companies tapping this market. However, we believe understanding the needs of the segment and developing tailor made product range with competitive pricing will enable us to be on an edge. The newly launched EDGE series, part of the acclaimed 'Think' family, combines the solid reliability of the ThinkPad with features of style and entertainment that an SME seeks.

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