The COVID-19 pandemic and the subsequent work-from-home move has compounded an already challenging IT environment caused by digital transformation and the shift away from on-premises infrastructures to the cloud.
Hewlett Packard Enterprise president and CEO Antonio Neri told analysts at the company’s annual securities analyst meeting that those trends play into the hands of HPE, and outlined what his company is doing to ensure it is on the forefront of the technology businesses need to survive and then thrive in the face of the challenges.
This year, because of the pandemic, HPE held its securities analyst meeting virtually instead of its normal face-to-face meeting on the floor of the New York Stock Exchange.
“We welcome you to our first-ever virtual securities analyst meeting,” Neri said. “We are broadcasting live from San Jose, California, observing the social distancing and health protocols established by Santa Clara County. The world as we knew it a mere year ago is vastly different. 2020 has tested global markets, customers, employees and all of us in ways we could never have imagined. The pandemic has created lasting and permanent changes in the way we operate.”
The pandemic has served as a catalyst for making digital transformation a critical and strategic priority for enterprises and for driving increased customer demand for secure connectivity, remote work solutions and data analytics capabilities, and creating a significant opportunity for HPE, Neri said.
“This is why we are advancing our strategy by aligning resources to critical core businesses and areas of growth that accelerate our ability to meet these increased customer needs,” he said.
Digital transformation is not an option
The pace of technology disruption continues to accelerate, and digital-native and digitally transformed companies are outpacing their competitors, Neri said.
“Digital transformation is no longer an option for enterprises, but a strategic imperative,” he said. “Customer spend on digital transformation technologies is expected to more than double in the next five years.”
But before digital transformation can become a reality, Neri said, businesses need secure connectivity as a way to enable new digital experiences and disruptive business models and empower remote workforces. He said that over 45 percent of employees will be working remotely through 2020 and beyond, and that over 55 billion devices and things will be connected to the internet by 2025.
“Two years ago, HPE defined the enterprise of the future as edge-centric, cloud-enabled and data-driven,” he said. “This vision has been validated by the global pandemic. The future we defined is here now. Customers now operate in a very large distributed enterprise. They need an edge-to-cloud architecture and set of technology capabilities to bridge the digital and physical worlds so they can personalize experiences for customers or provide remote connectivity to employees, or digitally enable classrooms for students, and ultimately deliver outcomes for their enterprises. These personalized and automated edge experiences must be cloud-connected and always secure.”
Customers Want To Consume IT As A Service
Neri said HPE is committed to delivering its entire portfolio as a service by the end of 2022. Enterprises are looking to digitally transform, which he said includes developing next-generation cloud-native applications and creating actionable insight from data. But many of these enterprises may lack in-house IT skills, face limited budgets and financing options, and don’t have the flexibility to choose the right technology foundation.
“Consumption-based IT offers solutions to these challenges by providing greater agility, empowering people to shift from managing infrastructure to driving innovation by leveraging insights from their data all while eliminating capital and operating expenses tied to infrastructure over-provisioning,” he said.
HPE is meeting this opportunity with industry-leading software, services, infrastructure, financing and as-a-service capabilities, Neri said. This includes a modern cloud-native software stack that addresses legacy and cloud native environments, as well as a broad infrastructure portfolio, backed by best-in-class services talent and capabilities and a wide range of financing solutions providing asset life-cycle management and consumption-driven business models, he said.
“Our as-a-service experience is years ahead of the competition, driven by early investments in our software platform and managed services capabilities enabling HPE to provide a true consumption-based experience from the edge to the cloud for all workloads, applications and data,” he said.
HPE last year proclaimed itself as the edge-to-cloud Platform-as-a-Service company, Neri said.
“Our approach hinges on providing a true, distributed cloud experience—at the edge, in a data center, in a co-location or in the public cloud—to help customers modernize and transform their applications,” he said.
One of the keys to that move is HPE GreenLake Cloud Services, which saw bookings in the last quarter grow 82 percent year-over-year, Neri said.
“At our Discover Virtual Experience in June, we launched our next-generation HPE GreenLake Cloud Services, all accessible via a self-service point-and-click catalog on our HPE GreenLake Central cloud portal,” he said. “We also introduced our new HPE Ezmeral Software platform that underpins our customers’ cloud experience through HPE GreenLake and enables transformation of apps, data and operations to drive speed, unlock insight and boost efficiency.”
HPE also offers HPE Pointnext Technology Services to accelerate customers’ digital transformation and to design, build, optimize and run their hybrid IT estate, he said.
HPE strategy: drive long-term, sustainable, profitable growth
In addition to turning everything into a service, HPE continues to invest in a wide range of areas to align resources, unlock operating leverage and build long-term growth, Neri said.
This starts at the compute and storage businesses where HPE ships 46 terabytes of storage and four servers every 60 minutes, he said. “Compute and storage are also critical components of our edge-to-cloud platform as-a-service strategy [and] a key competitive differentiator,” he said.
HPE is also driving multiple near-term growth opportunities and doubling down in growth areas like the intelligent edge and high-performance computing as shown by its recent acquisitions of Cray and Silver Peak, Neri said.
HPE is also optimizing its R&D and supply chain costs to deliver the lowest cost per compute workload resources, Neri said. “We have made significant progress this year and will continue our efforts to drive simplification and supply chain efficiencies,” he said.
Just as important is HPE’s AIOps capabilities, Neri said. This includes the HPE InfoSight software, an advanced AI for infrastructure operations that can predict and resolve issues 86 percent of the time, he said. HPE InfoSight is now utilized on 85 percent of Nimble and Primera arrays and is ramping on different HPE server lines to deliver industry-leading AIOps for customers and enable HPE Pointnext Technology Services offerings, he said.
“We are focused on making strategic investments to fuel future growth,” he said. “We have taken very deliberate steps to pivot our portfolio and expand into new customer segments and markets.”
M&A key to growth
During the question-and-answer period following the HPE presentations, an analyst noted that HPE’s investment over the past three years in research and development grew 24 percent even as revenue declined materially, meaning that mergers and acquisitions have to be a part of growth, and asked if HPE plans to increase the size or quantity of M&AE transactions and in what areas.
Neri said that HPE will have invested US$4 billion in organic R&D from 2018, when he declared the edge to be the next IT frontier.
“The acquisition of Silver Peak is an incremental addition to that strategy, but again, always with discipline of return on investor capital,” he said. “Cray is another great example of doubling down after our acquisition of SGI and our organic business in HPC.”
HPE’s current planned 1 percent to 3 percent revenue growth and its expected margin expansion is pure organic at this point in time, which means that HPE does not need an incremental acquisition, but will continue to assess what is available at the right valuation to accelerate its strategy, Neri said.
“And those areas are in the software space,” he said. “Definitely in the software space. Obviously, that‘s what makes [customers’] experience unique and differentiated. And anything that is capable as a service will be also considered.”
HPE is very disciplined when it comes to the 18 acquisitions over the past five years starting with the very successful acquisition that year of Aruba, Neri said.
“But obviously, we need to continue to assess what‘s available, and always think about, can we bring the right intellectual property and the right talent that we can quickly incorporate in our solutions, and then take it to our go-to-market at scale,” he said. “So we continue to do that. And I expect that to continue to be the case.
The channel is strategic
HPE’s indirect sales channel is very much a strategic asset for the company, and plays an essential role in shaping and executing the company’s strategy, Neri said.
“We have one of the largest networks of channel partners in the industry, and it continues to be recognized as best-in-class,” he said. “Nearly 70 percent of our sales go through the channel network today, and we have more than 80,000 channel partners around the globe. Today, more than 700 partners in our HPE channel ecosystem actively sell HPE GreenLake Cloud Services, and over the past year we have seen a triple-digit growth in HPE GreenLake bookings from our partners.”