​Why is Hewlett Packard Enterprise buying SimpliVity?

​Why is Hewlett Packard Enterprise buying SimpliVity?

Tech giant chases lucrative hyper-converged market with new acquisition.

Meg Whitman - President and CEO, Hewlett Packard Enterprise

Meg Whitman - President and CEO, Hewlett Packard Enterprise

With 2017 only a few weeks old, Hewlett Packard Enterprise (HPE) has raced out the blocks to secure a billion-dollar rated start-up at a discount price.

As reported by ARN, the planned $US650 million acquisition of SimpliVity is designed to expand the tech giant’s leadership in the growing hybrid IT industry, while tapping into a hyper-converged market expected to reach $US7 billion by 2020.

“This transaction expands HPE’s software-defined capability and fits squarely within our strategy to make Hybrid IT simple for customers,” Hewlett Packard Enterprise president and CEO, Meg Whitman, said.

“More and more customers are looking for solutions that bring them secure, highly resilient, on-premises infrastructure at cloud economics. That’s exactly where we’re focused.”

According to Whitman, by bringing together HPE’s infrastructure, automation and cloud management software with SimpliVity’s software-defined data management platform, HPE and its partner ecosystem will deliver the industry’s only “built-for-enterprise” hyper-converged offering.

“HPE’s planned SimpliVity buy reflects the need for agile innovation and selling models in a disrupted data centre market, and foreshadows further vendor consolidation,” Technology Business Research, senior analyst, Krista Macomber, observed.

“Today’s fast-paced, data-centric and always-on business environment requires IT to shift from a cost centre to a driver of agility and productivity.

“As such, IT departments are increasingly turning to hyper-converged platforms in lieu of traditional, costly and cumbersome data centre infrastructure to serve a range of mission-critical legacy and next-generation workloads.”

For its part, Macomber said long-standing data centre industry incumbent HPE plans to acquire the hyper-converged platforms pure play company to accelerate both vendors’ abilities to keep pace with this fast-growing, quickly evolving and significantly disruptive market.

According to Technology Business Research findings, global hyper-converged revenues will grow at a 53.1 per cent from 2015 to 2020 to $US7.2 billion, with 32 per cent of customers replacing existing hardware with hyper-converged alternatives and 25 per cent decreasing other areas of IT spend to fund hyper-converged platforms purchases.

“As a combined entity, HPE and SimpliVity will benefit from portfolio and go-to-market depth and investment scale rivalled by few and needed to keep pace with customer workload deployment patterns and rapidly emerging pain points,” Macomber explained.

Combined, Macomber said the two companies generated approximately 20 per cent of global hyper-converged platforms revenues during 2016, trailing market revenue leader Nutanix but outpacing the remaining range of pure play and multiplatform peers, such as Pivot3 and Dell Technologies, on a combined basis.

Furthermore, Macomber believes such a transaction would represent the integration of the globe’s largest industry standard server vendor with one of the “most successful innovators and sellers” of hyper-converged platforms software in terms of revenue.

“Integrating SimpliVity’s OmniPath platform with broader, maturing HPE initiatives such as composable infrastructure stands to unlock accretive value to customers in addressing pain points such as those around scalability,” Macomber added.

Immediate impact

For Macomber, the planned acquisition - set to close during the second quarter of 2017 - will “immediately impact” customer purchase decisions and data centre ecosystem alliance models.

“SimpliVity is not a current HPE partner and, in fact, has sparked growth and influenced the development of the hyper-converged platforms market in large part due to pre-existing deals with HPE competitors including Cisco, Dell Technologies and Lenovo,” Macomber said.

“These offerings as well as HPE’s current lineup of organically developed, StoreVirtual-based hyper-converged appliances will continue to be supported post-acquisition, per HPE.”

However, Macomber believes the deal will be a “land grab” for HPE, and as a result anticipates quick integration of HPE’s ProLiant server and SimpliVity’s OmniPath portfolios if the acquisition closes.

“Ultimately, this would consolidate the combinations of hardware and software available to customers in a market requiring increasingly workload-tailored infrastructure,” Macomber added.

Looking ahead, Macomber believes the deal will further pressure the hyper-converged platforms market around innovation and market share growth, spurring an uptick in industry alliance activity and sparking consolidation of the vendor landscape.

“Vendors including Dell Technologies, Nutanix and HyperGrid will seek to refine differentiation by quickly building out capabilities in areas such as application containerisation and hybrid cloud automation and orchestration that mesh with the promise of the emerging architecture - simplicity, flexibility and cost effectiveness,” Macomber added.

“As customers purchase with a focus on addressing broader workload requirements, we anticipate the market will coalesce around a smaller number of vendors that can provide not only point hyper-converged appliances but also broader solutions configurations with sophisticated integration and support expertise.”

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