Hewlett Packard Enterprise chief executive Meg Whitman has said Cisco have not been as aggressive about unified computing system as it's been in the past.
Whitman spoke to CRN USA after speaking to Wall Street analysts on Tuesday that the server powerhouse is poised to make channel changes aimed at shoring up declining industry standard server (ISS) sales.
"I think Cisco is facing some of the challenges that we faced three or four years ago. Remember, if you think about the [impact of] cloud, perhaps servers go first, maybe then storage, then maybe networking, and I think they are starting to see some real weakness there, which means they have not been quite as aggressive about UCS as they have been in the past.
"And I actually think the blade market is slowing down a little bit too for them, and we've been more aggressive. We've come back off the mat ourselves with blades, with Synergy, and so I think we're feeling pretty good about that. And then I think VCE is just getting complicated, because they've got the Dell EMC thing going on over there," said Whitman.
She said HPE aims to compete with Cisco and Arista has taken 13 points of share from the vendor.
"Our partnership is designed to open the channel to Arista because they sell very little through the channel. I think maybe two years ago they had a little channel foray, but it didn't go that well. So they're really relying on us to open the channel for Arista."
Whitman said Arista is a big opportunity for partners. "Here's how I think about it: I think about this as a bathtub. We are pouring lots of really fun and interesting things into the top of the bathtub that are higher-margin, more value-add with higher services attach.
"We just can't have core rack [ISS] draining out of the bathtub. We're going to need to stick a plunger in the hole of the bathtub so all the new things we're adding in is incremental growth as opposed to some replacement growth.
The chief executive said HPE and Arista need to run the channel sales together and make sure that there are no conflicts between the Arista direct sales force and the VAR channel.
"The good news is the compensation of the Arista sales force is entirely complementary to the channel. In other words, we are not cutting the Arista guys out of deals if we work with them.
"I think we have got that all aligned because, as you know, the way these things go horribly wrong is the incentive compensation out in the field is not aligned. The good news is it is totally aligned. And we want to think very carefully about who are our best partners who can handle the Arista product because it is a reasonably sophisticated sale."
HPE believes the Arista product is in demand as it works for small- to medium-sized financial institutions and big financial institutions. Arista thinks it can achieve many more verticals than before with HPE's help.
"And they don't want to build a channel because, as you well know, building a channel organization is time-consuming and quite costly, and they can leverage ours. We are thrilled because it is incremental volume for the channel courtesy of Hewlett Packard Enterprise," said Whitman.
Whitman said HPE is working hard to make sure the company has the right demand generation, in regards to changes so partners can drive increased industry standard server sales going forward versus Dell and Lenovo.
"We've also got to make sure the disties are fully engaged here because the distributors cover what we call 'the unattended space,' and so we've got to make sure the disties are focused with their smaller VARs on making sure we've got the right coverage.
"We continue to improve quote-to-cash. It's getting better. I think it's down to two hours. It needs to be down to two minutes. And that is everyday low pricing. We cannot be in this transactional business doing the Iranian rug bazaar. So I think focus, marketing, demand gen, and we're going to be out at Discover [2016 in London next week] asking the partners how we can do better as well.
Whitman told CRN USA that HPE is re-empowering its business units by country to make sure they can make pricing changes on products in real time.
"In some ways this core ISS business is starting to feel to me a little bit more like the PC business. You know [HP Inc. CEO] Dion [Weisler] is out there changing prices in-country by product line every two or three days. I think we've got to be faster on that because the market is super-dynamic," added Whitman.
HPE believes the growth and margin for partners is on high-end server sales with HC380 and the high performance compute with SGI.
"So this is where the growth and margin is for the partners, but I suspect the partners' economics are a lot like ours. If they've got a shrinking ISS business, then all the new stuff is just in some ways not as impactful.
"If we can all stabilize our ISS business, then everything is incremental on top of that, high performance compute, Synergy, the HC380, the SGI products, more time on all-flash and core 3Par."
HPE reported server revenue in its fourth fiscal quarter was down 7 percent to US$3.52 billion, compared with US$3.77 billion in sales in the year-ago period.
HPE's overall sales for the quarter were down 7 percent to US$12.47 billion, compared with US$13.44 billion in the year-ago quarter.