>> Announcer: Live from Las Vegas,
it's the CUBE
covering HPE Discover 2017.
Brought to you by Hewlett Packard Enterprise.
>> Hello, everyone, and welcome to the CUBE's
special presentation of HPE
Hewlett Packard Enterprise Discover 2017.
I'm John Furrier and my cohost Dave Vellante.
For three days of wall to wall coverage.
This is our intro section of our three days
of Hewlett Packard Enterprises transformation
and coverage.
This is our seventh year covering HPE Discover,
formerly HP Discover after the split.
Lot of commentary today.
We have seen HP over the years transform.
We've been watching this,
sort of a front row seat to HP,
now HPE,
really getting hammered in stock market
their last earnings again
didn't meet expectations,
but this is not a quick turn around.
I mean, this is a market place that's shifting.
HP's had their plan now for multiple years.
We're going to cover it for three days.
But interesting.
The world is turning.
You had tweeted this morning
on a Twitter storm you put together
@dvellante, twitter.com.
So it's Dvellante.
Everyone should check it out.
But it really highlights it.
True private cloud, or private cloud,
cloud has impacted everything.
HP's kind of shifted their cloud strategy.
It's becoming clear what they're doing,
but private cloud, true private cloud,
is legit.
It's a 250 plus billion dollar market opportunity,
as you guys have put it out on wikibond.
Hybrid cloud is very relevant,
and on the horizon is multi-cloud,
the ability for customers to use multiple clouds.
And on top of that we have machine learning,
AI, and a myriad of things.
Marketplace is shifting significantly,
HP has been transforming significantly
over the past five plus years.
Your thoughts this year at HPE Discover
and marketplace conditions
and are they poised for success?
>> Well, John, we're in the fifth year now
of the turnaround that Meg Whitman initiated,
and I think it's the light at the end of the tunnel year.
HPE--
We've said many times at theCUBE that
HP has the strength to grow.
Well, it's certainly shrunk.
They're about a 50 billion dollar company
with a 26 billion dollar market cap,
and there's a way to eek out some growth.
If you separate all--
Call it Remain Co.
Like the remaining company.
Take out the software, take out EDS,
take out actually tier one,
tier one customer who's--
who's not buying as many servers as possible,
or as they had previously,
and the company grew about one percent.
So what you're seeing, John,
is some quarters HP grows a little bit,
some companies it shrinks a little bit,
but essentially it's facing what
most legacy hardware companies are facing.
Legacy hardware's down,
everybody's scrambling to what we call
true private cloud, which is essentially hybrid IT,
trying to mimic the public cloud.
And then HP adds in a dose of IOT at the edge,
and then, really importantly, services.
Services have never been more important for this company,
and that is what I called earlier Remain Co.
The remaining HP.
Once it jettisons the software business this fall,
that's what will be left,
basically a 50 billion dollar company
with about 55,000 employees.
>> I was looking at a--
some IOT stories just last night,
and a Business Insider article came up.
It was an image,
and it had listed the companies that--
by average age.
And you had, obviously, Facebook, average age like 28.
HP was at the highest end, like 39.
And I want to bring up this notion of changing market
because HP has always been customer focused,
so the question is, if they are truly customer focused,
as is Amazon, for instance, we talked to Andy Chasey,
he talks about that all the time.
And the context of where you've been and where you're going,
historical legacy, declining markets,
say servers for instance.
And where you're going.
It brings up an interesting point.
And notable is recently Amazon web services
hired Gosling, the founder of Java,
which had a big conversation on the internet around age.
A lot of the winners are older systems guys.
So what's interesting is I actually look at
that Business Insider article and saying
actually age is a wisdom point now,
because right now HP's got to solve customer problems.
In addition to transforming themselves,
they're looking at a customer base
that's changing their requirements,
so having experience is actually a good thing,
as pointed out by some of the big leaders right now
in hyperscale are old m systems guys.
This is an opportunity for HP,
and I think that's where I want to get your thoughts on.
Are they customer focused in your mind,
and if they are going to be, continue to be,
what should their customer focus be?
>> Let's talk about what customers are doing.
So, first and foremost, customers are deinvesting
in non-differentiated, you know,
hardware maintenance and provisioning, okay.
So they're shifting IT labor from provisioning luns
and servers into digital transformation initiatives,
so that's sort of one piece.
The other pieces there
as they're shifting those resources
in places up the value stack.
So it's applications;
it's, as you say, digital transformation services;
it's new IOT activity.
So they're only investing--
from the HP standpoint, HP's an infrastructure company.
They're only investing in infrastructure
that looks like public cloud
and can focus on hybrid.
So are they customer focused?
Yes.
And what are they doing there?
So they're investing in MMA,
they're doing some MMA tuck ins.
They're focused on develop--
delivering platforms with an API
that are essentially programmable infrastructure.
And very importantly,
they're in a low margin business now.
It's sort of low 30 percent gross margin business.
So they have to get volume.
How do they get volume?
How do they reach those customers?
Partners.
So you are seeing a new partner emphasis.
You know, are they customer focused?
Yes, but they're really right now
partner focused to reach those customers
and increase their scale and coverage.
That is a critical difference between the new HP,
not that they always didn't have partners,
now partners are critical to their success.
>> One of the things that's the theme here
is simplifying hybrid IT
and I think from a customer standpoint,
simplifying that is going to be critical.
At the same time, creating new services opportunities.
So I want to get your thoughts on the top story,
at least from my perspective, here at the show
at HPE Discover,
and that is, is it better to be big or small?
And HP has a strategy of
a collection of small, nimble, agile business units.
Dell EMC, for instance, has a strategy
of being big and using leverage
and supply chain and what not.
Two different strategies.
We pointed that out on the web.
Certainly we've heard a lot of different approaches.
Your thoughts on HP's strategy vis a vis
bigger and better, or smaller and nimbler is better.
>> Well, HP's not small.
Hewlett Packard Enterprises is still big.
I mean, it's a, it's a company that's twice the size,
or more, than EMC was at its peak.
So it's still a very, very large company.
The difference is, John, I think they're focused.
So they really are focused on hardware and infrastructure,
the support, you know, the digital transformation,
whatever you want to call it.
The big question I have, John, is
now that HP is getting rid of its software business,
its outsourcing and EDS business,
what is HP going to do with regard to software and services.
So, they reinvented the whole services organization.
The big question mark for me is software.
Will they get into this,
what you call inter-clouding business?
Software to manage multiple clouds.
It's a wide open space, everybody's going after it,
and I haven't heard much from HP there.
So what is their software strategy?
Now, the other thing I'll add, is
the good thing about being smaller
is that it's going to generate cash for them.
So they're going to get, going to get
cash out of the spin merge with CSC.
They're going to get cash
out of the spin merge with MicroFocus.
And you've already seen HP become more aquisitive
with the Simplivity acquisition,
certainly with Nimble recently,
previously the Aruba acquisition,
and some other tuck ins.
That's critical in order for HP to reposition
and continue to grow.
>> Yeah, and my take on HP right now
is they got to be more assertive.
Their voice in the marketplace, at an industry level,
has to be very assertive and relevant.
I think that's something
you've got to put the stake in the ground
and hammer that home.
I think we got the piece parts,
and I think the spin merge is not a
"they're getting out of that business."
They're just decoupling from the
monolithic entity that was HPE
and creating kind of cohesive entities.
And I think there's a strategy, in my opinion,
that looks really strong there
in the sense that, hey, at the end of the day,
it's going to be a services game.
And if you look at the IOT Edge,
to me that's the tell sign of the marketplace.
As the value shifts from IT--
So, simplifying IT, having true private cloud,
having some hybrid pathways for IT,
maybe a declining market from a service perspective,
but simplifying that and operationalizing that
and shifting the value to the Edge with services
is a huge opportunity for HP.
This is something that not a lot of people on Wall Street
are kind of rocking at this point.
But the value shift from IT, centralized IT,
to a distributed kind of network effect
is a really interesting play.
And I think this a bet I think HP's making
from my standpoint,
and that's where the intelligent Edge piece comes in.
If they could nail that, and layer on the services,
and bring real value paths for customers
with outcomes that are,
not pie in the sky--
Sure, they throw some AI in there,
machine learning, it's all relevant.
Getting into open source.
Taking that labs machine and memster technology
and bringing that out at an appropriate timing.
With the services in place.
I think that's a good strategy for HP.
>> Well, you mentioned Wall Street.
Look, Wall Street is very tactically focused on the quarter
and the margin decline,
and, you know, D-Ram prices doubled in January, okay?
So a company like HPE is going to get hurt by that.
So that's head winds for these guys,
these currency head winds.
The stock, the price will go up and down.
But the point I want to make, John,
is there's a new competitive reality.
CIOs have woken up to open source and cloud.
And as a result, we've emerged into
a new competitive dynamic where
HPE is competing with Dell.
It's competing with China,
and it's competing with AWS.
And it's one different--
Two differentiable advantages or services,
you know, clearly HP's doubling down on services.
I'll actually add a third.
The second is partnerships,
and the third big one, which is green field,
is an ecosystem around IOT
and what they call the intelligent edge.
>> Well, Dave, great commentary.
My, again, my feeling is
customer focus at an industry level,
having the right product mix that's relevant
in the, for the solutions customers want.
And also their partners.
Leveraging that partner network.
Really going to be a two pivot points for me.
I see that as great leverage for HP.
At the end of the day,
everyone talking about declining market
of servers and storage.
I actually don't see that.
There's more computers available now,
more storage available.
The key is can that shift
to true private cloud,
which again is a 250 billion dollar market,
partly declining.
And hybrid cloud is certainly growing.
So, declining and growing,
I mean they're all different perspectives,
and I think HP's messaging here--
Come the end of the show,
we're going to look at that and understand
and impact and unpack that, that analysis.
So, I'm Jeff Furrier, Dave Vellante.
Day one of coverage,
of three days of wall to wall coverage
at HPE Discover 2017.
More live coverage after this short break.
(upbeat music)