HPE Pushes IT as a Consumption Model, with Hardware as the Facilitator

HPE positions itself as an IT utility, with increased revenues from services, and its hardware and infrastructure play a background role as a facilitator.

“The bulk of the margins will come from services and software,” said Antonio Neri, CEO of Hewlett-Packard Enterprise, answering questions from EnterpriseAI during a press conference at the Discover trade show to be held this week in Las Vegas.

“The vision is very simple,” Neri said, “the infrastructure of this is nothing more than a cost of sale,” he added.

HPE is making a big bet on its GreenLake platform, which it introduced four years ago as a way for companies to implement a hybrid cloud strategy. The platform includes hardware, software and services.

GreenLake dominated the trading floor, which also focused on pushing IT more as a utility to organizations, much like electricity to homes, consolidating services into fewer bills. HPE customers can rent and pay for the GreenLake services on a per-use basis, with HPE managing the hardware, middleware and services.

Customers have a choice in their level of engagement with GreenLake, with HPE taking over management, implementation and delivery of the connected fabric to data and software assets that may reside on public clouds or other repositories.

Antonio Neri of HPE

The big announcement on the show was GreenLake Private Cloud Enterprise, a private cloud service that can be fully managed by HPE† The offering includes the hardware, software and services and can be installed in private infrastructure or hosting services such as Equinix or Digital Realty. The pricing model is very similar to what the public cloud offers and customers can pay as they go.

The offering is an important step for HPE to build a subscription model for a larger portion of its businesses that leverage the company’s infrastructure, storage, networking and computing services. Many years ago, those hardware offerings were at the forefront of HPE’s offerings, but they are increasingly being rolled into GreenLake’s offerings.

There are many ways to charge for subscription services in GreenLake, Neri said. The components may include network-as-a-service or storage-as-a-service, but the bulk of the margins will come from software-as-a-service, where the hardware components are “cost of goods sold”. to be. said Neri.

HPE has highlighted GreenLake as an “edge-to-cloud” offering, a similar approach taken by public cloud providers Google, Amazon and Microsoft.

The public cloud providers are adding hardware — traditionally targeted in their mega data centers — at the edge endpoints to facilitate data collection and processing.

GreenLake is HPE’s way of managing the hybrid cloud, competing with offerings like Amazon’s Outpost and Google’s Anthos. But HPE’s rich history of personalizing systems to a customer’s requirements gives HPE an edge over public cloud providers, which rely largely on off-the-shelf hardware.

“That’s how HPE markets GreenLake. It’s like, ‘yes, we’ll work with you for whatever hardware needs you have. We’ll expand on that.’ That model requires a fair amount of software to work, it requires software integration,” said James Sanders, research analyst at 451 Research.

The older hardware-centric billing strategies of core usage per CPU no longer make sense, and software-as-a-service makes more sense.

“If all the software you buy comes in a SaaS model, you don’t have to worry about the hardware lifecycle because you don’t tie that license to a physical server,” says Sanders. “Servers had four cores. Today the server has 128. Right. And that’s going to be a completely different financial matter.”

HPE’s Arm-based 128-core ProLiant RL300 Gen11 Server

HPE at Discover introduced a 128-core ProLiant RL300 Gen11 server, which has Arm-based chips with 128 cores from Ampere Computing. Software partners already in the public cloud have also announced their offerings on GreenLake. Nvidia eg. said it would offer its Enterprise AI software platform on HPE GreenLake.

IT environments are becoming more complex as the cloud expands to the edge, HPE’s heritage of system builders gives it the ability to understand the granular demands of customers and meet last-mile demands at the edge, where compute resources are smaller, said Keith. Townsend, an analyst at consulting firm The CTO Adviser.

“HPE has a huge advantage. It’s not a centralized solution. If you have complex distributed challenges, what we call the edge or in the data center, Google, AWS and Azure aren’t really well positioned,” Townsend said.

But many of HPE’s customers still don’t understand where the company is going or what it’s doing, Townsend said.

“HPE is trying to do something that is very difficult, which is to take what we would consider traditional infrastructure and deliver it as a cloud service. But you don’t use it in the exact same way you would use a cloud service. It’s traditional enterprise -IT managed by HPE, it is used as a service, which is different from the cloud,” Townsend said.

A few years ago, the idea of ​​cloud-first was different, and people are realizing that moving everything to the public cloud is good for some, but not for everyone, said Fidelma Russo, CTO at HPE in response to a question from EnterpriseAI during a press conference.

Many companies take computer resources in-house to comply with privacy and legal requirements. For example, medical companies may attempt to manage electronic health records internally due to regulatory requirements. Also, some countries require customer data to be stored on servers in the country.

“With our logistics network, with our knowledge of what it takes to build highly efficient compute and storage sitting on the small footprint in certain areas, I think that’s a powerful advantage,” Russo said.

HPE is still peeling the onions in its transformation strategy, and it’s now resonating in its bottom line, said Crawford Del Prete, president of IDC.

In the most recent quarter, HPE revenue was $6.7 billion, a growth of just 1.5 percent compared to the same period last year. But GreenLake and the services sector were bright spots, with GreenLake’s customer bookings accounting for more than $6 billion on balance sheets, growing 107% year-over-year, and the third straight quarter of orders more than doubling.

“Our mix of GreenLake is shifting to more software and services every quarter, which obviously comes at a significantly higher margin than just the hardware,” Neri said.

HPE’s computer division still accounted for the bulk of revenue, totaling $2.99 ​​billion, growing just 1% year over year. The fastest growing division was the intelligent edge, which is closely tied to GreenLake’s offerings, with 9% year-over-year revenue growth to $867 million. HPC and AI revenue was $710 million, up 5%. (Frontier supercomputer sales aren’t in yet.)

The company hopes to expand GreenLake’s presence through its resellers, who have traditionally sold hardware and other equipment. Resellers are still not used to the change in business model, but HPE is trying to convince resellers that they can add their own value.

“They can choose to build, resell, or manage on behalf of clients,” Neri said.

About the author: Tiffany trader

With over a decade of experience in the HPC space, Tiffany Trader is one of the foremost voices reporting on advanced computing today.

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