HP Throws Down Its Cloud Hand

Not that I obsessively track EMC's competitors in the IT industry, but HP is a different beast altogether. 

By revenue, they're the largest IT company in the world.  Although they may not have the panache of a Google or Apple, like IBM, they've got a boatload of potential capabilities.

And, after more than 30 years in the IT industry, you learn to treat very large elephants with respect.

So, it was with more than passing interest that I pawed through the various commentary from Leo Apotheker on how HP intends to play their "cloud hand".

The good news: he was very clear.  The problem: I think in some respects HP might have made the wrong strategic choice.

What's Going On Here?

Many of us believe that cloud is the Mother Of All Disruptors in the IT industry.

Business leader and IT leaders alike are beginning to realize that cloud can potentially redefine how IT delivers services, and essentially repositions what an IT organization is all about.

Vendors are realizing that -- once again -- power positions are up-for-grabs in the IT industry.  It ain't business-as-usual any more, or -- more properly -- won't be for very long.

A Key Strategic Choice

One of the core strategic choices that EMC wrestled with early on was positioning.  Do we want to sell cloud services (e.g. be a cloud vendor) or sell enabling technologies and services to those that do?

After going back-and-forth, and realizing we couldn't have it both ways, we made a full-on bet on the latter approach: deciding our efforts on cloud enablement vs. providing cloud services directly to IT organizations.  Incidentally, Cisco (and, of course VMware) are largely in the same philisophical boat as EMC, and for very similar reasons.

HP's strategy will be to build very large and very functional clouds, owned and operated by HP.  They stated that their target competitors will be Amazon and Google. 

At one level, this is all very reasonable.  Amazon and Google (and, to a certain extent Apple, Oracle and Microsoft) are directly challenging HP's core markets in infrastructure as well as desktop. 

One could make a case that the battle should be fought there, and nowhere else.  And I'm sure that there will be much speculation around HP's prospects in this regard.

But, in making this key strategic choice, what are the broader implications?

What About Service Providers?

EMC's belief is that there will be many, many public cloud service providers for IT consumers to choose from.  These IT-as-a-service SP market is already quite considerable (although relatively poorly charted by the traditional pundits) and appears to be growing at breakneck velocity.

And, as these next-gen SPs go looking around for IT vendor partners, the last thing they want to do is bet their future with someone who has a clear and public strategy to compete with them head-to-head. 

It's not a technology discussion, it's a business discussion.

There's Only So Much Money Available

Deciding to invest in what is (presumably) a global network of scaled-out data centers is going to take a lot of cash -- both upfront, and on a continuing basis.

Every dollar that is spent on this new venture is a dollar that won't be spent on improving HP's technology portfolio, or acquiring new companies, or investing in new solutions for customers.   Owning and operating data center infrastructure has never been the most margin-rich business, either.

And, at a time when technology paradigms are moving faster than ever, that's got to be a hard choice for HP to make.

What About The Enterprise?

No surprise, EMC (along VMware and Cisco) are heavily invested in transforming larger IT organizations into a private cloud model.  It's not only about enabling technology, it's about process and organizational change as well.

Between our individual companies, and our collaborative joint venture (VCE), we're collectively investing staggering sums to bring about this transformation for our customers: essentially helping them to become internal IT service providers.

No mention in any of the HP materials around the importance of helping to evolve their customers forward along this vector.  Another really hard choice for HP to make.

Connecting The Dots

It's no secret, individually and collectively, V, C and E are pursuing the same cloud-enablement strategy. 

Move your customers to a fully virtualized private cloud model. 

Invest in creating an ecosystem of compatible service providers. 

Connect your cloud-enabled customers with your cloud-enabled service providers.  Choices and options abound for everyone.

Compare that with HP's intent to build and sell cloud services directly to IT organizations -- essentially bypassing service providers, resellers, system integrators -- the whole value-added ecosystem that's so essential in today's enterprise IT world.

Another really hard choice for HP to make.

Impact For Customers?

If we put the lens on HP's customers and partners, and try and assess the impact, it's early days.  My guess is that HP will start following behind IBM's message, which is essentially "this IT stuff is way to hard, let us do it all for you".

For some IT organizations I meet, that's certainly a valid proposition.  But for most, they'd prefer to do some of the important bits themselves.

We'll see ...

Comments

[marc farley]

Marc Farley from HP here. The following is my own opinion.

There is no question that there will be competition in the markets for cloud services. There will be a lot of services, a lot of service providers and a lot of ways for companies like HP to establish partnerships with lots of cloud service providers.

One of the main reasons for HP's successes over the years is the company's ability to share it's opportunities with its business partners all around the world. This next major stage in the evolution of information technology will create many, many partnership opportunities, something that plays very well to HP's strengths.

[Chuck Hollis]

Hi Marc

Sure, I can agree with your take on the past, but -- given what we've heard from your CEO -- it's hard to see how that model can be the same going forward.

Delivering cloud services directly to customers essentially bypasses most of the value-added ecosystem. Not a lot of partners heavily invested in value-add around Amazon and Google, for example :)

I also am curious as to why you offered up a tweet as to classifying this as FUD. I would argue that you're being overly sensitive here. I have great respect for HP's history, but I think they've been forced to make a tough call that will ultimately not work out so well.

And that's not FUD.

-- Chuck

[marc farley]

Chuck, of course it's FUD unless you have a working crystal ball.

[Chuck Hollis]

Actually, Marc, I've been reasonably accurate in my predictions over the years.

It's not a working crystal ball, but it's a decent substitute :)

-- Chuck

[marc farley]

Predictions of demise and failure of competitors like Netapp and 3PAR were not so accurate.

[Chuck Hollis]

C'mon Marc, you're being over-sensitive again.

Just because I offer up my personal views on HP's cloud strategy and its ultimate implications, you shouldn't take it personally.

I don't think I *ever* predicted the demise of either company. 3PAR was always an acquisition target, I think we both would agree on that. And NetApp is one of those companies that is now "too big to fail".

If you'd like a collection of eerily prescient blog posts, I can send them along for you ...

-- Chuck

[Sinlung]

Do you think its pretty odd? Pretty odd… If EMC is not competing with its customers then why did EMC acquire Mozy ?

[Used Servers]

"Drama Beef" in the Storage world... the cloud craze has spread nicely.