“The number of seats we manage is into the millions of DaaS customers."

Jeffrey Schwartz

April 9, 2021

10 Min Read
Lenovo DDoS ThinkBook

Demand for Lenovo DaaS (device as a service) is on the rise. As the company enters a new fiscal year, it is accelerating its effort to drive PC DaaS growth.

Industrywide, demand for PCs surged in 2020, according to figures published by IDC last month. Shipments rose nearly 13% last year, and for 2021, IDC is forecasting growth of more than 18%, amounting to more than 357 million systems.

Lenovo sees DaaS as a key to maintaining growth, and is driving to maintain PC DaaS growth momentum via its new Solutions & Services Group (SSG). By forming SSG, Lenovo hopes to grow more subscription and usage-based services. It will focus on small and midsize businesses (SMBs) and vertical solutions.

SSG is one of three new business units that make up a new organizational structure that Lenovo established for its 2021 fiscal year, which began April 1. Lenovo announced the new structure in its last earnings report, released in February. The other two units are the Infrastructure Solutions Group (ISG) – the new name of its Data Center Group – and its Intelligent Devices Group (IDG), focused on smart IoT.


Lenovo’s Rob Makin

Leading Lenovo’s DaaS efforts is Rob Makin, who is executive director of the company’s worldwide device-as-a-service business. Makin, who joined Lenovo six years ago, has led the company’s DaaS initiatives for nearly half of that time. In an interview with Channel Futures, Makin discussed the DaaS opportunity, and Lenovo’s newest initiatives.

Channel Futures: It seems DaaS has been slow to catch on. Is it starting to take off?

Rob Makin: It is fair to say we’ve seen some pretty dramatic growth — triple-digit growth year-on-year for the last two years. We see that continuing into [our] next year [that started April 1.]

CF: Growth, by what measure?

RM: Let me put it into context. From the number of DaaS customers, it’s into the hundreds. The number of seats we manage is into the millions of DaaS customers. It’s gradually growing to become more and more of a large part of Lenovo’s overall revenue. It’s a fairly substantial business now. I obviously can’t disclose exact figures, because we didn’t report on that yet, but what I can tell you is that this is a sizable business.

CF: Where is this growth coming from?

RM: In the last six to 12 months, we’ve seen growth in education in particular in the North American market.

CF: From the device-as-a-service perspective, are these customers that were previously leasing or just buying equipment outright and didn’t want to have the capital expense anymore?

RM: It’s a mixture. As a percentage mix, probably 30% of our DaaS customer base were those who historically were leasing either through us or through somebody else. And they’ve obviously migrated to more of a DaaS service. The other 70% are net-new customers moving from a capex to an opex solution – or as-a-service solution – and we’re seeing very strong demand for that.

CF: What are some of the nuances of why DaaS is a better alternative to leasing?

RM: Traditionally, leasing is very rigid and structured. You have a set term. At the end of the term, you hand the device back. If you go over that term, you carry on paying for the device, and sometimes that causes angst [for] the customer. But what we’ve tried to do, and what we’ve done fairly successfully, is created a truly flexible model.

CF: How so?

RM: We have up to 20% of our DaaS customer fleet on a flexible term. And what we mean by that is the customer at any point can either flex up or flex down. Something that is unique to Lenovo is something that we call Flex Pause. Flex Pause is where you can literally just pause the billing of your devices, for up to 24 months on a 36-month cycle.

CF: What is the benefit of that?

RM: The COVID-19 pandemic has shown the need for, in these uncertain times, to either scale up or scale down. But if you were to scale up or scale down with the traditional model that is available from our competition, that just basically …

… extrapolates the term of your contracts. You end up with the staggered leasing or finance structures that quite frankly can go on for years. Whereas, we simply have customers that have said, “OK, we’re not taking on our 1,000 employees this year — we’ve actually had a workforce reduction and not sure how long that workforce reduction will last. Can we please pause the billing on these devices?’ So we can take those devices back or electronically freeze them. And we’ll pause the billing for a period of time.

CF: How has that played out?

RM: When things are a little more certain, we’re seeing some of these customers actually take these devices back into their environment as they start to grow and hire again, and that has been really, really successful. The key thing about all of this, which a lot of our customers have shared this with us, is DaaS really drives predictability of cost. And if there’s one thing that the pandemic has really put a huge pressure on businesses — what they need is cost predictability. Whereas with a traditional old IT capex procurement, companies decide to sweat their assets for a little bit longer. Then, all of a sudden, at some point, there’s going to be a big bang. Their assets are just so old that they need to replace them.

CF: You said a lot of the DaaS growth is coming from education. Is that K-12 or higher education?

RM: We’ve seen a recent uptake in K-12 in North America. Traditionally that has not been a stronghold of a leasing or finance structure, but we’re seeing more and more school boards having to think differently about how they manage how they provide computers not just to their pupils, but to their teachers and staff as well. Especially when schools have been closed, with people working from home, hybrid scenarios, etc. So, the ability to flatline that expense, creating a predictable, opex line for the school, as well as to build up that user experience, has been really important. We’re seeing a very strong pipeline into the buying season coming up as well. To be honest, we hadn’t seen a strong leasing or DaaS market historically, but I think that’s rapidly changing now.

CF: And is that because they’re buying systems for teachers or students? By that I mean, are they buying the students PCs to use for school, or do they more typically have the students use their own devices?

RM: This is for teachers, of course, but for the students as well. Obviously, different school boards have different policies in that space. There are pros and cons with a BYOD policy, particularly around security and manageability. If little Johnny’s device suddenly breaks and he doesn’t have any warranty on it, how does he get a new device? How does he keep up with learning? Schools make different IT decisions based on that. Our job is to really give them give them a flexible platform in order to give the best output to their students and staff.

CF: Which models have been particularly popular in that segment?

RM: Chromebooks, obviously, just from just from a price point. There is still very much a drive to get …

… an affordable device out there. But some of the lower-end Intel- and Microsoft-based products as well, depending on which direction the school has gone with its e-learning platform, which is generally what drives the device.

CF: Are you seeing DaaS customers creating managed workspaces, such as virtual desktop type environments?

RM: The majority of what we’ve seen is native. But we are seeing increased demand for some of the VDI platforms that are out there. And obviously there are a few more players in the marketplace than there were a couple of years ago. There is Google’s platform, Microsoft’s [Windows Virtual Desktop, WVD] and Amazon WorkSpaces as well.

CF: Where do you see that going?

RM: I expect that to grow. It’s an interesting proposition. Because if you do the actual ROI on a thin-client solution, quite often from a cost-benefit analysis, it doesn’t actually tick the boxes a lot of the time. I think the industry will get there, but at the moment, particularly education, by the very nature of it, has a cost sensitivity. So I think we will see some interesting evolution as the ROI and cost benefits start to become more appealing. And then of course, obviously the manageability and the benefits and the security of the VDI, or virtual environment.

CF: Where does the new Lenovo Device Intelligence management service fit in?

RM: It’s two things. It’s proactive and predictive analytics. That allows us to monitor a fleet and basically predict failures before they happen. If there’s a particular software or driver issue that is causing some sort of failure or downtime of a device, or performance degradation of the device, we will be able to identify that early on. Not just identify, but actually predict what the problem would be, and then put a proactive fix out there in order to stop that. Now that gives benefit to the customer. And it also gives benefit to us. Because if there’s an issue with something on one of our machines, where we’re having to send people to fix change parts, a lot of the time it’s not actually the hardware. It could either be a driver issue or an application challenge. This tool set will be able to drive that value for our customers and for ourselves.

CF: Does Lenovo itself do this or do your partners do it?

RM: Now it’s us.

CF: So, if they’re in managed environments, the MSP would go through Lenovo?

RM: Both, really. We have some channel-packaging options. For the smaller implementations, they can use our Simplify offering.  And then we move up to Accelerate, which is again, more premier services. And all of these can be complemented by some of the channel partner’s services as well. And then we have our Transform offering for our channel which can basically do everything from the life cycle where the channel can simply resell and take margin or they can insert themselves into that ecosystem and provide parts of that service. We have a modular approach. For example, the channel partner may offer the white-glove service, where they may hold spares and stock for the customer and be responsible for delivering that to the customer site. That is a service that is not delivered by Lenovo and can be delivered by partners. So, we have a very partner-centric approach as well. And part of our growth and our focus, as we move into our new financial year, is to is to grow that capability for the partner base.

CF: Going into the new fiscal year, is it safe to say that Lenovo is accelerating the DaaS push?

RM: Absolutely. It’s a very strong focus for us. We will continue to grow that aggressively with our announcements. We think we’re doing a pretty good job, but we can always push it a little bit harder.

About the Author(s)

Jeffrey Schwartz

Jeffrey Schwartz has covered the IT industry for nearly three decades, most recently as editor-in-chief of Redmond magazine and executive editor of Redmond Channel Partner. Prior to that, he held various editing and writing roles at CommunicationsWeek, InternetWeek and VARBusiness (now CRN) magazines, among other publications.

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