At HPE Discover 2019, there was one overarching message: HPE is pivoting. The company is transitioning to HPE as a service in three years. We will call this HPEaaS. During the show, the drumbeat is “offering everything as a service by 2022.” Buying an experience that is tailored for the customer, consumed as a service, delivered on HPE hardware. If this sounds familiar, it is something HPE tried with the EDS acquisition years ago, albeit with a different execution. Instead, HPEaaS using GreenLake everywhere is the gateway to take the pain of infrastructure management away from a company using a more modern cloud consumption model.
HPEaaS with HPE GreenLake
As part of the push for building everything as a service, HPE GreenLake is the centerpiece. HPE GreenLake is how the company delivers hardware as a service in a consumption model. For customers who want an OpEx line instead of CapEx, GreenLake makes on-prem IT infrastructure look more like a public cloud. At HPE Discover 2019, the company is doubling down on GreenLake with four main sales points.
HPEaaS for the Entire Portfolio by 2022
First, HPE plans to sell its entire portfolio as a service by 2022. Purchasing storage array, edge WiFi, or VMware/ Microsoft licenses? That will be sold via GreenLake. Traditional compute, networking, and storage? That will be sold via GreenLake. At Discover 2019, HPE is increasing the number of products in its portfolio as well as the market segments it can address with GreenLake.
From a financial perspective, this is intriguing to say the least. HPE can define minimum consumption to maintain some minimum level of margin in a deal. It can then allow a customer to consume more at set pricing. This extra consumption can potentially be at a much higher margin than the baseline. For HPE this is a clear win. For customers, they can build infrastructure without enormous capital outlays and have a clear understanding of what consumption costs, as they do in the cloud.
HPEaaS Expands with HPE GreenLake for Mid-Market
Second, HPE is expanding customer segments. With HPE GreenLake for mid-market, the company is able to bring HPEaaS to smaller customers. For large enterprises buying HPE GreenLake involves highly customized configurations and complex models. These models take into account future growth and different usage patterns. That quoting process can be too complex for the mid-market with smaller deal sizes valuing speed and agility. HPE is investing in quoting tools to allow its mid-market customer base to quickly quote a GreenLake solution. The company is also partnering with providers like CyrusOne and Equinix to streamline the deployment of GreenLake. HPEaaS is able to sell not just the hardware and support in a package, but also the physical site and connectivity as well.
During the HPE Global Partner Summit, the company made a major push to have its channel partner community sell GreenLake. It says that it has had around 120 partners sell GreenLake solutions and booked more revenue in Q1 2019 than it did all of last year. HPE is building specialized rebate and MDF programs for GreenLake. These give partners both upfront and recurring revenue also allowing partners to layer in their own services.
HPE GreenLake Hybrid Cloud on Azure
Third, for the public cloud tie-in, HPE is partnering with Microsoft to expand HPEaaS offerings. The company is announcing HPE GreenLake Hybrid Cloud on Azure. The goal here is to allow workloads to run on HPE GreenLake infrastructure on-prem as well as take advantage of the Microsoft Azure cloud for burst capacity and other applications.
HPE GreenLake for Aruba
Fourth, HPE GreenLake for Aruba is going to be a major push. Aruba is the WiFi edge company HPE purchased several years ago. The HPE Aruba ecosystem encompasses the edge hardware that provides device connectivity but also a portfolio of solutions around the edge including security services. Beyond its traditional scope, HPE is looking at Aruba to move upstream into the data center as well. Offering HPE GreenLake in this segment means that otherwise capital intensive edge investments can be purchased using OpEx on a consumption basis.
HPE will continue to sell boxes as it does today. It says it has a 99% retention rate with GreenLake so far. Its only customer to leave needed to go back to a CapEx model for tax purposes.
This brings up the inevitable question. If one buys HPE servers, storage, networking, management, support, and software licensing, and colocation through GreenLake, have we not seen that model before? Is HPEaaS essentially a cloud model with more hardware customization? The more products and services that are part of GreenLake makes the model look closer to the public cloud.
For many customers, GreenLake is going to be an awesome way to get projects done through a more streamlined purchasing process. For HPE, HPEaaS will help increase vendor lock-in and provides an enormous financial upside for each deal. Selling GreenLake is a big win for HPE if one takes into account future revenue streams. This is similar to how selling a 7-10 year EDS IT contract was a big win.
Perhaps the most interesting question here is whether HPE will need to continue designing hardware long-term. Covering the entire HPE portfolio and including products and services from partners, HPE is changing its brand alignment. Instead of being aligned with making boxes, the company is shifting its model to be viewed as a service provider. If customers are buying 10TB blocks of storage in a consumption model does it need to be a HPE 3Par or Nimble array? Instead, can it be a Ceph cluster built on Supermicro or Wiwynn hardware?
With HPEaaS, 5-10 years down the road perhaps HPE is selling compute building blocks from other vendors extending lifespans to push a deal margin out. This is exactly what happened with the HP-EDS model. To some, it sounds preposterous, but there are more people who know they have HPE brand servers in their data center today than know the brand of Azure cloud server they use. Currently, HPE says that its iLO and other telemetry tools make it all possible with products like InfoSight. One has to wonder if there will be a project in the future to bring GreenLake to a wider audience. Potentially, GreenLake becomes a way organizations buy data center IT products from multiple vendors.
HPE’s announcement of everything GreenLake at Discover 2019 is a big deal that every server, storage, and networking vendor is going to be discussing today.