HPE To Step Back From 'Tier 1 Service Provider' Server Business While Focusing On Higher Margin Growth Areas


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Hewlett Packard Enterprise is planning to end production of what it calls customizable commodity servers targeting the largest hyper-scale cloud providers as part of a move to focus on more profitable growth areas.

HPE President Antonio Neri outlined several initiatives the company has to sharpen its focus on growth during last week's HPE securities analyst meeting.

As part of his presentation, which CRN reported on last week, Neri said that HPE will discontinue the sales of custom-designed, commodity servers while continuing to sell higher-margin products.

[Related: 10 Server And Storage Technologies Taking Center Stage At HPE Discover 2017]

An HPE spokesperson confirmed that the company will end that product line in fiscal year 2018.

"In FY18, HPE will cease selling custom-designed, commodity servers to Tier 1 Service Providers, which we define as Amazon, Google, Microsoft, Facebook, Apple, TenCent, Alibaba and Baidu.  We will continue selling our higher margin products like storage, networking and higher value servers to these companies," the spokesperson wrote.

Neri said HPE will stop selling custom-designed commodity servers to the Tier 1 service provider segment, including providers like AWS, Microsoft Azure, and Google, but will continue selling them higher-margin products.

"These commodity server deals come at very low margins, and there is no services pull-through opportunity for the company. So, we are modifying our strategy to reinvest these resources towards solutions and services that will drive profitable growth," he said.

HPE will focus on gaining share with standardized compute platform for Tier 2 and Tier 3 service providers, including companies such as Dropbox, eBay, and Salesforce.com, who have built their businesses in the cloud, Neri said.

"These SKUs will be delivered without a custom-design (including software and services), providing value to our customers while ensuring profitability for our business," he said.

"HPE offers channel partners many server options including its ProLiant DL line, its blade servers, and its Synergy composable infrastructure, and so a move to exit the Tier 1 cloud server business would probably have little direct impact on server sales through the channel," said Dan Molina, chief technology officer at Nth Generation Computing, a San Diego-based solution provider and long-time HPE channel partner.

However, Molina told CRN, the move will benefit the channel in other ways.

"This will free up HPE resources to support its other server lines," he said. "It can be hard for a company to keep up with so many server lines. HPE can now better focus on its roadmap for its DL and Synergy servers, or its SimpliVity hyper-converged infrastructure."

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