WAN Virtualization added to traditional HP Services expertise could turn HP’s cloud weakness into a competitive advantage
In April, HP announced HP Converged Cloud, clearly targeted at the traditional large enterprise market, with a focus on hybrid environments. It also more recently announced an expansion of the Converged Cloud portfolio at Interop. HP, of course, is a huge company – the world’s largest technology company, as they like to note – with an extremely broad offering. Per the focus of this column, I want to look at HP’s cloud strategy from the WAN perspective, and point out what I think is both the weakness in HP’s approach, and how they could turn that weakness into a significant competitive advantage.
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Disrupting the high-margin WAN services business model
HP is in many businesses with an extremely broad offering, as broad and arguably broader than anyone: Computing/storage equipment, network and security equipment and software, managed IT services, “traditional” enterprise IT and consulting services, and now cloud services for building public clouds or especially Virtual Private Clouds.
As a networking guy, I won’t attempt to review the merits of HP’s case within each of these separate domains relative to their competitors. I also can’t really comment on how its cloud offerings as “standalone” businesses – HP Cloud Services, including HP Public Infrastructure as a Service – compare to their competition, including Amazon Web Services (AWS). HP is focused on large enterprise customers with this approach. For one take on how HP’s approach compares to AWS, see this blog post from David Linthicum over at InfoWorld.
I won’t even touch much on HP’s network equipment business, the current umbrella for which is the HP FlexNetwork architecture, other than to note what I expect would be obvious to almost all Network World readers: while HP is certainly a player in the LAN and is a strong challenger to Cisco in data center LAN equipment, they really are nowhere in the WAN equipment space. While they do have offerings here, they’ve really only had any meaningful success in the WAN with SMB customers; Cisco has dominated the large enterprise WAN router business for 20+ years now. Even if HP’s WAN products were suddenly all far superior to Cisco’s equivalents in product cost, total cost, management, performance, etc., I still don’t know that it would make much of a difference in market share in that portion of the market. While of course HP needs to incorporate all of its own equipment within its solution umbrella, an approach to cloud that required enterprise customers to use only HP wide area networking equipment is unlikely to be successful with most of HP’s target customers.
The good news for HP, as we’ll see in a minute, is that the cloud in general, and hybrid cloud in particular, gives HP the chance to leverage a strength of its own to neutralize that long-standing WAN weakness, make up for the fact that HP is playing from behind in cloud services, and perhaps even get a big leg up on Amazon, Cisco and everyone else.
As noted above, it’s clear that HP is focusing on large enterprise customers here, and on hybrid environments in particular. Not only is this HP’s best bet, but I agree with Gartner and others that for large enterprise, hybrid is the way that IT and computing are going over the next several years.
To do hybrid cloud computing, where all of an organization’s users will access service on internal private clouds, virtual private clouds as well as services available in the public cloud and so over the Internet, requires a WAN architecture which maintains the network security and application performance predictability, and service level (ideally with a similar SLA) of today’s private, typically expensive MPLS-based WANs, while providing cost effective access – and in all likelihood, a lot more network bandwidth – between private data centers, plus HP-managed data center locations and public services, and between all enterprise remote locations and those private and public-based data centers and services.
As readers of this column over the last few months know, this, of course, is exactly what WAN Virtualization and the Next-generation Enterprise WAN (NEW) architecture deliver.
And it is here where HP could leverage its strength. HP bought Electronic Data Systems (EDS) a few years back. EDS is now the core of what is called HP Services.
Among the other expertise the EDS folks brought, they know how to manage WANs. In fact, they do a lot of managing Cisco WAN routers for enterprise – though not as much as they used to since EDS was acquired by HP, which is a network equipment competitor to Cisco and thus no longer a favorite of Cisco’s account teams. But HP Services frequently has a relationship with and credibility with enterprise WAN managers, and the credibility to manage the WAN – WAN management being both more complicated in general than LAN management, and historically far more likely to be outsourced by large enterprises than LANs and LAN management.
Between relationships and expertise, HP could easily offer WAN Virtualization as a service as a critical component of their hybrid cloud offering.
If HP Services were to offer WAN Virtualization as a managed service, it would simultaneously solve their WAN weakness, give HP a unique advantage over other cloud services providers, and even open up a new source of budget funds at its customers for such cloud projects.
With a WAN Virtualization offering, HP would be in perfect position to “hollow out” AT&T and Verizon, replacing MPLS over time (if not initially) while delivering the network SLA and more bandwidth at lower cost than the enterprise is paying today, while still providing the “single throat to choke” that many enterprise WAN managers like about their contracts with AT&T or Verizon. Moreover, they could provide this as part of a higher-level cloud computing sale and implementation. In all of the technology business, HP along with IBM and maybe Dell (since their Perot Systems acquisition) are the only companies who could pull off this cloud computing trifecta.
A cloud services provider using WAN Virtualization and other NEW architecture techniques to connect enterprise locations to cloud-based data centers – and ultimately to each other – will have multiple competitive advantages. It would enable customers to pay for part of their cloud migration via the very large MPLS budget the customer is now paying to the telecom SPs. It would be able to accelerate the move to leveraging cloud services by solving the WAN reliability and application performance predictability issues of accessing services not in an enterprise location that are a huge part of many enterprise customers’ reluctance to push into cloud in a bigger way today. As importantly, by becoming the provider of WAN services (though not necessarily all of the WAN links themselves), it would offer its customers a powerful incentive to stay with them as their CSP of choice. This is a mutually beneficial “lock in”, similar to the one-sided lock-in that the major MPLS vendors have historically had with their customers.
HP has a chance to build on its strengths and breadth of offering and get a leg up to serve its customers by addressing the WAN gap in its hybrid cloud offering. It will be interesting to see whether HP takes advantage of the opportunity that WAN Virtualization technology and the NEW architecture offers as a way to change the game on the “big gun” networking and cloud providers it most often will be up against with their HP Converged Cloud approach: Cisco and Amazon.
A twenty-five year data networking veteran, Andy founded Talari Networks, a pioneer in WAN Virtualization technology, and served as its first CEO. Andy is the author of an upcoming book on Next-generation Enterprise WANs.
