A New Era for HPE Services
It’s been a busy year for services at Hewlett Packard Enterprise. Moreover, HPE’s cloud strategy is finally coming into focus. Early in 2017, it hired a new leader, Ana Pinczuk. HPE also rebranded its services group with the name PointNext. This move followed the announcement of a spin merge, selling the former EDS assets to CSC. The intent was to have a clear focus for the technology services group and underscore its importance to the new HPE. HPE PointNext is intended to convey a distinct but integrated brand. In September of 2017, HPE acquired Cloud Technology Partners (CTP). CTP is a specialized consultancy that focuses on helping customers move to the public cloud; including AWS, Google and Azure.
HPE’s roots are in infrastructure. By de-levering its EDS SI and consulting assets, it opens the door for HPE to partner with the leading consultancies. Similarly, spinning off its software assets opens the door for a new breed of partners. Previously, for example, firms like PwC and many others faced lots of internal headwinds going to market with HPE. Life is different in the new HPE. For its part, PointNext is focused on the end-to-end lifecycle, attempting to differentiate with a hybrid IT and edge strategy emphasizing choice and ecosystem partnerships.
What about the Public Cloud?
Wikibon projects public cloud spending to grow at about a 15% CAGR through 2027 (log-in warning) with a TAM that exceeds $500B. HPE’s cloud strategy has been fuzzy for years. It made big investments in creating a public cloud. The company announced a public cloud offering. Then it quickly backtracked, leaving HPE’s cloud strategy in limbo.
Cloud Technology Partners provides a key missing link to HPE’s public cloud strategy. Prior to the CTP acquisition, HPE, like most infrastructure players, had limited credibility when it came to advising customers on migrations to public cloud. With CTP, HPE now has an offering and an informed opinion. CTP blends deep expertise in IT with proficiency in the major cloud platforms, to facilitate migrations to the public cloud. In turn, prior to the HPE acquisition, CTP had virtually no on premises play, while HPE had no public cloud angle. It’s early in the game, but the acquisition solves that problem and sets up genuine multi-cloud potential.
It also gives CTP the opportunity to scale. Often criticized for its lack of acquisition prowess, HPE, has changed that posture under Meg Whitman’s leadership. With a re-structured balance sheet after the HP/HPE split, HPE ended up with a pile of money – nearly $6B in net cash as of last quarter. HP(E) proved it can scale 3PAR. The Aruba acquisition is shaping up to be more than just a nice business- it’s looking like a strategic play for the edge. Meanwhile, Nimble is well-positioned to grow dramatically in the mid-section of the storage market. The key for CTP and HPE is to demonstrate that it can scale and transfer CTP’s cloud knowledge to a good chunk of HPE’s 5,000+ IT consultants globally.
The Pitch
HPE’s PointNext marketing position is clean and comes down to five key points in our view:
- The world is hybrid and will remain that way;
- HPE can help you bring the cloud operating model to your data – regardless of where your data lives;
- HPE has the technology chops to help customers manage the lifecycle of their data; whether in the public cloud, on-prem, in a hybrid model or at the edge;
- HPE stresses it has an open ecosystem and offers a choice of technologies, from edge to the data center to the cloud;
- HPE wants to sell you its infrastructure. To the extent it can demonstrate best-in-class capabilities in that space, HPE is betting its ecosystem of services will be a differentiator to deliver business outcomes. And you’ll buy lots of hardware and software from HPE in the process.
Look Back Look Forward
For years, HPE managers believed that size was the answer to its problems. Management often struggled to find cost synergies, many of which never materialized through big acquisitions. Under Meg Whitman, it seriously considered a merger with EMC, but ultimately, it chose to go in another direction– get smaller. By exiting large businesses including EDS and shedding most of its software portfolio, HPE was able to put itself in a position to be more focused. Moreover it now has a balance sheet that allows it to make key acquisitions. In our view this must continue as HPE has chosen a lower margin path, partnering and often reselling other companies’ technologies to make customers happy. Through acquisitions, HPE can re-load its IP portfolio and over time, improve its margin model.
Services is a key to keeping it all together and CTP completes the picture. With a strong services business, a hybrid IT message, solid distribution channels and expanded partnerships, HPE can lead with value and sell the vision of outcomes with an open choice model. That choice includes public cloud, on-prem cloud, hybrid and edge computing.
At HPE Discover Madrid, two key execs, Flynn Maloy, PointNext’s CMO and John Treadway (acquired through CTP) came by theCUBE to share their story, the rationale for the CTP acquisition and their assumptions for how the market is evolving. Here’s a curated playlist of the interview:
