Is HPE headed toward extinction?

The first question might be, why does a CIO care if any one vendor comes or goes? It matters if you are invested in that company’s products or services. The vast majority of enterprises have invested in a number of enterprise companies…including HP Enterprise (HPE). Many are asking where HPE is headed and how long customers can rely on that relationship and investment?

In order to answer that question, one has to break down the problem a bit. In the beginning, we had one Hewlett Packard.

 

HP SPLITS IN TWO

On October 6, 2014, HP (NYSE: HPQ) announced that it would split into two new publicly traded Fortune 50 companies. The two companies would split down the lines of consumer products and enterprise solutions. The former being called HP Inc. and the latter being called HP Enterprise. A year later, on November 1, 2015, the split officially took effect.

My take is that the split is a good thing for both HP/ HPE and customers. It allows each of the two companies to focus on their respective strengths and markets. The consumer market is much different from the enterprise market.

HPE CONTINUES TO REDUCE PORTFOLIO

Since the split in 2015, HPE has been busy reducing the size of their portfolio. There were four core pieces to HPE’s business: Cloud, Services, Software and Infrastructure.

One of the first things to go was HPE’s Helion Cloud business. The mystery here is that cloud is one of the largest opportunities for any of the legacy IT vendors, including HPE. As customers make the move from traditional corporate data center infrastructure to cloud-based solutions, existing providers need to consider this loss of revenue. Cloud presents one of the largest opportunities for customers and HPE could have leveraged their large based of existing customers. So, why would HPE move away from building up this business as part of its future strategy?

Unfortunately, While HPE’s foray with a cloud offering had the opportunity to carry HPE into the future, they struggled to find their footing with customers. In the end, the twists and turns for HPE offering a cloud offering were futile and they shuttered the Helion offering.

There is still a component of HPE’s cloud business that is hanging on called Cloud System. However, it is part of infrastructure and requires a Technical Services engagement as part of the purchase. In sum, this is a rather small part of HPE’s business and the requirement

The second step was spinning off HPE’s Services business to CSC May 2016. While HPE & CSC called the transaction a merger, it was widely seen in the industry as a spinout from HPE to CSC. The move aligned HPE’s Services business with an existing large services vendor.

The third step was spinning off HPE’s Software business to Micro Focus in September 2016. Again, the transaction was billed as a “merger”, however, it is also seen as a spinout from HPE to Micro Focus. The interesting thing about this transaction was that it included one of the gems in HPE’s business. It included their big data and analytics business.

Taking away HPE’s Cloud, Services and Software businesses, the only thing that is left is their core infrastructure business. Aside from their continued innovation in servers and storage, their Synergy platform potentially provided HPE a longer term future in the infrastructure business.

Enterprise customers are moving away from owning traditional corporate data center assets in droves. This includes traditional server and storage infrastructure. Out with the old and in with the new. HPE’s Synergy platform potentially provides HPE an interesting bridge for those enterprise customers looking to leverage infrastructure investments as they leverage new architectures and development routines on their way to cloud.

I say potentially because HPE’s infrastructure business is hindered by a number of factors. First, enterprises are moving away from traditional infrastructure toward cloud. And future state solutions including cloud and big data are now gone from the HPE portfolio. In addition, HPE continues to struggle with the traditional way of thinking. And this traditional thinking is not going to resonate with customers looking to change things up demonstrably. There is still potential for HPE’s infrastructure business, but only if they make significant shifts in thinking, strategy and leadership. That being said, the window of opportunity for HPE infrastructure is limited.

IS THE LONG TERM STRATEGY FOR HPE EXTINCTION?

Here’s the kicker: By closing down their Cloud business and selling their big data and analytics business, HPE essentially removed their long term future. On the surface that would be suspect until you think about the end-game.

Looking at the path HPE has taken over the past two years and what is left, there is a glaring conclusion that HPE’s strategy all along was focused on breaking up the company and selling off the assets. Many of us suspected this was the case right out of the gate. With the activities just in the past six short months, it is clear that HPE’s destiny is extinction.

The irony in all of this? Once the end-state for HPE infrastructure is determined, there will be only one “HP” left: HP Inc.