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How does the 2017 version of HPE support enterprise IT departments?

Meg Whitman at HPE Discover 2017
Meg Whitman at HPE Discover 2017

Recently, Amalgam Insights attended HPE Discover, HPE’s semi-annual show devoted to its enterprise offerings. Our firm was especially interested in seeing how HPE would position itself after having divested much of its software portfolio to Micro Focus and then spin-merging its Enterprise Services division with CSC to form DXC Technology on April 1st of this year.

In HPE’s General Session and subsequent presentations, several key themes emerged in HPE’s positioning. The most obvious is that, in consolidating HPE’s offerings to servers, storage, and networking, the company is now focused on being the arms dealer for hybrid IT support. This is based both on the core HPE portfolio of technology and services as well as removing the business services and complementary technologies that were previously seen as competitive to potential HPE competitors. This fundamental change should serve HPE well.

How HPE found its focus

In today’s IT and business world, vendors are rewarded for doing one task especially well rather than trying to be all things to all people. This approach can be considered from three different perspectives:

1) Winner takes all in the tech world: The current Big 5 in technology (Alphabet/Google, Amazon, Apple, Facebook, Microsoft) all have established revenue market leadership in a specific area. Although they all have diversified portfolios, each starts with a core capability (Google search, Amazon cloud computing, Apple’s iPhone, Facebook’s social network, Microsoft Windows) that serves as an anchor. Even for the largest tech companies, it is important to know your role. With this consolidation, HPE is choosing to own core IT at a time when large vendors seem to be exiting this space in the rush to go all-cloud.

2) Market trends for megavendors to remove non-core businesses: GE and IBM have long been known as companies that can do everything for everyone. There was no need for specific brand identity other than market leadership. However, in recent years, each of these venerable behemoths have made efforts to sell non-core assets and to establish a specific identity. GE has divested large units such as GE Capital, its appliances business, and NBC and is seeking to sell its industrial solutions and consumer lighting (yes, the light bulb business) as well. Other than healthcare, GE is fairly focused on higher-margin industrial efforts at this point. Likewise, IBM has sold off System X, semiconductor, and parts of the Rational suite in recent years while focusing on on cloud, industry verticals, and compliance. So, even at the highest levels, traditional conglomerates have seen this pressure as well.

3) A third way to look at this trend is through IT vendors who are also technology-neutral partners. Three vendors come to mind, although there are many others: Informatica, Polycom, Logitech. Consider how Informatica goes to market: although it is a billion+ dollar company and a market leader in each of its product areas, it has mostly expanded at the edges of new data management and governance capabilities rather than directly taking on analytics vendors, cloud and hardware platforms, or the megavendors of the IT world. This approach allows Informatica to remain in high-growth areas over time by either creating capabilities such as Secure@Source for security or developing fast-follower capabilities in data preparation and governance to directly compete with startups.

By moving to a core of servers, storage, and networking, HPE has a similar opportunity in that it no longer competes with business consulting partners and its channel community to the same extent as it previously did with its consulting, software, and consumer tecnnology business unites. With this newly consolidated and rationalized version of HPE, enterprises now know that HPE is built to support core enterprise IT as it pursues the new hybrid path of moving between cloud and on-prem. There is no confusion here of what else HPE is trying to do: the focus is centered squarely on the Hybrid IT challenges of server, storage, and network management and resource optimization.

HPE Announcements at Discover 2017

HPE’s product and service announcements as well as its messaging focus centered around this Hybrid IT focus and included the following:

HPE spoke about PointNext, which includes 25000 consultants from Technical Services and establishes HPE’s continued focus on technical guidance on providing Hybrid IT. For those wondering if HPE was existing the services business with the spin-merger creation of DXC, HPE’s focus on PointNext provided a definitive answer.

The importance of Nimble Storage acquisition for Flash and hybrid-flash storage along with HPE’s existing storage offerings.

The continued evolution of HPE’s Synergy Composable Infrastructure, including the acquisitions of Simplivity and Cloud Cruiser and the launch of Project New Stack

The launch of ProLiant Gen10 Servers and silicon-based root of trust for security. One interesting data point HPE brought up in this discussion was that HPE has sold over 40 million servers in its lifetime: a data point that speaks to the potential ecosystem available for ongoing management and support.

The launch of Aruba’s 8400 Core Switch series, which AI found interesting as part of both Aruba’s move into the wireline networking world and the opportunity to potentially replace Cisco Catalysts, which have been the standard in core switching for decades. To make this work, AI believes HPE will need to show how its operating system, ArubaOS-CX with fully composable APIs across all switching controls, represents a competitive advantage for companies that are willing to make the change.

Understanding the Cloud Cliff

During the Discover 2017 event itself, HPE focused on one key theme that resonated most with AI’s focus on Technology Consumption Management: supporting Hybrid IT and avoiding the “Cloud Cliff.” With the emergence of cloud, it has become easier than ever to purchase and access computing resources through AWS, Microsoft Azure, Google, IBM, and other cloud vendors. However, there is good reason that all of these companies want enterprise cloud business: it’s a profitable business! Even with all the cost cuts that Amazon continually announces, Amazon Web Services now has an operating profit margin of over 25%.

This is a challenge that Meg Whitman brought up head in introducing the “Cloud Cliff,” the idea that enterprises run into expense, performance, and troubleshooting control issues once they reach a threshold of cloud computing usage. These issues create a “cliff” of total cost of ownership that strains both IT budgets and long-term business model execution.

This concept is consistent with leading edge cloud deployments that AI as well as other analyst and consultant firms such as IDC, Frost and Sullivan, and Hurwitz and Associates have observed in recent months. Over time, the management of cloud workloads becomes increasingly untenable over time because of the challenges of managing decentralized resources and the lack of mature IT policies currently associated with cloud sourcing, oversight, and troubleshooting.

HPE’s focus on on-premises servers, storage, and networking as part of a hybrid IT portfolio approach is actually future-facing in this regard. AI predicts that over the next two years, multinational enterprise IT organizations that push the majority of their IT resources into multi-cloud or hybrid cloud IT approaches will be overwhelmed by the management and troubleshooting aspects of this approach. The result will end up being some combination of:

1) Multi-million dollar overages
2) Multiple hires simply to oversee the cost, troubleshooting, and orchestration of enterprise cloud resources
3) A variety of failed cloud oversight and management software deployments similar to what happened in the Telecom Expense Management industry a decade ago
4) Reactionary retreats by overenthusiastic enterprises from the cloud back to on-prem data centers for large-scale and mature enterprise workloads.

This is not to say that cloud computing is dead or should not be used to scale IT environments. Rather, it is a warning sign that, in the race to pursue Digital Transformation, enterprise IT departments are not conducting the same level of diligence in evaluating cloud environments that they take for granted in their own IT environments. IT organizations that conduct legitimate apples-to-apples comparisons in moving from on-prem to cloud will be successful.

However, AI believes that IT executives are underestimating the complexity of using cloud computing because they currently lack visibility and governance to the cloud computing usage within their organizations and don’t know what they haven’t seen yet. AI estimates that the costs in a typical unmanaged enterprise cloud computing environment can be reduced by 40% through effective governance and management.

The flip side of this equation is that on-prem core IT has been defined as CapEx spend that can be expensive to purchase on an upfront basis, which ends up making cloud computing more attractive from a financial and business perspective. To combat this, HPE has pursued more cloud-like consumption of private cloud and on-prem resources through a combination of Flexible Capacity and Project New Stack, which AI will cover in a separate post.

Overall, Discovery 2017 was a valuable show in demonstrating what the new HPE looks like. The presentations, product and service launches, and positioning showed that the overall focus on core IT and managing the challenges of Hybrid IT are shared across the company. AI believes that two key areas for HPE going forward are

1) to make the business value of their core IT capabilities clear across the board not only in terms of Total Cost of Ownership, but in business flexibility.

2) To make good on Project New Stack in providing a Best-in-Breed management plane for IT, Finance, DevOps, and Operations to coordinate on the future of IT.

Note: For additional coverage of HPE Discover, take a look at these videos, independent influencers and industry analysts:

HPE Discover Blogger Wrap-Up:

Richard Arnold – D8tadude

Keith Townsend – The CTO Advisor

Patrick Moorhead – Moor Insights and Strategy

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