CRN Exclusive: HP CEO Whitman On Not Competing With Amazon In Public Cloud And Why HP Is 'Miles Ahead' Of Cisco Intercloud

Whitman Sounds Off On Cisco Intercloud, Amazon, Azure And The Aruba Acquisition

Hewlett-Packard CEO Meg Whitman spoke with CRN Friday on a wide range of issues including Amazon Web Services, HP's public cloud commitment, the cloud battle with Cisco Intercloud, and HP's $3 billion acquisition of Aruba.

The conversation with Whitman, which also included a discussion of channel sales performance, came after HP posted better-than-expected earnings for its second fiscal quarter, ended April 30.

The Palo Alto, Calif.-based company reported non-GAAP diluted net earnings of $1.6 billion, or 87 cents per share, for its second fiscal quarter, compared with $1.69 billion, or 88 cents per share, in the same quarter a year ago. Sales for the quarter dropped to $25.45 billion, down 7 percent from $27.31 billion in the year-ago quarter. Below is an edited excerpt from the discussion with Whitman.

There was some talk about HP getting out of public cloud. Can you talk about that strategy?

We are not in the public cloud business to compete with Amazon and [Microsoft] Azure on a day-to-day basis on a race to the bottom for the lowest-cost storage you can pull down from a public cloud.

We offer a public cloud in the context of our hybrid infrastructure story. So let's say you are a company and you want that hybrid story. So you are going to run some applications in the HP private cloud, some in our virtual private cloud, and some in our cloud that is a public cloud but it operates inside your firewall. It is not a public cloud that sits outside your firewall and you grab all this stuff. It is a public cloud but not exactly the same kind of public cloud as an AWS. So it is an important part of our offering.

What was [HP Helion Senior Vice President] Bill Hilf's point with regard to public cloud?

I think what Bill Hilf (pictured) was saying, which got lost in translation, is if the only thing we were doing was public cloud we probably wouldn't do it. It is an important part of our overall hybrid cloud strategy.

How does HP OpenStack compare to Cisco's OpenStack cloud offering?

We don't really ever see Cisco's private cloud in the market. That is not our major competitor out there. Ours is [based on] OpenStack. Cisco originally was proprietary -- not OpenStack.

If you are a business, you have got to decide whose cloud journey do you want to go on. First of all, do you believe in the hybrid story? Second, do you want a proprietary stack or an OpenStack? And then who do you trust will be able to take you on that journey?

We have a great story to tell. We have got 12 very, very strong members of the Helion network of service providers around the globe. It's going to be a battle out there, but I feel like we are miles ahead of [Cisco] Intercloud at the moment.

Talk about how the Aruba acquisition sets HP up to compete more aggressively against Cisco.

Aruba is campus, branch and edge, and it plays right into two major trends: one is mobility and the other is the 802.11ac technology, which is going to encourage many, many companies of all sizes to redo their wired and wireless LAN on their campus and branches.

This is a big opportunity for the channel. I have been out doing a number of channel partner roundtables and people are pretty excited about this because they see the opportunity.

The great thing about Aruba's technology is it is super-secure and really best-in-class for mobile workers. So I think the channel is pretty excited about this. Everywhere I go there are always a few channel partners who sell Aruba. And they are really enthusiastic.

How have partners responded to the Aruba acquisition?

They love the [Aruba] Airheads [engineers]. They love [Aruba CEO] Dom [Orr]. And Dom Orr, you may know, is going to become the head of HP Networking. In a funny kind of way we are doing a reverse integration of HP Networking into Aruba because Dom is going to run the entire [HP Networking business] plus the Aruba portfolio.

What is the HP networking story vs. Cisco?

Really [it's] cheaper, better, faster, particularly on the Aruba side where [our] mobile security is significantly better than Cisco's. I think side-by-side comparisons would bear that out.

Listen, if you've got customers who are upgrading their campus or branch, you should really look at the Aruba solution. If you have got a customer with a data center, you have got to introduce them to HP Networking because of its lower cost, total cost of ownership and performance.

We run the 10th-largest company in the world on HP Networking and our CIO, John Hinshaw, would tell you it is lower cost, lower downtime and much better value. Fidelity runs all HP Networking in their data center. So it is just a matter of continuing to expose people to the solutions.

How important are the cost differences going to be as companies make software-defined networking and software-defined data center bets going forward?

I think the real benefits of cloud are twofold. One is the speed and agility with which your developers can develop applications that the lines of business want, so there is the speed of development. Then there is the cost and better utilization of your infrastructure. If you are not moving towards the cloud you probably have anywhere between a 5 percent and, on the high end, a 30 percent data center utilization rate. With cloud you can take it way above that.

That improves your return on invested capital quite dramatically. So obviously cost is important, cost of the infrastructure, cost of the software. I think we are remarkably competitive in that regard.

What is the journey to the cloud for most customers?

When you start off with your data center, the first thing you do is automate, then you virtualize, then you move to a private cloud. That private cloud opportunity, particularly for channel partners, is the easiest near-term thing to sell in cloud. It is cheap. It is cheerful and you can begin to experiment with being an internal service provider to your lines of business with private cloud.

Yes, there are some very sophisticated organizations, but most of the organizations that I see are just beginning that journey of automation to virtualization to private cloud.

Where did the channel perform well and where did it come up short in the most recent quarter?

Our momentum with the channel continues. The channel had a great, great quarter with industry-standard servers. We grew industry-standard servers in constant currency 17 percent year over year. It has been a long time since industry-standard servers has grown 17 percent. And as you know, about 75 percent to 80 percent of that goes through the channel. So the channel are pretty happy campers. And it was at good margin.

Storage in every place but EMEA [Europe, Middle East and Africa] was quite strong.

Networking is coming back. Our networking business overall was weak in large part because of China and the U.S. But the U.S. team and the U.S. channel is sort of re-embracing networking and now has obviously a huge opportunity with Aruba.

Talk about the channel's performance with regard to private cloud.

Fifty percent of our business in cloud goes through the channel. Both Gartner and IDC have rated our private cloud the No.1 private cloud for the channel and for enterprise. The channel has done a really nice job on private cloud.