Fast Tech: Shailendra Katyal Of Lenovo On How Its Omni-Channel Strategy Is Powering Sales
In this week’s The Core Report: Weekend Edition, Lenovo Managing Director Shailendra Katyal shares how the company pioneered four-hour deliveries through its exclusive stores and real-time tech, driving strong consumer demand. Today, its omni-channel model contributes 25% of total revenues.
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Shailendra, thank you so much for joining me on the Core Reports Weekend Edition. So let me ask you by or let me start by asking you about Lenovo and it's a brand that we've obviously known in India and around the world for a long time because it is a consumer facing brand. But tell us about what is Lenovo today in India and how are you set up, what are the products that you make and how are consumers typically encountering your products or both at the consumer level as well as the enterprise level?
So first of all, thanks Govind for inviting us for this podcast. And the timing of this couldn't have been better to your question on how we are present in the country. Coincidentally, we just turned 20 years as a global entity on March 2005 is when we got registered in the country.
And we just celebrated that milestone. And it's been a very interesting journey to give you a sense of what we are today in the market. We operate as a group with three entities, because we started as a PC company with the acquisition of the ThinkPad business from IBM in 2005.
But along the way, we built other franchises, we bought over Motorola as a brand, which expanded our footprint into other screens like smartphones, we've launched a tablet business over time. And also around 2015-16, we expanded into the server and storage side of the business, again with an acquisition of the IBM x86 server portfolio. So yeah, it's been in a lot of ways, it's been a long journey.
But if you look at our heritage, it's relatively short, we are a much younger technology company compared to our competitors in the market. And yeah, we pride ourselves on the width of our solutions, because we call it a pocket to cloud strategy, that you have Motorola in our pocket, and we are able to support high performance computing through our server business as well.
Tell us about the market in general. And where are you positioned in that? I mean, I know that you, for example, sell PCs even on your website. And I also noticed that you offer four hour deliveries, but I'll come to that later. So tell us about how you're positioned.
Yeah, so it will be a slightly longer answer, Govind, given the width of our portfolio. But let me start with the smallest form factor that we have. And for starting with the demand side, obviously, the Indian economy is doing well.
And it's a digital first approach that the government has adopted, which is good for technology players like ourselves, right? Because a lot of tech penetration in India is still low, while internet adoption has been good. And smartphone penetration is also increasing, there's still a lot of headroom for a lot of our technology to be adopted in the market.
So the economy is positive, time is positive. If I look at smartphones, which is one of our larger businesses now, India is the second largest smartphone market in the world. And it has opportunity in terms of penetration, which is the feature phone to smartphone conversion.
And also it's rapidly premiumizing, which is again good, when we are able to bring better technology into consumers hands. So that part is going very well for us. We are now in the top 10, I think our rank hit about, we were in the top seven in quarter three, and we've done well in quarter four.
So again, hoping that we are climbing up the ranks, our stated intention is to be in the top three in the next three to four year timeframe. Coming to the core business, which is the PC and tablet side, we are a strong number two. This is a part that we are more well known for, if you look at our Thinkpads, our Legion gaming devices, our Yoga premium lifestyle franchise.
So it's a spread out franchise, I think you couple of times hinted at the fact that we are consumer facing, actually, a lot of our business is B2B. And Thinkpad is a, it has diehard fans in all the enterprise space, once people get used to Thinkpad given the reliability, and the fact that we kept modernising that franchise, we are we are one of the market leaders in the B2B space as well. So yeah, top seven in smartphones, number two in PCs and tablets and equally strong, I would say on B2B and B2C.
And then the newest kid on the block for us was the server business, it's relatively new for us. And we're just about getting to double digit share, it's smaller compared to our other businesses. But again, looking at the demand side, we keep saying that India's 20% of the world's data gets generated in India, but the data centre capacity is only 3% of the global capacity.
So there's a 7x headroom, even if India were to host its own data. And if we start hosting data for the rest of the world, then again, it's a very rosy demand view for the next decade or so that we see. So very balanced, I would say, all our businesses and almost everything is looking quite positive on the demand side.
And if I were to look at PCs and phones, but let me start with PCs. Maybe compared to others, your share of manufacturing is quite high. And as I understand that you are keen to take it even higher. So tell us about where you are today. And where do you see that going?
Yeah, great question, Govind. And for many people, many of our competitors Make in India as a new topic. That's what we've been making in India for the last 20 years, because our Pondicherry factory we inherited from IBM.
And that's the part that we've kept investing in, in terms of modernising our lines and expanding the portfolio there. So yeah, PCs, we've been making for a long time, we make about 30-40% of our requirement depending on the quota, as we speak, and given PLI 2.0, we have committed to the government that will keep expanding our footprint on the PC side and tablet side also, where we've now empaneled Dixon to also start making PCs for us. So we have a dual footprint now, our own plant, which is a legacy plant and also using the capacity that Dixon is building.
We have great relationship with Dixon, by the way, because 100% of the phones that we sell in the country are made in India. And we also leverage that capability to export to other markets like North America. In fact, we were one of the first beneficiaries of the PLI 1.2, because of the partnership with Dixon. So 100% smartphone is localised, if you look at PC, 35%. And we just announced, in fact, it's as recent as March, that we established a server manufacturing line also in Pondicherry. So the first few products are just getting rolled out this month.
So again, from a long term strategy point of view, India is an important part of our diversified supply chain. We have plants all over the world. In fact, that's a key differentiator for Lenovo, that apart from very good technology, our supply chain is very diversified and resilient.
And depending on the commercials and how the demand we were shaping up in any market, our ability to flex between different plants and different supply chain, it's very, very robust.
And when you say 30% of your PC production is here, is that numerical or value?
So we count in units, the value term also, it would be near about similar because a lot of the products that we make in India are actually the ThinkPads, which are of a slightly higher value. The consumer franchise is what we are building for, including the recent expansion with Dixon, that some of the lower end models also we are starting to build.
So tell us a little more about that in terms of what are you importing to make, when you say 30%, does that mean everything that goes into the production or the manufacture of the ThinkPad is made in India? So the idea of my question is to, you know, understand our electronics ecosystem a little more and in some more detail in India.
Yeah. So like I was saying, we've been participating in whatever initiative has come through in terms of enabling the local supply chain and the local ecosystem to grow. So first on the smartphone side, 100% local and we've reached more than 50% local value at a lot of the components because the ecosystem has grown much faster on that side.
So the local value is also significant there. On PCs also on some models, there was a programme from the government where we participated, which was called PMA, preferential market access. And on select models, we got to more than 50% local value there as well.
But look, it's a journey, right? Component ecosystem has to move and you're aware that the government has also recently rolled out a PLI 3.0, which is now to move up the value chain, including local sourcing of components. And we are actively participating in all those topics, whether it was PLI 1.0, 2.0. And with 3.0, we can't obviously participate directly. We are not a component supplier, but we are talking to our supply chain vendors on how fast they are able to localise on the component side.
So if I were to take a classic or a popular Lenovo product in India today, what part of it would be manufactured in India? Like for example, could it be a lens, a camera lens? Could it be the screen and so on and so forth? And what part is still, let's say, not being manufactured?
So look, it's a slightly complex one to answer, given the width of our portfolio.
Yeah. Now, the answer for a smartphone will be different for a smartphone, for a different model of PC. At any given point of time, there are almost 200 odd PC models also that we have in the market.
But at a broad level, I think displays are just about coming in on the phone side display. Local sourcing is okay now. And on the PC side, we also people are putting up fabrication plants.
But if you look at the components which go into a PC, some of those are chips, right? Which we get from AMD, Intel, Qualcomm, or the OS, which is Microsoft. So a large part of the value of the product is not in the chassis or in the camera module like you called out or in the keyboard, etc.
A large part of the value is actually in the OS and the chips. And India is getting there. I think some people have committed to getting into the fab space in India, but it's a long haul.
It does take time to build capability there. But encouraging to see all the steps that the government has taken. And at least we have a foot in the door.
And obviously, now we'll have to start ramping on those topics. I think PLI 3.0 is a great step where the local value add will increase. And we do expect batteries, displays, camera modules to start getting localised.
That's a commitment even in the PLI 2.0 for you to on the whole incentive, there's a six year plan to localise one step at a time over the next five years.
So you said you were amongst the early companies to start manufacturing here, also the plan that you've inherited. When you look around the manufacturing ecosystem today, which includes, let's say, the Foxconn's and the Vistron's and Pegatron's and Tata's, all of that, how have things changed in a very broad sense? And then maybe there are some specific illustrations you can share.
Yeah, so our own view has been quite diversified in the sense of some part captive and some part leveraging the local EMS ecosystem as it grows. And we do see that as the, I think India has the good fortune of having a local captive demand. So it's not necessarily reliant on exports.
And with the local captive demand itself, we see both locally EMSs like Dixon emerging in a strong way. Tata Electronics is also putting up a fair bit of capacity going up to the silicon level. And we do see global interest as well.
So it's not, I would say, a very uniform view that will the locally EMSs grow or will global companies make a play. I think given that the demand view at a local captive market is strong enough, and increasingly people are looking for more diversified and resilient supply chains in the new world order as it's getting created. I think India is showing up on the map a little more on the export front as well.
So we do expect that there would be a very robust ecosystem development, both on the local EMS front as well as more global interest coming in.
And roughly today, what's your proportion of domestic sales to exports?
So right now we are exporting only phones out of India, because we are already consuming whatever we make. And we had a little bit of spare capacity, which is what we are leveraging. On the other side, firstly, we have to fulfil our local demand, it's only 30% of the demand that we are fulfilling.
And right now, I don't have capacity, which I can spare for the export market. But that's a topic which will evolve as more of our global supply chain is also moving to India. But it's again, depending on the category, phones, it's already there, where we are exporting a fair bit, almost, I would say, 1 million phones, if I remember the number is what we exported the year before.
And we've still not concluded the full numbers for this year, but export had also grown significantly. So phones is robust, it's a proven test case, I think PCs and servers, we still have to wait and watch.
Let me talk a little bit about or ask you a little bit about the domestic market. So what is interesting and unique and perhaps different about the Indian market as you see it today? And, and how are you or have you been responding with the range of products that you currently have on offer?
Yeah, so I think trends are slightly different between the three businesses that we have. And also, if you take a consumer view versus the enterprise view, but let me touch upon a few.
Consumer PCs to start with.
So on consumers, like I said, and if I stick to PCs first, India is still a huge penetration story, because home PC penetration is still very low. And we are usually under indexed even to other emerging markets like Brazil, Indonesia, and even countries like Malaysia, they're ahead in terms of the home PC penetration.
And does come as a bit of a surprise when a country obsesses so much about education. But parents are still not investing in getting a PC in the house, largely because it was seen as a distraction. But I think with the internet penetration now, in most parts of the country, and with the focus on the new education policy, where the government is also encouraging digitisation of classrooms, we do expect the PC penetration to go up now even without the PC penetration being very high.
We're still under 20, we are dancing around the 15% kind of a range, which is maybe half of what Indonesia or Brazil would have, we are already the third largest PC market in the world. Now imagine if PC penetration doubles, we are talking about 100% headroom for growth. So penetration is surely one argument led by education as a use case, which requires a different kind of a solution.
And it has to work hand in hand with what solution is getting adopted at the classroom level. Because what works in the home also has to work in the classroom. The other big trend is on the current base of penetration, there's very rapid premiumization.
So people are wanting bigger, better devices, because post COVID, this living in a hybrid world, these kinds of conversations have become the norm, right, which you can't do without a good speaker without a good camera without a good display. So we see people moving from very basic devices on the refresh side to fairly premium products. So it's a two pronged kind of approach, you keep trying to grow the size of the market through a penetration argument, and you also keep widening the portfolio.
Like I said, gaming has become a very big use case in India, that's the part which is really on fire. And those devices don't come cheap. They're $1,000, $1,500 kind of price point, but that's growing at a very rapid rate.
And is that a newer addition to your portfolio in India, gaming?
Not very recent. I think we launched a gaming portfolio Legion as a brand, which is one of the most recognised brands now in gaming in 2018-19. Yeah, so it's been a four to five year journey.
We did not have these sub brands or these franchises earlier, but it's got built over the last four to five years. And we have almost one fourth of the market now on gaming with Legion and Lock, which is the more the budget gaming brand. But time is growing and we are also growing share almost a market leader now in that space.
So in terms of units and value, what are your top brands within the PC space today?
So great question. I don't think we have done it by because the way we look at life is more like an end customer segment. So there's a consumer segment, there's a small and medium business segment, enterprise segment, global accounts.
That's how we are structured.
Sure.
I don't think we've done it by product line, but yeah, all our franchises are doing well. Thinkpad obviously is quite large and profitable for us. There's Legion as a gaming franchise.
There's Yoga, which is a premium lifestyle product. There's Motorola obviously on the mobility side, which is doing well. So all these brands, if we do any brand survey, these are very loved brands.
One is the master brand Lenovo itself, but all our sub brands also in every brand tracker would show up as a brand of interest for most of our consumers.
And I'm assuming obviously, if it's gaming and so on, your consumer profile in terms of demographics is different. And any insights on that?
Yeah, no. So obviously, India is a young market, right? And whether you look at education use case, or if you look at gaming or even lifestyle, you will have those college students or early jobbers driving most of the decision making, because that is the most tech aware franchise.
But if you look at for early education, it will still be the parents. So we have to address all if it's a lifestyle segment, we go with the yoga, just slightly different kind of cohort. If you look at gamer, they'll all be very young, obsessed with gaming, both for streaming as well as playing.
And if you're talking to parents for education, that becomes a slightly different segment. But the point that I started off with, we pride ourselves on the width of our portfolio. So there will not be any space or customer segment that we would like to leave vacant because our belief is any market that you enter, you have to be a market leader in that space.
And if you look at our global mission as well, it says, smarter AI for all. And as a company, we take a lot of pride in that for all part, smarter technology, almost everyone will build, but not everyone puts their mind to democratising access. So access, affordability, all those are very important for us as a company, because we believe that technology is life changing, and everyone should have access to our products and solutions.
Right. Let me come back to the penetration. And you did say that we are relative to, let's say, countries like Indonesia, Brazil, Malaysia underpenetrated, and therefore there is an opportunity.
But if you were to go back to, let's say, 30,000 feet, how do you see or how have you seen these individual segments grow or not grow? When I say segments, I mean, your tablets versus PCs versus phones. You know, one of the things I remember from COVID is that a lot of people, maybe middle income or even lower, did not invest in, let's say, PCs.
One is because it was expensive, but then the mobile phone did most of the job. And that's, of course, a larger India thing as well. But how are you seeing this from the top?
So if I look at the overall economy, right, if you look at people using technology, the top companies obviously will have 100 percent penetration. Right now, even if I look at SMB adoption, given that people got used to UPI payments and some kind of POS solution, I think digitisation in the SMB segment has also been quite rapid.
There's still a lot of headroom there. But if you visualise now, Kirana store trying to compete with QuickCommerce, they cannot do it without some amount of digitisation. So again, there's headroom on SMB adoption, but that part really has grown and a lot of the startup world is actually part of the SMB segment now.
And those guys are digital natives, they are digital first in terms of the thought process. So they are driving up demand in the SMB segment per se. In the home segment, I think the last few years has been a little more, like I said, on premiumization.
We've not seen too much of the penetration argument come through because you would have seen rural economies also kind of stressed and people are prioritising health care and other topics. But we do expect that the new education policy and most of our dialogue as an ecosystem, including with government stakeholders, is that if India has to take a lead in AI applications, and increasingly that's becoming a visible, I would say, seat at the table, right? That India only India is the engineering talent and the demographic dividend to feed this demand for AI talent.
If you look at software development, India maybe supplies 5% of the demand. And for AI, it's being spoken of that it has to be 3x, 4x of that because there's no other talent pool available, ready for it. Now, how do you start teaching these kids AI, it cannot be at the at the high school level, it has to start really early, which is what some countries have started doing.
And for that, obviously, a phone is not enough to your point of people using phones for learning. So yes, it's a learning device. It's one way consumption.
But for things like problem solving for creation for productivity, for coding skills, you need a PC. So I do see that the penetration argument is becoming stronger, especially given the push towards more AI talent being required from the country. And I do see a lot of conversation in the government ecosystem also on that topic.
Interesting. So you're saying that, while the mobile I mean, there are more than 700 million plus smartphones and that will remain high that proportion to population, you're saying that PCs will continue to grow as these needs, or people feel this people see the need for, let's say, more active computing or computing per se, including in the context of software.
And if you see most of the announcements that were made in the recent budget also, right, in terms of the actual mission in terms of setting up all those robotic labs, there is recognition that exposure to computing and robotics and AI at an early age is now paramount for the economy to have another leg at growth within the tech world. So one is on the supply side, manufacturing, exports, etc. But what will be the next ITES equivalent from India, it will come from a application for which we have to start early, I think there's enough cognisance of that topic.
So one of the things you mentioned as a newer growth area is data centres. And you said that basically, you know, we have 3% of the data centre capacity, or I'm sure of that 3% 2.5% is in Mumbai, where I am, and where you used to be once upon a time. And we have 20% of the data.
So I can respond on what Lenovo is doing there. But on the ecosystem side, there is a there is a in this mad rush for large language models and enough GPU capacity, people also realising that it's an expensive proposition. And it's also very energy intensive.
So for India to stake a claim to that part, that if 20% of the data is generated here, can we also host 20% of the data on Indian shores? I think these two problems have to be solved, that how do we find a frugal enough way? How do we develop enough indigenous LLMs, also on the local data rather than relying on only other models getting developed, and also solve for the energy problem.
So if you look at Lenovo's play, we are we are investing in these two or three areas that we spoke of, right, if there's a data privacy or a data sovereignty kind of point that the government is making. We were also required as a company to host all our data as per new MCA requirements, which was not there two to three years back. If you look at energy requirement, we have developed, we are on the sixth generation of that, by the way, on liquid cooling, that you can actually cool a server with warm water, you don't even need to chill the water.
So how does that work? I mean, I also read for example, you power computers at DreamWorks, and using some of this. So tell us about this sort of newer form of cooling.
Yeah, so this technology has been there, whether it is everyone was on air cooled, and there were more efficient solutions being required, because air cooling means that somebody has to chill the air before it goes in to cool the server down. Warm water cooling is something that we've perfected, I would say, because we are on the sixth generation, others are just about starting. And this is interesting, because you're just pouring in warm water.
And it has to be done with the utmost level of safety, precaution, and a lot of engineering precision, right? Because water is coming very close to electronic circuitry. But we work very well with that.
And yeah, we have this little known nugget about us as a company that one third of the supercompute on the planet is powered by Lenovo. So a lot of the installations that you have powering smart cities, powering large public universities, some of the bluest of the blue chips, in terms of Ivy League universities that are not our infrastructure. And on the cooling part, it works in a fairly simple way, you're putting in warm water, and it comes out as hot water, which also in some colder climates, we've used to then heat up the building that that getting there's so much of heat generated at the exit that you're using it to warm up a pool or you're using it to warm up a building also, or to clear up pathways when the streets are frozen over, that if you use hot water, obviously, the streets get cleaner, faster. So the end to end cycle on sustainability is something that we are very focused on.
And that business is growing very well for us globally.
And I'm going to come to AI in a moment. So when you when you talk about Lenovo building, let's say a server farm or a data centre, how is that different from in terms of the components that you're using or the inputs for it? I'm talking about the physical inputs from let's say what you're doing in PCs or tablets or phones. I mean, phones, I know is very far away, but from PCs and tablets.
Yeah, no, so we don't build data centres. What goes into a data centre is our technology data centre is more about somebody building the real estate and the land part of it. Yeah, but the components are more complex, they're more different, there's nothing called an Neptune cooling and which is a liquid cooling solution in a in a PC.
But there are obviously some overlaps on engineering that if I would think pad and a think system, which is think system would be the server side and think pad will be the laptop side. There are some technologies which are which are common and yeah, there are teams which work collaboratively at R&D level. Some part of a supply chain at the back end also is because the same chip supplier will be there.
We will take Intel chips for our PCs also take Intel for our servers. So there is back end integration that we do both on supply chain and components between PCs and and servers. But it is very distinct.
It's almost as distinct as phones, if I were to stretch that parallel.
So, you know, we've been touching on AI. And I know that's something that I know was doing a lot of work on across the spectrum. So tell us about what is the sort of interface points for AI today from a consumer view, whether it's an enterprise or, or a retail consumer.
So obviously, AI is the buzzword now. But I keep telling people that AI is not a new topic, right? That term got coined in some university publication in the 1950s.
That's how old the term is. And it's been, it's been a human, I would say moonshot dream to make machines as sentient and intelligent as ourselves. So it took about, I would say four or five decades for the technology to move out of universities to some adoption.
But if I look at AI, ML, IoT, big data analytics, these have also been around from the early 2000s. Yeah, but the pace of adoption was slow. I think what was magical in 2022 was generative AI.
And finally, we were able to train models to become a lot more better at forecasting and predictive work become more generative at a level. So what has enabled that to happen is obviously the computing power that there was a limitation on how many trillion operations can you run in a second. But with GPU technology evolving, and then on the PC side, NPU, GPU, CPU coming together to collaborate, I think the hardware technology is now enabled for a lot more processing at much faster pace.
So that's the change and the way we see it evolving is that AI is such a fundamental technology, generative AI. It is like the birth of the internet. It's very seminal, that it will touch every part of your life.
I think it started with the infrastructure side, that large language model, large GPU capacity. But from there on it very quickly moved to a different argument that all your data cannot be in the cloud. But you still need some AI solutions.
So from there it moved to can you have AI within your data on your device as a personal AI model. And there's something in between, which is the enterprise AI model that some enterprise applications can run on the cloud. But a lot of your enterprise data, again, you would not want to run there enough things about both meetings, getting summarised on a public platform, and meeting minutes getting circulated.
So sensitive data is also flown into the cloud because people are not very. So this thing about responsible, ethical, secure AI is the way we see it. And our stated thing is it will be hybrid AI, we call it hybrid AI, because it will be personal, it will be private.
And it will be public, all three models will develop at the same time. And from there on in the last one year, if you would have seen the entire topic has moved beyond hardware. So it was GPU then moving into devices, but then what is the AI application, we're talking about agentic world.
And if there are multiple of these agents or assistants or bots helping you become more productive, either in your personal life or in your company, then there's already talk about having some super agents to help you go on all of this more like a service. So we're invested heavily across when we see we have GPUs, we have AI on our devices. And we've also developed a agents of our own.
There's something called Moto AI coincidentally developed out of our Bangalore facility, which keeps your data secure on on your phone, but it gives you more intelligent recommendations. And we have a application called AI now, which is for our PCs. So devices are hardware is their applications on top of their we are doing AI as a service.
We've created a consultative practise called AI fast start, because a lot of companies are struggling on what to do with AI sounds like a buzzword. But is it just a hype? Or is there a real application?
So we've created a 90 day programme, where we have our advisory team, which works with companies to develop AI use cases, which the CIO can then take and convince his or her board to make it into a sustainable project. So very excited with what smarter AI or hybrid AI holds for the future. But a lot of this has to be discovered.
It's like I said, the birth of the internet, Google, Amazon, Facebook happened much later. From the first email, we will see a lot of super apps come through in the next decade or so.
So I mean, if I can ask you a question, which sort of goes back, or rather takes a step back from exactly what you said. So Lenovo, again, is a perceptionally is a hardware company present in these four categories that we've talked about. When strategically when you're applying AI, or as you're applying AI, what's the approach here? In terms of how it's flowing into either devices or interactions, or services that you offer?
If I wind back even four or five years before the gen AI boom happened, we were trying to transform ourselves into a solutions company. Right. And we had seen this uberization of everything.
That everything moves to a subscription model, some part of the data centre businesses also move to that was the first port of the cloud environment, right? So you, in any case, we were building on that premise that a lot of our thing, which was about hardware CAPEX transaction, can we move it to as a as a service kind of a model. And then on top of that, you're able to build a lot of other things, right?
For example, for your company, if we give you 100 devices as a CAPEX versus giving it as a service over the lifetime of the asset, then we manage it for you, we manage the security, we take care of the disposal, which is also becoming a net zero topic, right? Asset recovery services is a big one. So we were well on that path of selling everything that we have as a service, moving beyond just the hardware transaction piece.
And on top of that, now we have AI, which is a beautiful glue, because it will bind everything together in a hybrid AI world, it can't be that your enterprise data, and your data in the cloud and your personal data, at some stage, they have to talk to each other, but you should have the right to govern which one will talk to which part. So something will have to be at the governance layer, which is where I think as a player, we are very well positioned. In fact, all the pieces of the puzzle, all our acquisitions, our transformation that we were doing, it seemed like we were preparing for this moment, where this glue of hybrid AI will hold everything quite well together.
And you have a large presence in India, I mean, 14,000 plus people, and you also have an R&D lab. So what's the kind of work that's going on in that R&D lab right now?
Yeah, so 14,000 is the direct plus indirect employment that we offer, because also the flex force people in manufacturing, our on-role headcount will be around 2000. But that also has grown 4x in the last few years, we were 500 employees strength. So we're growing quite well.
And because India talent is on the map, I think we've invested a lot in setting up a lot of COEs out of our Bangalore office, which is what you hear as a, we don't call it internally a GCC, but the industry term is GCC. So we have our analytics team, we have our AI COE, we have our CX team. So a lot of those development COEs are out of Bangalore.
And the newest ones that we did over the last 24 odd months, apart from the manufacturing investments, have been the state of the art lab for server design. It's a beautiful 150 seater came up in record time in our Bangalore office. And this now supplements what we already had on Motorola, we had 400 engineers working on Android phones.
And now we have people on the technical side who are helping develop the latest server technology. Apart from that, for advanced service delivery, we've created our operations centre, it's a knock and a sock. Again, we've set that up in our Bangalore facility.
So it's a good 150 seater where we are able to offer services like cyber resiliency, network threat detection to our customers. So end to end, if you say now I say that from design to delivery, we are occupying all parts of the spectrum as a technology company in India. And I think it positions us quite well, both for the local demand as well as when we say India for the world.
It's not just for export, it is also for services, it is also for other things that we can contribute to our global ecosystem.
And let me come back to the consumer, the consumer side of things. And we touched, I just sort of referred to it in the beginning, you offer four hour deliveries. So I mean, do people do people opt for it? Why did you start that and not want to do it to someone else? And how has that been working?
Glad that you've noticed it. In fact, this four hour we were promising much before quick commerce started taking shape in the country. It's been a three to four year old story for us.
So look at we've been pleasantly surprised that and it was a maybe a moment of serendipity when we said we have 550 of our exclusive stores. These are all Lenovo exclusive stores. We have a it's not a company run model.
It's a franchise run model, but the government infrastructure, everything is is us. And we had developed Lenovo.com. It was just about putting the two together, saying that can we really operate in omni channel environment.
But yeah, we invested millions of dollars in the technology where we have inventory visibility at each of those stores, which is very important, you can then promise delivery and have a stock out. So the data has to be real time on pricing. So we managed to do that.
And yeah, there's a lot of adoption, you would be amazed at how many people want to buy a two lakh rupee product and want it in the next few hours to them. And given Bangalore traffic, I can vouch for it. It's not a pleasant experience driving three hours to get a piece of technology, but good adoption there.
And also interestingly, we are the we offer to CTO to CTO means that you can customise you can build your own box. And especially geeks who want good technology workstations gaming. So you can log into.com.
And there is one segment which is wanting things in a rush. In the next four hours, there's another segment which is building their own boxes. And they're happy waiting two weeks after spending two and a half 3 lakh rupees to get the technology that they really want.
And both parts are going quite, quite well for us the quick ship part as well as the CTO part on.com.
And between let's say you're doing your own delivery via your franchisees. And let's say why are all of that selling through chroma or Reliance digital? I mean, how does it compare?
So we follow the customer, right? So products will be available in all the names that you spoke of, whether it's a retailer or a large retailer.
We sell through mom and pop stores, the traditional channel also we reach almost 10,000 of those tier three resellers as well. And we have this exclusive format, which is omni channel format between Lenovo exclusive stores and Lenovo.com. I get about 20-25% of my revenues from the exclusive format.
All the rest is in multi brand channels.
And how much would be? So can you break that up a little further? So when you say 25% is from your own franchisees?
Yeah, so if I break up the online offline part, right, because that's obviously of interest to many people in our category, if you look at phones, almost 60% is now online.
And we are overindexed there because Motorola has followed a retail first kind of modular offline presence is still smaller. So we are overindexed on that 60%, which is the industry kind of normal tablets are about 50%. If I look at PCs, then the retailers contribute about 30%, 35% to the category.
And we are reasonably indexed there, we are not overindexed. So there are offline online balance, including our own exclusive stores is far more, I would say spread out in terms of contribution. So your 30-35% will be retail, there'll be about 15-20% with the large format retailers, or what is called quote unquote, modern trade.
And the rest will be the traditional stores or the exclusive stores that you have.
And the institutional buying you're not including in this, right?
Yeah, institutional buying is all, it's one to one conversations with companies, either directly as Lenovo or through our value resellers, the value added resellers that we have, because those conversations are not just about our technology, right? Typically, these are system integrators who would sell a whole solution. So those conversations are very different from the right, we have the consumer side, we have the SMB side, which on which some part is distribution led similar to consumer.
But I think about 50 to 60% of our business will be customer B2B, selling orientated, which is more one to one, either ourselves or with our partners.
Right, last couple of questions. And you know, if you want to look a little ahead, what are the kind of trends that you're seeing in the market in India? And in terms of the way consumers are going to consume the kind of devices they're going to buy and what could influence that because, you know, you talked a lot about gaming.
And that's clearly is a newer phenomenon, which may or may not have been anticipated by the industry and therefore industry responded. Are there other trends that you see on the horizon or trends in general?
Yeah, so by and large, I would say it's coming back to what I'd shared earlier, that India offers both a penetration argument, our category is still not saturated. And it also offers that premiumization kind of opportunity. There is this new space which is coming through in terms of a connected ecosystem, right?
Because people are struggling that I have data on my phone, I have data on my PC, I have something else on my wearable, a lot of those fitness bands, budget, etc. But can it become a more seamless experience? So we've built that up now we have smart connect features between Motorola and Lenovo.
Now, very recently, we launched just two weeks ago, we launched a moto connected ecosystem. So we also now have moto branded PCs, and moto branded tablets leveraging the strong growth that we had on Motorola as a franchise. We've developed a product range, which is more suited for that lifestyle tech kind of customer.
So all our brands, like I said, are giving us opportunity and the smart connected thing is something that we are quite excited about that more, especially with AI more data convergence coming through. You wanting data to be secure across all your devices and offer a seamless experience. It's a it's an interesting thing to watch for apart from the penetration and the premiumization.
Last question, I guess. So, you know, you worked in a FMCG company some years ago, and now you're working in a in a consumer electronics company. What are the things that you see similar? If so, in amongst Indian consumers, and maybe the lessons that you've learned that you're able to apply even today, and maybe what are the dissimilarities?
Similarities are true across all businesses. But finally, a business is built around a customer proposition, right? So listening to your consumers, customers, what do they really need, and then building solutions around that.
I think the difference between FMCG and technology is at times consumers don't know what they really want. All of these are maybe a little more forward looking. But even with that, slightly, I would say futuristic view that technology brings, you still have to keep the customer, you can't be doing things that the customers don't want.
If you talk to typical technologies, they'll get very excited about something which may or may not be marketable. So some of the things are universal in terms of being customer centric, at the heart of the company. And then having the most efficient supply chain, but the products have to be affordable, they have to be easily accessible.
So these I would say are similarities, whether it is FMCG, FMCD, electronics, any category that you take. In terms of differences, obviously, there's a there's a long term relationship that you get in devices and technology. In FMCG, there's very high loyalty, but you don't know the customer, you already know the customer.
There's a lot of intimacy because there's a service relationship as well. So the stakes are higher, I would say, for building that four to five year relationship with every customer.
So what's the product category that has surprised you? And what is the product category that has disappointed you in some ways? Or maybe you've not found the traction you thought that it would have? Or it could be a specific brand or model?
So I think, if I talk about things which have been a little unclear, right, and it's gone through many cycles, and I was involved in the launch of that business, I'm still involved as the overall site leader for the country is the tablets business, right? When it came through, it held great promise.
But over time, I think it got sandwiched between a phone and a PC. But what is the real use case? Do I really need a third device?
But I continuously get surprised now that that's a category which is again growing at a very fast clip. Because of this entertainment need that when people are travelling, even when they're watching content, I think the tablet growth is coming at the cost of television screens or some other large screen. So yeah, it's it's gone.
It's been a slightly cyclical business at times it becomes why do I really need this product at times I want a very expensive product because I want to watch content in the best possible way.
So you're saying tablets are both surprised as well as disappointed in different times.
I was looking at the we launched the business about 10 years back, right? And we launched with great fanfare, but the consumer demand just vanished because people couldn't figure out what to do with the device. But over the last two years, again, the new use case of entertainment has come through.
The other one was gaming has grown. And if you remember, in my growing up years, maybe a similar vintage as yourself. Console gaming was the big thing.
Yeah, console gaming is practically dead. And it's more PC gaming. But in between, there was this thing about console gaming coming back.
And we had launched a legion go kind of product again, best in class product, you can tag it to a big screen and have a much bigger experience rather than even a 17 inch screen showed great promise in all the testing. But again, the market has not taken off. So you tend to get surprised one way or the other, at times you feel the demand will be great.
And you come up short at times, you're pleasantly surprised by unmet need which customers are displaying.
Shailendra, it was a pleasure talking to you. Thank you so much for joining me today.
Likewise, Govind. Happy to chat with you.
