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Vendor Rating: Hewlett Packard Enterprise

Published: 05 December 2017 ID: G00326558

Analyst(s):

Summary

HPE has completed major restructuring in its PC/printer business, its enterprise services business and its software business, with plans for further business optimization. HPE is now focusing on a three-pronged strategy: hybrid IT, intelligent edge, and advisory and implementation services.

Overall Rating

Figure 1. Vendor Rating: Hewlett Packard Enterprise
Research image courtesy of Gartner, Inc.

Source: Gartner (December 2017)

Overall Rating: Positive

After splitting off from HP's PC and printer business in 2015, Hewlett Packard Enterprise (HPE) has just completed two more significant structural changes (see Note 1). It has spun off its Enterprise Services business to merge with CSC and form DXC Technology (completed in March 2017). And it has spun off its Software Group to merge with Micro Focus (completed in September 2017). These changes have fundamentally changed HPE from a one-stop, end-to-end provider to a best-of-breed supplier focused on partnerships and solution ecosystems overall. HPE has retained businesses that are executing well. However, HPE has more work to do to prove it can execute well on its newly focused strategies centered on hybrid IT and intelligent edge (both technologies and services). HPE will need to shift effectively to a partnered, ecosystem approach — a challenge when its large installed base has previously dealt with HPE as a one-stop shop and a broad strategic partner.

Further structural changes are likely. On 16 October 2017, HPE's Board of Directors approved a restructuring plan (called "HPE Next") that will take place during the next three years (see Note 2). This restructuring plan will reduce annual costs by approximately $1.5 billion, with about half of the savings to be reinvested in "go-to-market, operational and R&D investments in key growth areas." HPE also expects to continue making targeted acquisitions to improve its portfolio. In 2017, their acquisitions were focused on its strategy:

  • Cloud Cruiser acquired (hybrid IT software) — January 2017

  • Niara acquired (security, user and behavioral analytics for Aruba and edge) — February 2017

  • SimpliVity acquisition completed (hyperconverged solution) — February 2017

  • Nimble Storage acquisition completed (flash storage) — April 2017

  • Cloud Technology Partners (CTP) acquired (cloud computing advisory services) — September 2017

The executive structure of the company continues to change. In August 2017, Chief Sales Officer Peter Ryan announced that he would be leaving HPE, just one year after being promoted to that global role. In June 2017, CEO Meg Whitman promoted executive vice president Antonio Neri, ceding the role of HPE president to him. In November 2017, HPE announced that Whitman would be stepping down from the CEO role, with Neri taking that position on 1 February 2018 (both Whitman and Neri will be on the HPE board of directors). As HPE settles into its new, more-focused role, and as they execute the HPE Next plan, more executive and organizational changes will occur.

Detailed Rating

Product/Service: Positive

Research image courtesy of Gartner, Inc.

Research by: Thomas J. Bittman

HPE has a strong portfolio of software-defined infrastructure (SDI) offerings, with a broad range of servers (traditional, converged, hyperconverged and composable) and storage (leader in several Magic Quadrants; growing well in flash-based storage). In February 2017, HPE completed its acquisition of SimpliVity to elevate its profile and capabilities in the increasingly important hyperconvergence market. Aruba is the clear No. 2 player in campus networking; however, HPE's role in data center networking is evolving to include more reselling and integration with partners. HPE will continue to invest in infrastructure software that enhances its hardware, including OneSphere (fomerly "Project New Hybrid IT Stack"), InfoSight and the Universal IoT Platform. HPE is expanding its large Pointnext business, which includes product support (IT Operational Services), technology advisory and implementation services. HPE also has a substantial Financial Services business (accounting for about $3 billion in revenue).

Support/Account Management: Positive

Research image courtesy of Gartner, Inc.

Research by: Dane S. Anderson

HPE is strongest in managing partner relationships, as well as regional and industry coverage. HPE effectively avoids channel conflicts, and it is strong at winning and managing its pipeline of large deals. It has continued promoting strategic offerings through its sales force and channels, but still may be underselling across the portfolio. Customer problem resolution tends to be a strength.

As HPE has restructured and reinvigorated with a services-led approach, the more-focused portfolio will improve its ability to sell, and selling with solution partners will become more important. This will be especially important with the CTP acquisition, and HPE must accept, adopt and adapt to this new mechanism for engaging clients and prospects.

Hardware Support Services (now named Operational Services) are reported as a part of the recently coined HPE Pointnext, the former technology services arm of HPE Enterprise Group. A strong profit generator for the company, these services not only serve as an effective window into customers' data center environments, but also enable HPE to change the stigma of support into a more proactive, as well as projective offering. Although this specific service space is seeing new competition from third-party maintainers, Pointnext continues to adapt offerings and approaches to orient on its traditional support functions. It has expanded new solutions into Proactive Care Services, Data Center Care and Flexible Capacity solutions.

The critical "new" element of these offerings is the level of automation being applied, in addition to its predictive and pre-emptive analytics within those solutions. Furthermore, Pointnext has made its SMART offerings (e.g., Smart Part, Smart Locker and Smart Dispatch) appealing for the convenience, intuitiveness and "Amazon-esque" approach to an age-old conundrum — just-in-time part replacement, without immense inventory implications for customers.

Pointnext continues to gain momentum, as well as leverage its Operational Services as an opportunity for itself and clients alike, to find out what else can be done and improved. However, outside the HPE installed base, Pointnext is still largely unknown. As the Operational Support portfolio continues to build out, HPE will need to move operational services from the back end of an engagement to the front-end business value (improve on running the business). This will more fully create opportunities for its advisory and professional services capabilities. While improving on the capture and articulation of business value of their clients, Pointnext will not get to this "next point" without continuously demonstrating and building market awareness around the results that Operational Services clients achieve. Advisory and Professional Services may not get the market opportunity to take HPE on its HPE Next path.

As HPE has restructured during the past few years, HPE customers have raised concerns about sales relationship continuity. As HPE continues to restructure in the future (e.g., HPE Next), maintaining consistency and relationships with customers will be a critical challenge that could affect sales execution.

Pricing Structure: Positive

Research image courtesy of Gartner, Inc.

Research by: Thomas J. Bittman

HPE's product pricing structure and practices follow industry norms, and are generally neither overly competitive or undercompetitive. Similar to competitors, mature products with declining installed bases are offered conservative discounts, while growing product lines can be aggressively priced and discounted — for example, in campus networking, where products are commoditized. However, HPE's discounting is sometimes less consistent than its direct competitors.

The lifetime warranty continues to be a differentiator that creates economic value for customers (as compared with some other lifetime warranties from other vendors that are more of a marketing response to HPE's offerings).

The HPE Financial Services business enables creative and flexible pricing and consumption models for customers, including preprovisioning, flexible capacity pricing based on usage, per-unit server/support subscription pricing and flexible asset return options (for Synergy systems).

Technology/Methodology: Positive

Research image courtesy of Gartner, Inc.

Research by: Thomas J. Bittman

HPE has a heritage in technology innovation, and HP Labs has long championed breakthrough technologies and research aimed at profoundly improving and redirecting HPE's future products. Its largest recent project, "The Machine," is an ambitious effort to reinvent the fundamental architecture of computing. Although The Machine has not become a product, per se, research for it has led to new technologies that are being embedded in a variety of products, such as HPE's Synergy system. Future investments in HP Labs are likely to shift, as HPE's overall strategy increasingly focuses on hybrid and edge.

HPE has also been investing in the Internet of Things (IoT) and edge computing, combining technologies and services to create innovative leading-edge customer references, well ahead of general market growth. It's early, but, with continued investments and aggressive execution, HPE can take a leadership role in this important and emerging market. However, this will happen only if it moves from custom, one-off deployments to offerings that can be replicated with partners in large, targeted segments.

HPE has also leveraged intellectual property from acquisitions — such as Superdome Flex (from the SGI acquisition) and InfoSight (from Nimble).

Although HPE will continue to invest internally on pioneering technologies, and acquire, when appropriate, it has made an important shift toward venture investments as it works to expand its partner ecosystem. Through its Pathfinder organization (with about a dozen employees), HPE invests roughly $100 million per year in startups that focus on big data, edge, security, cloud computing and data center. HPE aims to curate these startups, help them scale and connect them to enterprise customers. Current investments include:

  • Data Center — Chef (2015), Mesosphere (2016), Platform 9 (new in 2017)

  • Storage — Scality (2016), Cohesity (new in 2017), Hedvig (new in 2017)

  • Security — Hexadite (2016), SafeBreach (2016), Shape Security (2016), Synack (new in 2017)

  • Data and Analytics — Tamr (2015), Keen IO (2016), ThoughtSpot (2016)

  • Networking and Mobile — Barefoot Networks (2016)

Strategy: Positive

Research image courtesy of Gartner, Inc.

Research by: Thomas J. Bittman

After the latest major structural changes were announced in 2016 (and closed in 2017), HPE's vision became focused on core competencies in SDI, edge and related services. This involves being:

"The leading provider of hybrid IT — built on the secure, next-generation software-defined infrastructure that will run customers' data centers today, bridge to multicloud environments tomorrow, and empower the emerging intelligent edge that will run campus, branch and industrial IoT applications for decades to come. All designed, delivered and supported through world-class services capability."

Gartner sees four important elements to this vision.

Hybrid IT

Enterprises rely on a mix of infrastructure, including on-premises and private and public clouds. HPE's hybrid IT capability is strongest in modernizing on-premises infrastructures. After the services and software spinoffs, HPE has created gaps in cloud broker and cloud management software that must be filled through partnerships and organic investment. HPE's planned OneSphere and its recent acquisition of CTP are important to its Hybrid IT strategy, as well as the continued enhancement of its Pointnext advisory, implementation and flexible capacity offerings.

Software-Defined Infrastructure

Infrastructure hardware is HPE's strongest segment. Although late with a strong hyperconverged offering, HPE's composable solutions, hardware and software are a solid strategic foundation. The vendor improved its hyperconverged story through its acquisition of SimpliVity. HPE is also strong in campus networking, but is challenged in the data center as it transitions from internally developed data center switches to using Arista Networks as its predominant data center networking platform.

Intelligent Edge and Internet of Things (IoT)

This is the most forward-looking part of HPE's vision, but also the least developed from a potential business perspective. HPE is investing in the growing importance of wired and wireless connections to people and things, and has a strong foundation with Aruba. From IoT to augmented reality, the connectivity, compute and analytics, security, and location services needed for the edge will be a major opportunity. Specific to IoT, HPE has mostly created unique reference deployments (together with Edgeline servers and Pointnext services); however, the opportunity to replicate and grow is there. HPE will need to invest heavily in development and marketing to become a visible leader with differentiated offerings in this space.

Ecosystem

Fundamental to its vision is an expansion in the importance of partnerships and ecosystem. Its new strategy creates an opportunity — and a requirement — to partner with best-of-breed vendors in software and services, in addition to Micro Focus and DXC Technology after the spin/mergers. Cloud28+ is an important part of HPE's Hybrid IT partner ecosystem. HPE will need to expand its relationships, including innovative startups (for example, HPE's Pathfinder program, used to identify and finance startups). The Aruba Ecosystem Partner program enables partners to integrate new services for wireless, network security and location-based services. HPE's recent acquisition of CTP (which has relationships with AWS, Google and Microsoft) will test how HPE works with partners that cooperate in some areas and compete in others.

HPE's new strategy aligns well with its core competencies, product portfolio and industry trends. Pointnext is a business multiplier, because it promotes enterprise transformation to Hybrid IT and edge; however, HPE has gaps to fill through development, acquisition or partnerships (notably in Hybrid IT and transformation services). HPE's OneSphere is central to its Hybrid IT vision, and has not yet rolled out. HPE also needs to align its sales force, which has only recently become aligned with solution sales, combining hardware, software and services. It also needs to build new partnerships and effectively market its strategy to HPE customers.

Corporate Viability: Variable

Research image courtesy of Gartner, Inc.

Research by: Thomas J. Bittman

In a market rocked by cloud computing (e.g., Amazon, Microsoft and Google), consolidation (Dell/EMC), evolving "new" competitors (such as Nutanix), and fundamental changes in business requirements and applications (e.g., DevOps, microservice architecture and edge computing), HPE has made aggressive business changes. As it strives to remain competitive, focus and find opportunities for continued growth, there have been three major structural changes in the past three years.

  • HPE's split from HP (announced October 2014; closed November 2015). HP has split into two companies — one focused on PCs and printers, and the other focused on enterprise infrastructure, software and services.

  • HPE has spun off Enterprise Services to merge with CSC (announced May 2016; closed April 2017). In March 2017, HPE announced that it was developing its Technology Services business unit to increase its advisory and implementation capabilities, and is rebranding it as "Pointnext."

  • HPE spun off its Software Group to merge with Micro Focus (announced September 2016; closed September 2017). In June 2017, HPE announced "Project New Stack" (now called "OneSphere").

HPE hasn't finished restructuring. HPE Next (see Note 2) promises further dramatic cost cutting, combined with focused investments on its strategic growth opportunities for the next three years. Although necessary in a market that is transforming, the long-term nature of these changes creates a challenging work environment, as well as challenges in marketing a consistent vision and identity to customers and partners. As always, the key will be how well HPE executes continued transformation. The past three years have been marked by the successful execution of major business spinoffs. The next few years will need to be marked by consistency, focus, operational excellence, improved go-to-market, marketing internally and externally, and strategic investment and growth.

Financial: Variable

Research image courtesy of Gartner, Inc.

Research by: Andrew Neff

We have maintained HPE's Financial Statement Scorecard rating as Variable to reflect the competitive challenges facing the company after the spinoff/merger of the software and services businesses. However, HPE is taking steps that could lead to an upgrade in this rating. if it can show sustainable margin expansion in a challenging revenue environment. Normally, the Financial rating is based on Gartner's quantitative scoring methodology, which measures growth, profitability, liquidity and cash flow on a historical basis. However, the historical metrics are not relevant, due to the removal of software and service revenue. Moreover, Gartner's methodology is based on GAAP numbers, which reflect the software business through 1 September 2017. This reduces the relevance of our quantitative rating.

To begin with, HPE in its current form is more focused, which has enabled it to execute an acquisition program that addressed gaps in its strategic roadmap. However, the flip side of this focus is that its markets are highly competitive, owing to three concurrent trends: disruptive technology changes, such as cloud and flash; growing customer power from hyperscale vendors; and software increasingly replacing hardware.

In the enterprise group (EG) — which includes servers, storage, networking and technology services — there are encouraging signs. Looking at HPE's most recent results, EG reported 4Q17 revenue of $6.85 billion for its 4Q17 (ending 31 October 2017). This was flat, compared with the prior year, due to 5% growth in storage (13% of EG revenue), 21% growth in networking (10% of EG revenue) and 2% growth in technology services (29% of EG revenue). The server business (48% of EG revenue) was down 5%. However, the operating profit margins for EG have been under pressure (10.6% in 4Q17). This is down from the 12% range seen during the past year — some of which can be attributed to component costs — but is also structurally low relative to its peers.

HPE also maintained the Financial Services unit, which had 4Q17 revenue of around $1 billion and a 7.7% operating margin. HPE management has announced the HPE Next program which is intended to simplify HPE's business model, spur innovation and, ultimately, improve margins. HPE has said that this should show impact in FY18.

At its recent analyst meeting in October 2017, HPE management stated that its long-term target is a 7% to 9% growth in earnings per share, based on 4% to 5% growth in operating margins on 0% to 1% revenue growth. This implies that the earnings growth will be generated by cost savings and mix shifts in a flat environment.

Additional Analyst Insights

Servers

Research by: Daniel Bowers

HPE offers a wide and deep portfolio of servers. In addition to industry-standard x86 servers, HPE also offers mission-critical, Unix, HPC, and IoT-focused servers. HPE has maintained its global market lead in both overall and x86 server revenue in 2017, although Dell EMC overtook HPE in x86 unit shipments in 4Q16. In 2017, HPE launched the 10th generation (Gen 10) of its flagship ProLiant x86 tower, rack, blade and modular products, with features that strengthen HPE's solid system management story. HPE has a strong scale-up x86 platform portfolio, with a rapid integration of products from SGI, a 2017 refresh of its Itanium-based Integrity servers, and the launch of the new 32-socket capable Superdome Flex mission-critical server. One market segment where HPE has been especially successful with its scale-up server portfolio is with SAP Hana. HPE has also expanded its HPC-optimized Apollo line.

At the end of 2017, HPE announced they would stop providing custom-built servers for Tier 1 service providers. HPE had targeted this market segment (including hyperscale providers such as Microsoft and Facebook) with a portfolio of heavily optimized servers called Cloudline. Although the hyperscale business is high-growth, it's also low-margin, with purchase volumes that are large, but unpredictable, and it's also price competitive. HPE has struggled to leverage the R&D spent on customized hyperscale designs into its mainstream server portfolio. HPE plans to shift its focus here to a larger number of smaller Tier 2 and Tier 3 providers, with a more standardized set of Cloudline servers.

HPE will encourage users of its aging C-Class blade architecture to refresh newer architectures, such as Synergy. However, the ongoing integration of SGI, a lessened focus on providing servers to the hyperscale market, and continued decline in the demand for Unix servers places pressure on HPE to maintain revenue and market share of its ProLiant x86 server. This line faces increased competition from China-based vendors and direct-to-user ODM sales.

Integrated Systems

Research by: George J. Weiss

HPE continues to add value-based differentiators to its integrated systems portfolio, including composable infrastructure, multitenant workspaces and self-service hybrid cloud portal capabilities. Products include converged (ConvergedSystem 500, 700 and 900), hyperconverged integrated systems (HC and SimpliVity), composable (Synergy), hybrid cloud solutions (including Azure Stack), and reference architectures and point solutions.

With the addition of SimpliVity, which has an installed base of about 6,000 systems, and the large market potential of its global channel, HPE has raised its market potential and achieved share among the top four HCIS vendors.

During the next 12 months, HPE will emphasize its Composable Infrastructure strategy, based on Synergy. To add differentiation, HPE will deliver software value based on the OneView unified management suite, an emerging cloud management suite, and the extension of composable resource management across the portfolio. For HPE, outcomes can be positive, as well as risky. The rewards are integrated system leadership and new levels of differentiation. However, the ongoing integration of SGI and SimpliVity products, and the need to address hybrid cloud use cases with new products (e.g., Azure Stack) puts pressure on HPE to simplify and rationalize a large, complex and sometimes overlapping portfolio.

Risks are longer Synergy sales cycles through the channel, applying new SDI to unify complex systems (e.g., CS, Synergy and SimpliVity), and HCIS competitive challenges from strong incumbent vendors (e.g., Cisco, Dell EMC and Nutanix/Dell). Overlapping converged systems, such as Superdome Flex and CS900, and SimpliVityand HC380, plus reinforced Synergy marketing efforts may slow HPE market momentum. This has been shown in client feedback on difficulties rationalizing acquisitions and legacy installed base with an upgrade strategy that depends on future deliverables and roadmap.

OneSphere

Research by: Dennis Smith

HPE introduced "Project New Stack" (later renamed OneSphere) in June 2017. OneSphere is a multicloud management solution that combines the resources from public cloud infrastructure as a service (IaaS)/platform as a service (PaaS) subscriptions and on-premises infrastructure (e.g., HPE Synergy or HPE SimpliVity) into a virtual pool of API-driven resources. HPE OneView is an integral component of the OneSphere solution, enabling orchestration, provisioning and operational management of HPE hardware. OneSphere will provide a common dashboard for managing functional services in cloud environments. The SaaS management solution includes self-service resource provisioning, operational health visibility, and cost and workload optimization in multicloud environments for IT, developers and business executives. HPE's initial OneSphere offering will be available in early 2018.

If properly executed, OneSphere will position HPE to compete in the hypercompetitive multicloud management market. Coupling these multicloud management capabilities with the ability to operate and manage HPE's composable infrastructure is a plus.

Storage

Research by: Roger W. Cox

The strength of HPE's storage portfolio is block-based storage supporting storage area networks (SANs), while branded network-attached storage (NAS) and object storage offerings remain weaker areas. In April 2017, HPE acquired Nimble Storage, in part, to bolster its flagging storage revenue performance and gain ownership of InfoSight. With the acquisition of Nimble, the HPE primary storage portfolio has become more diverse, but also more complex. HPE is positioning Nimble Storage, along with its 3PAR StoreServ Storage platform, as front-line hybrid and solid-state array (SSA) offerings for primary storage. However, because of overlap in entry-level and midrange price bands, HPE is challenged to crisply position and message the Nimble and 3PAR StoreServ Storage offerings for best fit use cases.

With shrinking revenue, the XP7 Storage, StoreVirtual Storage and MSA Storage are legacy offerings that round out HPE's primary storage portfolio. Data protection use cases are addressed by the scalable StoreOnce disk-based backup appliances, the Nimble Secondary Flash array and the StoreEver Tape portfolio. Cloud Bank Storage, scheduled for availability in late January 2018, enables StoreOnce users to leverage multiple public cloud platforms for the long-term retention of backup copies.

Data Center Networking

Research by: Mark Fabbi

HPE's data center networking business is transitioning from the development of a wide range of data center solutions to that of a reseller and integrator of third-party networking solutions. HPE's mainstream approach focuses on integrating Arista's data center networking solution into HPE's data center solutions. Work is underway to provide close integration between Arista and HPE's compute platforms, with common management in Oneview. For customers pushing for greater control and disaggregated approaches, HPE continues to enhance its Altoline offerings, with the addition of software from Big Switch Networks (to offer alternatives to the resale agreement they already have with Cumulus Networks).

HPE also resells overlay solutions from Nokia (Nuage) and VMware (NSX). Although HPE has clearly moved away from the H3C-sourced FlexFabric solutions, it continues to support these customer networks for the foreseeable future. The success of the integrator strategy will hinge on HPE's ability in the field with its key partners. Activity with Arista has been modest, and HPE could offer Arista a significant channel to mainstream and midsize enterprise accounts. However, this will only be successful if the right rules of engagement and compensation programs are in place.

Campus Networking and IoT

hybridResearch by: Tim Zimmerman

HPE Aruba remains a strong player in the access layer market, earning the top placement across all use cases in Gartner's 2017 Critical Capabilities for Wired and Wireless LAN Access Infrastructure. It is the second-largest vendor in the wired/wireless LAN access layer worldwide market, with revenue share of 19% for wireless and 10% for campus switching in 2016. Through the acquisition of Rasa Networks (2016) and Niara (2017), HPE Aruba has continued to bolster its broad portfolio.

To address the need for access layer flexibility, HPE Aruba must execute on its plans to update its cloud offering (Aruba Central) to the equivalent functionality of its ClearPass suite and AirWave on-premises applications. It will also be important to move beyond the stand-alone functionality of the Rasa Networks and Niara (now IntroSpect) applications by integrating them with the ClearPass Policy Manager. HPE FlexNetwork legacy switches still do not offer the same level of functionality as AirWave and ClearPass, compared with Aruba switches, which can increase the likelihood of suboptimal deployments. The launch of the Aruba 8400 switch is a good first step as the team refreshes the older ProCurve switch portfolio.

Although leadership changes for the HPE Aruba IoT strategy support a broader look at the market, HPE must still expand Meridian's location-based services capabilities and strategic relationships beyond Wi-Fi and Bluetooth low energy (BLE). It will need to capture more than narrowly defined usage scenarios in a growing market. The addition of the Edgeline product family to the Aruba portfolio is a step in the right direction; however, it must be integrated into an overall IoT strategy, including supporting components and applications or risk being orphaned. HPE (Aruba) must continue to train its channel outside North America and western Europe to understand its expanded value proposition and continue to take market share.

Pointnext

Research by: Dane S. Anderson

Like its competitors, Pointnext brings three approaches to services, which is decidedly different from its long history. Formerly known as HP Technology Services, Pointnext now focuses on:

  • Advisory Services

  • Professional Services

  • Operational Services (formerly known as Support Services from the Technology Services Group)

Although these three service types are not new in the industry, the approaches Pointnext is applying in taking these to market is newly angled. With greater focus in advisory services, and an expansion of cloud offerings through the acquisition of CTP, HPE Pointnext has the potential to change its services business, as well as the company as a whole. The key will be in accepting, adopting and adapting to the reality that it is not an HPE-only world. CTP's approach, perspective and methods will assist with this, and can make HPE Pointnext more appealing to a broader, non-HPE contingent of prospects. However, if the independence of CTP is eradicated and it reverts to HPE-only constructs and architectures, HPE will find itself back where it began.

Pointnext's ongoing evolution will include the aggregate (as well as discrete) IT Experience as a Service, which will be founded, to start, in Private Backup as a Service, and Big Data as a Service offerings. As Pointnext moves forward, HPE will bring forth more software-enabled services, more consumption-based offerings and cloud manager infrastructure, via HPE's OnsSphere.

Although there is not a dedicated, fully managed service throughout the entirety of the customer "RUN" function, Pointnext intends to drive the next, new style of IT, with these offerings as alternatives to traditional IT outsourcing and managed services. Optioning these offerings with its flexible capacity model, as well as the cloud consulting, architecture and implementation capabilities of the CTP acquisition, Pointnext has an opportunity to change the HPE operating model, as well as its own business model. All the while, HPE and Pointnext need to continue to demonstrate the changes and results with which they assist clients. This could bring about a change in HPE's identity from a hardware infrastructure company to a hybrid platform company.

Note 1
HPE Spinoffs/Mergers

The spinoff/merger of HPE Enterprise Services with CSC to form the new company, DXC Technology, was announced 24 May 2016 and closed 1 April 2017. This $8.5 billion transaction involved $4.5 billion in stock transfers to HPE shareholders, $1.5 billion in cash dividends, and $2.5 billion in debt and liability transfers to CSC.

The spinoff/merger of HPE Software to Micro Focus was announced 7 September 2016, and closed 1 September 2017. This $8.8 billion transaction involved $6.3 billion in stock transfers to HPE shareholders and $2.5 billion in cash to HPE.

Note 2
HPE Next

"On 16 October 2017, the Board of Directors of Hewlett Packard Enterprise Company ("Hewlett Packard Enterprise" or "HPE") approved a restructuring plan ("the plan") in connection with the company's initiative to clean-sheet the operating model, simplify the organizational structure, redesign business processes and prioritize investments in growth areas, known as HPE Next. HPE expects that the plan will be implemented through fiscal 2020 and will include gross cost savings as a result of changes to the company's workforce, real estate consolidation, and business process improvements of up to approximately $1.5 billion. HPE will invest about $700 million of the gross savings back into the company in the form of go-to-market, operational and R&D investments in key growth areas. Net cost savings on a run-rate basis will be approximately $800 million exiting fiscal year 2020." (See "HEWLETT PACKARD ENTERPRISE CO Filed This 8-K On 10/19/17." )

Overall Rating Definitions

 

Strong

Is viewed as a provider of strategic products, services or solutions:

  • Customers: Continue with planned investments.

  • Potential customers: Consider this vendor a strong choice for strategic investments.

Positive

Demonstrates strength in specific areas, but execution in one or more areas may still be developing or inconsistent with other areas of performance:

  • Customers: Continue planned investments.

  • Potential customers: Consider this vendor a viable choice for strategic or tactical investments, while planning for known limitations.

Variable

Shows potential in specific areas though still variable in more than one of the required categories:

  • Customers: Consider the short- and long-term impact of possible changes in status.

  • Potential customers: Plan for and be aware of issues and opportunities related to the evolution and maturity of this vendor.

Caution

Faces challenges in multiple required categories and execution is inconsistent:

  • Customers: Understand challenges in relevant areas, and develop contingency plans based on risk tolerance and possible business impact.

  • Potential customers: Account for the vendor's challenges as part of due diligence.

Weak

Has difficulty responding to problems in multiple areas:

  • Customers: Execute risk mitigation plans and contingency options.

  • Potential customers: Consider this vendor only for tactical investment with short-term, rapid payback.