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Lenovo is transitioning to become a software provider with IoT focus, says exec

➤ Lenovo is looking to tap the internet of things sector by establishing smart factory infrastructure and networks.

➤ Some clients require IoT consulting before they buy smart devices from Lenovo.

➤ For hardware makers, there is often limited access to user data.

China's personal computer maker Lenovo Group Ltd. is seeking to switch its business model from a hardware maker to a solution provider amid declining global personal computer shipments, according to Arthur Hu, the senior vice president and chief information officer of the company, who notes that the market for customized devices and solutions are still hard to break into due to user data issues.

Below is an edited version of the conversation with Hu.

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S&P Global Market Intelligence: What are your thoughts on the declining shipment of global personal computers?

Arthur Hu: We do admit that shipment has slowed down. Both handsets and personal computers shipments have fallen in China and globally. However, this does not mean that there is no way to make profits from the devices business.

What is Lenovo's strategy?

We are transitioning our business model to be closer to a solution provider. This means we are focusing more on devices that are growing swiftly, such as computers for gaming purposes. Additionally, we are building data centers by leveraging our super computation severs business.

Can you explain a bit more about the business transition from hardware to software?

We want to build an IoT network which combines our hardware with software. In the next five to 10 years, we expect to see exponential growth in the IoT industry. Indeed, we have been working with retailers overseas to set up smart factories and we already have an IoT software system called Think IoT, which connects to third-party cameras and Lenovo devices.

What challenges do you see with exploring the IoT industry?

Since the IoT industry is very new, when clients come to us for IoT devices, they do not always come with clear demands for a specific type of products. They need Lenovo to be able to suggest a good combination for them. It is a challenge for us because we are used to focusing on how many devices we sell. Nowadays, we need to consult for customers too.

Will the focus on IoT impact Lenovo's hardware business?

Hardware will always be at the essence. Also, the devices of the future will be different in that they will not only focus on the size of the screens and the quality of the cameras, the devices will be more about customizing personal data. It is important to make sure our hardware is well equipped with components compatible for smart devices.

What are the difficulties of building software and hardware for data analytics purposes?

The challenge is accessing user data and building a feedback system. In order to provide customized services, we need to collect user data and get to know customer habits and preferences via analytics tools. This is hard to achieve because first, we will need to find a way to stay in touch with customers after we sell our devices to them as we, device makers, do not usually have a feedback ecosystem to rely on. Secondly, users are not always willing to share their data with us due to privacy concerns.

Will your first market for developing smart devices be China, given that there is more data available there?

I do not think so. The difference between the 100 million sets of data or one billion sets of data is not that much. If the technology is mature enough, getting more data could add little value to the machine learning process. Therefore, with mature technology, there will not be much of a difference in collecting user data in China versus other countries.