A ‘New World’ For Partners
Hewlett Packard Enterprise CEO Antonio Neri says the company is moving faster with its edge-to-cloud everything-as-a-service shift to drive “sustainable, long-term, profitable growth” with HPE partners.
“We are here to help partners get ready for this new world,” said Neri in an interview with CRN after HPE Thursday unveiled a three-year “Cost Optimization and Prioritization Plan” aimed at delivering gross savings of $1 billion with changes to its workforce, real estate model and business processes. “Ultimately it is about how partners drive the profitability of their business because we have the best Partner Ready program with the best economics. Our intent is to continue to grow together with sustainable, long-term, profitable growth.”
HPE is accelerating its edge-to-cloud everything-as-a-service sales offensive in the wake of the “economic disruption” from the global COVID-19 pandemic, said Neri.
Overall, HPE reported non-GAAP earnings of 22 cents per share on a 16 percent decline in sales to $6 billion for its second fiscal quarter, ended April 30. Despite the pandemic, HPE reported a 17 percent increase in its GreenLake annualized revenue run-rate business to $520 million and a 12 percent increase in Aruba HPE’s Intelligent Edge business in North America.
HPE has committed to shift its entire portfolio to an everything-as-a-service model by 2022. Neri told CRN that he “absolutely” wants to get to that model as quickly as possible.
“When you go through these challenges and you have conviction in your strategy you need to go faster,” he said. “Remember we used to say the future belongs to the fast. That is exactly what this is. The future belongs to the fast. We have an opportunity to accelerate what is next, … to provide an edge-to-cloud platform that can be consumed as a service. We have the assets. We have the talent. We just need to go faster. That is why reallocating resources in growing areas is essential.”
What impact will the cost optimization and prioritization have on partners?
The cost optimization and prioritization is all about allocating the right resources while we scale the organization correctly. But fundamentally it is enabling partners to have better engagement with us from a digital perspective.
I was the one who started this journey to streamline the go to market and obviously simplify our business processes and modernize our IT (with the HPE Next initiative in 2018). We are well underway on that. We have made great progress. Now over the next year we are going to have the opportunity to build new digital experiences on top of one consistent platform from the edge to the cloud, supported by one IT architecture. We didn’t have that. It was many, many architectures. That actually will streamline our engagement with the channel and actually will drive the channel to be better enabled and more automated and more profitable if they adopt those platforms because, fundamentally, they will be able to do a lot of work in a very automated way.
Fundamentally I see a long-term opportunity to grow the long-term profit pools. Obviously as you drive this shift there is an opportunity to make more long-term money. It is not just selling something now and walking away. It is about making money now and continuing to make money through the lifecycle of that engagement because now you have a longer engagement with the customer because of the as-a-service model. Those are the things that we are thinking about.
How will accelerating the shift to as a service impact go-to-market alignment with the channel?
Our strategy is to deliver everything we do in our company as a service. You saw the momentum we had with GreenLake and the channel. Partners continue to embrace it. They continue to see the pipeline.
Partners need to be able to provide a true edge-to-cloud experience and become more relevant in the context of the public cloud. To me, we both have the opportunity to go faster here. When you go through tough times as we are today, this is where leadership matters and you have to move faster. That is what we are doing. I still believe it is a necessity for both of us. If you are just in the commoditized business, it is not sustainable. But you can use the commoditized business and your reach to become even more relevant in the context to provide solutions that can be consumed as a service, therefore renewing that customer lifecycle for a longer period of time.
Will HPE change internal and partner compensation to accelerate the shift to everything as a service?
We have been gradually pivoting the compensation. Generally we don’t make compensation changes during the year because it is very disruptive. A lot of our channel partners make plans for the year based on how we align compensation structure, which is obviously how we pay them with MDF (market development funds) and other tools like certification. For us we cannot disrupt that. But definitely, as we go down this path, our aim is to align compensation to areas of growth like we have done before, whether it is volume to value, storage, as a service or Aruba. Now we are going faster to as a service. That is a journey. We need to make sure we understand the cash flow implications for the channel. I am not dismissing that. But you should remember whatever we do inside [HPE], it will be the same for channel partners. I consider our direct sales force and our channel partners’ sales forces as the same. Ultimately you need to have both synced exactly the same way.
You committed to everything as service by 2022. Is the goal to get there quicker than that?
Absolutely. When you go through these challenges and you have conviction in your strategy, you need to go faster. Remember we used to say the future belongs to the fast. That is exactly what this is. The future belongs to the fast. We have an opportunity to accelerate what is next, … to provide an edge-to-cloud platform that can be consumed as a service. We have the assets. We have the talent. We just need to go faster. That is why reallocating resources in growing areas is essential.
That is why I streamlined the company. All of the business units now report directly to me, making sure this transition happens faster.
How important is the channel in the everything-as-a-service acceleration?
No. 1, our view of the channel is that it continues to be a key strategic enabler and differentiator for us. We are and we continue to be a channel-led company. That channel motion will have to evolve to the customer needs and demands. Our job is to position our partners to compete and win in this new reality.
COVID-19 has changed everything. Therefore, we have to go faster. We cannot do this ourselves. We have to do it with our channel partners, which is the bedrock foundation of who we are. My commitment to the channel is to make sure that we position them to compete and win with the right innovation, the right enablement and ultimately the right economics. All three play a significant role. I want to make sure when they think about how they are going to meet and exceed their customer needs they think about Hewlett Packard Enterprise because we have the best innovation, the best portfolio and the training and certification for this new world.
We are here to help partners get ready for this new world. Ultimately it is about how partners drive the profitability of their business because we have the best Partner Ready program with the best economics. Our intent is to continue to grow together with sustainable, long-term profitable growth.
What is difference for partners with regard to making money in the as-a-service world versus Dell Technologies and Cisco Systems?
When you have a clear strategy aligned to a purpose and you have conviction, it is much easier to move faster. Remember what I said a long time ago—my goal is to have my competitors look at my tail lights all the time.
Aruba is doing phenomenally. Even with the coronavirus [pandemic] we had 12 percent growth in North America. Our Wi-Fi solutions were up seven percent year over. Cisco does not report the breakout of WiFi, but their infrastructure products were down 15 percent.
The kind of performance that we had [with Aruba] comes when you have clarity of purpose, a clear vision and strategy and you are executing through innovation, ultimately leveraging the crown jewel we have, which is the channel because of the reach and depth that we can provide.
Fundamentally, my goal is for competitors to follow us and copy us, which you have seen every time we announce something or we deliver a message about the vision. They copy us, which is true with one of our competitors. That is fine. We are focused on our customers and partners.
How important are the coronavirus relief efforts you have implemented for partners in the form of extended payment terms and a $2 billion HPE Financial Services payment relief program?
For us, obviously, remembering that we are an extended family here with the channel is so critical. We reacted fairly quickly. Our competitors, as always, copied us and followed us on that front.
That said, I am proud of how we responded to our employees. I am proud of how we responded to our customers. I am proud of how we responded to the channel.
It is tough for everyone. Obviously, it was a tough quarter because of the supply chain.
There was significant disruption. Let’s remind ourselves that we were operating under one full quarter of coronavirus versus some others that are on a calendar quarter.
For us, finding the right balance to help the channel get through this, whether it is shipping to them or enabling the $2 billion financing we are making available to customers and partners, and obviously the relief in terms of some of the metrics for what I consider the best channel program, our Partner Ready program. That is natural for us.
We have to navigate this together [with our partners], which is essential. We are more committed than ever to do so. I have spoken to many, many channel partners who are very appreciative because they are all facing a liquidity crunch. Any payment extension makes a huge difference.
This is a testament to who we are and ultimately a sign of loyalty. Hopefully it will be reciprocated from partners as we go forward.
In the end, that is who we are, and that is our character. That is why we are together in this. That is why our purpose to advance the way people live and work is more relevant than ever.
What can partners expect at the HPE Virtual Discover event, which starts June 23?
I am super excited about the first ever Digital Discover. It is going to be spectacular. Obviously I am disappointed we cannot meet in person. But I am happy to say after many rounds with our Chief Marketing Officer Jim Jackson and [Chief Communications Officer] Jennifer Temple, it is going to be a world-class event. We are going to raise the bar on how to deliver customer engagement in a digital format.
You are going to see new offerings and solutions with a lot of emphasis on as a service. I think that will accelerate our channel motion [with as a service] because these offerings are way more standardized, simple to sell, simple to deploy and simple to manage. Obviously there are also many value-added services partners can add themselves.