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HPE hybrid cloud users ushered toward Azure

With the HP split complete, HPE customers can expect to see a stronger hybrid cloud push tied to Microsoft Azure and new cloud server systems.

IT shops braced for impact ahead of the HP split on Nov. 1, and like the year 2000, nothing happened -- at least, not yet.

Hewlett Packard Enterprise (HPE) does plan to shut down its Helion public cloud on Jan. 31, 2016, but a stronger partnership with Microsoft's Azure public cloud will help the transition to a new HPE hybrid cloud focus.

"Microsoft shares our view of a hybrid IT approach for enterprises, and we both see opportunity to simplify hybrid infrastructure for our customers," said HPE CEO Meg Whitman during the first earnings call since HP split into two companies, adding that Microsoft Azure will be a "preferred public cloud partner."

The partnership is important, "particularly as it is offset by HPE's shuttering of its own public cloud," said Kuba Stolarski, a research manager at IDC in Framingham, Mass.

The earnings report was the final one delivered for HP, which split into HPE and HP Inc. on Nov. 1. Whitman claimed the split was executed "flawlessly," and neither customers nor partners were disrupted by the split.

One HPE customer confirmed there didn't seem to be any negative impact to customer service.

"We use a lot of HP hardware and software, and we did not have any issues," said Dan Hyman, a systems engineer at Sentry Insurance Group in Stevens Point, Wis., noting that his HP sales representatives remained the same, and the service has been good both before and after the split.

HP and Microsoft also collaborated on hyper-converged systems for HPE hybrid cloud, with an unveiling this week of a hyper-converged system with hybrid cloud capabilities, called HPE Hyper-Converged 250 for Microsoft Cloud Platform System Standard.

It is "jointly engineered" to bring together HPE ProLiant technology and Microsoft Azure in a company's data center to allow enterprises to decide where and how they want to use cloud computing.

HP earnings end on a low note

HP reported fourth-quarter revenue of $25.7 billion, down 9% from the fourth quarter a year earlier, excluding some one-time expenses. Revenue for the full year was $103.4 billion, down 7% from a year earlier.

For the parts of the former HP business that now comprise HPE, revenue fell 4% to $14.1 billion in the fourth quarter. That breaks down to $7.4 billion in revenue from the Enterprise Group, up 2%; $5 billion from Enterprise Services, down 9%; and $958 million from software, down 7%.

HPE, the new business coming out of the split that focuses on server, storage and networking hardware and software, is in the process of becoming a "solution selling company," Whitman said.

It is that focus that HPE needs, as it attempts to compete against Dell, said Zeus Kerravala, founder and principal analyst at ZK Research in Westminster, Mass., and a TechTarget contributor.

"Dell bought EMC to take all the components of a solution and sell it together," he said. "HP really leaves it up to the customer to solve all the problems."

I haven't seen [HPE] this focused on real solutions in literally years, and they are blending a lot of learning with SuperDome with the rest of the line.
Patrick Moorheadpresident and principal analyst at Moor Insights and Strategy

HPE has the ability to put it all together, something that "fewer and fewer companies out there have the ability to do," narrowing down that category to Oracle, Dell-EMC and IBM-Cisco.

"They sell all the ingredients to the pie, but have never been able to put together the pie," he said.

It will take time for HPE's new focus to become ingrained in the company culture.

"I haven't seen HP this focused on real solutions in literally years, and they are blending a lot of learning with SuperDome with the rest of the line," said Patrick Moorhead, president and principal analyst at Moor Insights and Strategy in Austin, Texas.

HPE server sales grow on cloud use

While other parts of the business struggled, HPE's server sales were strong, which included "solid core growth and increasing demand" from Tier 1 cloud computing providers, according to Whitman. Industry standard server sales were up 5% over last year, she said. Those server sales also come with more "value-added services," such as proactive care and data center care, she said.

"Looking forward, we are well-positioned to benefit from the server market upswing driven by the growth in cloud and big data," she said.

HPE has the broadest server line out of all the major infrastructure vendors, Moorhead said, and is getting more customized with each successive generation. The company recently launched a composable infrastructure system, Synergy, which is designed to play a part in the growing focus on hybrid cloud for HPE.

"Their competitors would say that they are superfluous additions, but I think they're onto something," Moorhead said.

HPE expects to grow its share of the market in x86 servers, storage and networking in the third quarter of 2015.

"Based on what Whitman has been saying, it sounds as though she believes the pendulum is swinging back from simple arms dealer relationships to solution selling again," Stolarski said. "She could very well be right about that, and if so, that opens up all sorts of relatively high margin possibilities for HPE's Enterprise Group."

HPE's strategy for filling gaps in its offering is to first do it from "organic innovation," then look to partnerships and lastly, do it through a merger or acquisition, Whitman said.

Karravala was glad to see the attention given to forming more partnerships, noting the increase in automation. Third-party products will help fill the holes better, and forging new partnerships can help the company as it continues to invest in innovation.

"Partnerships have become as important as innovation," he said.

The plan to grow its offerings doesn't differ from many of HPE's competitors, said Stolarski, noting that HPE has been "pumping research and development dollars into their hardware and software" in recent years, specifically products such as Moonshot, Project Kraken, Project Synergy and Project Odyssey.

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