Recently concluded HPE Discover was different than most other analyst events in more ways than one. First, HPE announced that it has strategically dived into the cloud swim-lane with a confident commitment to offer “everything-as-a-service” by 2022. HPE has plans to offer entire portfolio through a range of subscription, pay-per-use and consumption driven offerings. It is a bold strategy and in direct contrast to its key competitors. Second, the phrase “doubling down” on SMB and midmarket segments was not only mentioned in the HPE Global Partner Summit on the mainstage, but also in the keynote address by Antonio Neri as well as by several senior leaders in their respective breakout sessions thereby targeting SMBs as a priority market segment.
Specifically, “everything as a service” or XaaS is a very astute strategy. As we near the end this decade, it is clear that the IT industry as a whole has been transformed by cloud - by the way it alters IT service delivery options, by the way it impacts the economics & resource requirements associated with that delivery, and by the applications and business opportunities that cloud unlocks for user organizations of all sizes and in all industries. We are increasingly immersed in a post-transactional market, where discrete sales of individual products or integrated systems are replaced by agreements to provide IT capacity and business functionality “as-a-Service.”
No segment of the IT market is immune to this trend. Sales of on-premise hardware and software are declining and will continue to decline; at the same time, leading web service providers, including Microsoft (Azure), Amazon Web Services, Facebook, Google and Alibaba, are building 40 percent – 50 percent of all x86 servers for internal use, and then providing access to these servers on a pay-as-you-go basis, and software developers are creating systems on these platforms to automate sales, marketing, finance, HR and other business functions.
Inexorably, the market is shifting from one defined by discrete purchase-and-deploy deals aligned with refresh cycles to one where businesses take a hybrid approach that blends a limited number of on-premise assets with a growing range of on-demand services. Although hybrid IT is inherently a more flexible and efficient way of providing IT services needed by businesses, it still requires effective planning to address important issues within business operations. There are many different types of hybrid IT solutions, but they all belong to one of three basic types: Solutions that respond to IT department needs, and are adopted by IT professionals; Solutions that address business management needs, where demand is driven by non-IT executives or staff members; Solutions that change both business processes and IT systems, and which require IT/business management collaboration for effective delivery. And these are the hybrid market segments that HPE plans to address.
But Antonio Neri’s ambition is far bolder and greater than simply pivoting to an XaaS business model. His promise is for a zero-friction future in a cloud-less world for all segments of the market. A strong foundation has been laid with HPE GreenLake, an outcome of its acquisition of Cloud Cruiser in 2017. At HPE Discover, HPE extended its GreenLake offerings for the midmarket to enable quick deployments of workloads with right sized and ready to go storage, compute and virtualization. For midmarket firms which do not own and manage their own data centers, HPE has partnered with Equinix and CyrusOne to offer co-location solutions. To help its channel partners that serve the midmarket segment, HPE has developed a new quoting tool that reduces quote time from 18 hours to 15 minutes. In addition, HPE also announced the availability of HPE GreenLake Chatbot - an artificial intelligence driven, automated chatbot that quickly answers partners' HPE GreenLake inquiries.
Extending HPE GreenLake to midmarket is a brilliant strategy but in its current structure it is still out of reach for most firms. HPE has to do even more by making it affordable for lower midmarket firms and even to smaller businesses. Both small and midmarket firms have limited IT resources and therefore suffer from IT efficiency deficit. These firms rely heavily on IT services for both ongoing service delivery and as a source of new activity, a hiccup in IT service delivery could have a dramatic impact on the financial success of the business. Techaisle’s recent research shows that a midsized business has an average of 12.7 IT staff, which is 1/20th of an enterprise. A staff of 12 have responsibilities well beyond rapid response to trouble tickets. There is naturally very little time left of other strategic initiatives or identifying the right technology that allows for scale and simplicity.
Increasingly within SMBs and midmarket firms discrete sales of individual products or integrated systems are replaced by agreements to provide IT capacity and business functionality “as-a-Service”. The trend appears to be towards OPEX as 20% of midmarket firms are moving towards more OPEX-based agreements where these firms are looking for flexibility and prefer to acquire technology based on usage – namely IT consumption model. Why? Because of five key reasons:
- IT asset under-utilization,
- Absence of capital resources,
- Cash flow constraints,
- Unpredictable business environment,
- Difficulty in deploying new technology assets
However, the awareness and advantages of IT consumption model is limited and is challenging. Regardless of the attractiveness of the model, Techaisle data shows that predominantly infrastructure focused technology purchases are still being made through existing budget. But over the next five years as the complexity of technology increases, most small and midmarket firms will be unable to realize the return on investments for long-periods of time or as their businesses scale. The vendor supplier best positioned in the market will gain from the massive shift to XaaS procurement models.
However, there are three challenges
- How elastic is the consumption model?
- What is the right term for the model, 36-60 months?
- How does one calculate the minimum capacity threshold, that is, avoid over-provisioning?
Let us take the last point as an example. If a business’ usage falls below a capacity threshold (because of business changes, unpredictable environment) determined upfront then the business is still paying more than usage. If the usage increases, then can the capacity be increased and what price? For example, Dell Technologies has something call Committed Capacity Line. If the business usage falls below the Committed Capacity Line, the midmarket firm still pays the charge associated with the Committed Capacity. This line is considered a baseline usage that was determined based on their projected usage profile. The ability to scale up and down exists within the buffer capacity to drive the business’ ability to leverage elastic capacity.
As I mentioned earlier, besides midmarket firms, SMBs were also front and center in many discussions during HPE Discover. Time Peters, VP & GM, Small and Medium Businesses, HPE is excited about the relevancy and uptake of the “as-a-service” vision. He acknowledged that after the HP Inc. and HPE bifurcation, the attention on SMB within HPE was somewhat eroded but it has once again come into sharp focus. Jim Jackson, CMO, HPE is committed to “doubling down on SMBs” and is launching a new campaign “HPE for small businesses”, a campaign that is riding on the success of HPE’s Monster IT branding. Both Keith Miracle, Director, Server Segment Marketing and Kate O’Neil, Vice President, Global Product Marketing are spending time listening to the SMB customers’ point-of-view and re-tooling their product and market strategies.
Many notable SMB solutions were overshadowed by the glitzy announcement of Primera, HPE’s next generation mission-critical storage offering 100% availability guaranteed with HPE InfoSight built into the controller. Most important SMB announcements were:
- Aruba WiFi for SMBs with price points of US$199 and below in a SaaS integrated model
- HPE PointNext end-to-end services consisting of advisory, professional and operational components for seamless transformation
- Hybrid file & backup, Hybrid virtualization, Hybrid database, High availability storage
- Small office deployment
It is safe to say that HPE has made a positive pivot by breaking the mold of a hardware supplier and pushing itself into the post-transactional market. Even the channel partners are noticing and buying into the HPE vision but the real heavy lifting from Paul Hunter, HPE’s Global Channel Chief’s organization has to begin. But I believe, 85 years of being a partner-centric organization will continue to show that partner intimacy is in their DNA. Every technology supplier is focused on simplicity, winning together, ease of doing business but HPE partner organization is focused on enabling all of these while transforming its own business model to as-a-service. It is commendable that they are able to take their partners along the transformation journey. Some of the partner organization's key initiatives have already been put in place:
Five points stood out for me:
- Investment in marketing for creating a massive market pull to help partners
- Doubling down on SMB segment
- Digital marketing acceleration and accreditation program and HPE Social Media Center for partners
- Single platform for configuration and quotation across all Bus
- HPE Next (Single Consolidated ERP)
It is HPE's game to lose and lose they will not. There is usually a whisper-conversation among analysts at these events that all vendor visions are the same, only the brand is different. In HPE's case both the vision and the brand were unique.