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HPE’s array of hybrid workplace offerings provides silver lining for customers amid the pandemic

HPE bundles its existing portfolio in a GreenLake wrapper

When CEO Antonio Neri initially announced in June 2019 that HPE (NYSE: HPE) will offer everything “as a Service” by 2022, many were skeptical that the plan would resonate with the market as a whole. It was clear that pockets of customers would buy into this offer, particularly in the SMB space, where pricing can have a greater impact. But for major customers, the conversation often boiled down to something as trivial as where to put the expense on the balance sheet for stakeholders. However, considering the changing market dynamics over the last six months due to the pandemic, this aggressive marketing campaign could not have come at a better time. Because HPE has been pushing GreenLake hard since 2019, the vendor is now serendipitously ahead of peers on its “as a Service” offerings.

HPE’s “as a Service” push is directly related to increases in IT sprawl. “Sprawl” is a concept the IT industry has grappled with for decades. Prior to distributed IT environments, the term was used to describe the increase in the variety of workloads in each environment. Now, it is used when describing a single-pane-of-glass management console to ease the burden placed on IT personnel when managing a diverse environment of IT infrastructure. Sprawl is now the upshot of the increasingly diverse application of technology to business, or digital transformation. Diverse applications lead to diverse IT requirements, from the edge to the core to the cloud, making cloud an integral piece of the story and establishing the importance of bundled solutions that provide business outcomes, which is precisely what GreenLake can provide.

GreenLake does come at a premium, as software and services are baked into hardware deals consumed through this model in many cases, but pricing it as a monthly subscription makes these solutions more available and affordable to firms with less capital support. HPE GreenLake clearly resonates with customers, as key competitors Dell Technologies (NYSE: DELL) and Lenovo both formalized their own consumption-based pricing offerings after GreenLake began to gain traction, although Dell Technologies did have informal offerings emerge around the same time as GreenLake initially. With COVID-19, the edge becomes increasingly more important as organizations deploy new workloads in their factories, office spaces and retail locations to ensure public safety while returning to work.

HPE’s workplace portfolio of solutions is attractive for several reasons. HPE’s existing infrastructure portfolio is augmented by HPE Aruba’s connectivity engine and associated services through HPE Pointnext Services, which combines expertise across workplace networking and IoT. The combined offering is then layered with GreenLake and sold as a use-case-based package to end customers, the primary benefits being the efficiencies gained in conjunction with the fact that the solutions are positioned and sold as business outcomes. Essentially, HPE takes care of the grunt work normally weighing down the end user but offers increased manageability and increased control at a reduced effort through GreenLake, leveraging the existing expertise within its organization to reimagine how the world of knowledge-based employees works and what is necessary to make it operate seamlessly in a hybrid model.

IT vendors are poised to solve the challenges that have arisen in the wake of the COVID-19 outbreak, and Hewlett Packard Enterprise (HPE) is a prime example of a vendor that, in response to the pandemic, is addressing previously unforeseen challenges by formalizing offerings pertaining to the workplace. Hybrid working was a pre-existing trend that COVID-19 has accelerated. However, for those individuals working in a knowledge-based field or with school-aged children, how they work and learn has fundamentally and permanently shifted. Further, people with non-knowledge-based jobs, many of whom lost work due to COVID-19, will find in-person work again, and these jobs will also see a fundamental shift in how they are performed to ensure safety and productivity. HPE’s announcements today at Workplace Next highlight how the company’s portfolio can be leveraged to ease customers’ COVID-19 mandated digital transformations.

Opportunities abound for enterprise security vendors as customers adapt their IT to the new COVID-19 world

Opportunities abound for enterprise security vendors as customers adapt their IT to the new COVID-19 world

Key insights

COVID-19 rapidly increased the need for enterprise security in remote and edge environments to enable remote employees to work securely.

Many multiline vendors in the enterprise security market also sell data center infrastructure and attach enterprise security sales to hardware sales to provide customers with complete solutions. Data center hardware backlogs therefore slowed some near-term sales for these vendors, which will be remedied in 2H20.

IBM maintained its position as the revenue leader among benchmarked enterprise security vendors in 1H20. 

TBR’s Security Benchmark provides clients a deep dive into the enterprise security market, highlighting the financial performance of public and private, multiline, and pure play vendors within the industry.

While challenges persist for security vendors due to COVID-19, opportunities abound as customers adapt to the new world

Acquisition sprees continue despite economic woes

As noted in TBR’s 1H20 Security Benchmark, consolidation continues in the enterprise security market as customers continue to seek to work with fewer vendors to secure their IT portfolios. This encourages larger firms to make tuck-in acquisitions to meet customer demands. COVID-19 rapidly increased the need for enterprise security in remote and edge environments to enable employees to securely work remotely.

Logistical challenges with hardware shipping threaten multiline vendors’ ability to deliver solutions

Many multiline vendors in the enterprise security market also sell data center infrastructure and attach security sales to hardware sales to provide customers with solutions. The logistical and supply chain challenges that data center hardware vendors encountered due to COVID-19 hampered their ability to fulfill orders, resulting in a hardware sales backlog in 1H20. However, this backlog will be cleared out in 2H20, which will enable these vendors to realize the revenue. This should, in turn, enable multiline enterprise security vendors to realize the revenue of attached security solutions in 2H20 as well.

New use cases created at the edge amid pandemic

COVID-19 has fundamentally changed how society works, rapidly increasing the demand for new use cases for IT infrastructure as companies swiftly seek new ways to continue to do business. A key example is the emergence of new edge use cases to help slow and monitor the spread of COVID-19, including leveraging surveillance equipment to monitor social distancing and mask wearing as well as assist to assist with contact tracing if a person tests positive. These new uses will result in the need for more technology at the edge and heightened security to protect individuals’ privacy.

TBR’s Security Benchmark provides clients a deep dive into the enterprise security market, highlighting the financial performance of public and private, multiline, and pure play vendors within the industry.

Headcount growth decelerated, revenue declined even faster as vendors felt the whiplash of pandemic-induced downturn

Headcount growth decelerated, revenue declined even faster as vendors felt the whiplash of pandemic-induced downturn

Overview

The 14 vendors benchmarked in TBR’s Global Delivery Benchmark continued to hire and acquire resources, albeit at a much slower rate in 1H20 than in 1H19 due to COVID-19, a trend we expect to accelerate in 2H20.

As vendors went into damage-control mode amid the pandemic, most deployed proven legacy cost rationalization methods, including layoffs, salary freezes and limited SG&A spend to protect profitability.

COVID-19 has accelerated digital transformation-related opportunities around cloud, AI and cybersecurity, demanding vendors develop right-skilled and right-sized benches to provide support beyond technology excellence.

The Global Delivery Benchmark provides efficiency comparisons, assessments and insights into global delivery strategies and investments across 14 leading IT services firms. The research highlights overarching resource management market trends, discusses implications to operations from increased labor automation and examines disruptors that shape new business models and KPIs.

Vendors’ ability to develop nonlinear revenue growth model will be tested once again as COVID-19 sets the stage for demand in ‘as a Service’ sales

Market overview

The 14 benchmarked vendors continued to hire and acquire resources, albeit at a much slower rate in 1H20 than in 1H19 due to COVID-19, a trend we expect to accelerate in 2H20. 1H20 was a tale of two quarters as vendors had to swiftly change priorities and mobilize their staff to work remotely while continuing to provide support to ongoing digital transformation (DT) projects. As COVID-19 accelerated in late March and April, buyers paused many of their DT programs and increased focus on run-the-business projects, compelling vendors to adjust their hiring and reskilling programs and demonstrate capabilities in cloud, cybersecurity and workplace solutions management. Vendors can learn from their own experience three years ago when revenue contracted much faster than they were able to adjust hiring before rebounding back to maximize productivity and ROI.

Automation and profitability

As vendors went into damage-control mode amid the pandemic, most deployed legacy, proven, cost-rationalization methods, including layoffs, salary freezes, and limited SG&A spend to protect profitability. Automation also continued to play a role in this effort but was not, as many had hoped, the single most important variable in offsetting top-line and cost of services pressure associated with the legacy labor arbitrage model. With the consulting model most challenged due to limited face-to-face interaction, we expect vendors to begin exploring new channels to increase share of profitable sales. Vendors could either accelerate bringing consultants back to clients’ sites to increase higher-value advisory opportunities or begin to add digital routes as a sales channel to attract new buyers, particularly in the SMB space. Either scenario carries its challenges and opportunities, but in the long term, as vendors strive to increase “as a Service” sales, KPIs and expectations must also be aligned.  

The Global Delivery Benchmark provides efficiency comparisons, assessments and insights into global delivery strategies and investments across 14 leading IT services firms. The research highlights overarching resource management market trends, discusses implications to operations from increased labor automation and examines disruptors that shape new business models and KPIs.