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Antonio Neri: COVID-19 ‘Economic Disruption’ Is Time To ‘Double Down’ On HPE Everything-As-A-Service Strategy

“Partners need to be able to provide a true edge-to-cloud experience and become more relevant in the context of the public cloud,” said Neri in an interview with CRN. “To me, we both have the opportunity to go faster here. When you go through tough times as we are today, this is where leadership matters and you have to move faster. That is what we are doing.”

Hewlett Packard Enterprise CEO Antonio Neri Thursday said HPE is accelerating its edge-to-cloud everything-as-a-service sales offensive in the wake of the devastating “economic disruption” from the COVID-19 pandemic.

“I believe in a downturn like this is when you double down on your strategy,” said Neri in a conference call with analysts to discuss the company’s fiscal second quarter results after the HPE Board of Directors approved a three-year “Cost Optimization and Prioritization Plan” aimed at delivering gross savings of $1 billion with changes to its workforce, real estate model and business processes. “This is when you have to invest in the right places now so when the recovery takes place you come out on the other end stronger. That is fundamentally what we are doing: addressing the cost resizing for the situation we are in.”

Under the Cost Optimization plan, HPE has implemented cost-cutting measures, including a short-term salary reduction that will be effective July 1 to Oct. 31, 2020.

“In the short term, we have taken some painful actions,” said Neri. “For me as a CEO, telling our employees we are going to cut salaries is not an easy thing to do. I don’t take that lightly. On the other hand, putting the right people and the right resources and right investment into the future now that we are in the downturn is the biggest opportunity.”

Neri said he is more convinced than ever that HPE’s edge-to-cloud platform-as-a-service strategy is the right strategy for customers and partners.

Among the bright spots in the quarter were a 17 percent increase in HPEs GreenLake annualized revenue run-rate business to $520 million and a 12 percent increase in Aruba HPE’s Intelligent Edge business in North America.

“Partners need to be able to provide a true edge-to-cloud experience and become more relevant in the context of the public cloud,” said Neri in an interview with CRN following the conference call. “To me, we both have the opportunity to go faster here. When you go through tough times as we are today, this is where leadership matters and you have to move faster. That is what we are doing.”

HPE has committed to shift its entire portfolio to an everything-as-a-service model by 2022. Neri told CRN that he “absolutely” wants to get to that model as quickly as possible.

“When you go through these challenges and you have conviction in your strategy you need to go faster” he said. “Remember we used to say the future belongs to the fast. That is exactly what this is. The future belongs to the fast. We have an opportunity to accelerate what is next, … to provide an edge-to-cloud platform that can be consumed as a service. We have the assets. We have the talent. We just need to go faster. That is why reallocating resources in growing areas is essential.”

Neri said the move to accelerate the edge-to-cloud platform-as-a-service strategy is what prompted an HPE restructuring just last week that brought a new streamlined organization along with a new GreenLake Cloud Services Business Group and a new Chief Technology Officer, Kumar Sreekanti, taking on a dual role as CTO and head of software.

Neri said the channel continues to be a key “strategic enabler and differentiator” for the company. “We are and we continue to be a channel-led company,” he said. “That channel motion will have to evolve to the customer needs and demands. Our job is to position our partners to compete and win in this new reality. COVID-19 has changed everything.Therefore we have to go faster. We cannot do this ourselves. We have to do it with our channel partners, which is the bedrock foundation of who we are. My commitment to the channel is to make sure that we position them to compete and win with the right innovation, the right enablement and ultimately the right economics.”

Neri said HPE is committed to helping partners make the transition to the new everything-as-a-service world. “We have the best PartnerReady channel program with the best economics,” he said. “Our intent is to continue to grow together with sustainable, long-term, profitable growth.”

Overall, HPE reported non-GAAP earnings of 22 cents per share on a 16 percent decline in sales from the year-ago period to $6 billion. The results were below the Wall Street consensus of 29 cents per share on $6.28 billion in sales.

HPE shares were down in after-market trading five percent, or 53 cents per share, to $9.83.

Partners, for their part, told CRN that HPE’s GreenLake pay-per-use sales model is resonating with customers in the COVID-19 era.

Russ Chow, vice president of technology solutions for New York-based PKA Technologies Inc., one of HPE's top Platinum partners, said Neri’s everything-as-a-service shift has put HPE at least 18 months ahead of competitors.

“HPE is spot on with regard to where the market is going,” he said. “It’s great to see HPE doubling down on that everything-as-a-service strategy. PKA has the same vision of the future. The conversations we are having with our customers is all around operationalizing their IT environments.”

PKA is seeing increased sales pipeline around the GreenLake pay-per-use model, said Chow. “HPE is ahead of the curve with GreenLake,” he said. “They are well ahead of the other OEMs, particularly with GreenLake Central, which gives customers visibility into their hybrid cloud environments. GreenLake Central gives you a single view into your IT assets whether they are on premises or in the cloud. That is huge. The other OEMs don’t have the technology to do that.”

HPE’s move to put more resources and sales muscle behind GreenLake and the edge-to-cloud platform-as-a-service model is the right move, said Chow. “HPE has made huge investments into new hiring and resources to support the GreenLake model both on the sales and technology side of the business,” he said. “That decision to put more into this strategy is going to allow them to continue to stay ahead in this market. There are a lot of new offerings coming out to support this model. HPE is definitely moving in the right direction.”

Chow said he sees HPE’s hybrid model resonating with customers. He sees customers giving more consideration to the hybrid cloud model rather making a knee-jerk move to the public cloud. “They are making sure they do their due diligence with an assessment of the actual applications to determine where those workloads should reside,” he said. “That’s a big difference from several years ago.”

With IT budgets being cut at an alarming rate in the wake of the COVID-19 pandemic, GreenLake pay per use is the right model, said Chow.

“With IT budgets being cut, the HPE GreenLake as-a-service model makes perfect sense,” he said. “Customers don’t have the capital budgets they used to have. We couldn’t be more confident in the as-a-service vision that Antonio has layed out for HPE and partners. The as-a-service model is in every conversation we have with customers. It is gaining momentum.”

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