Posts

HPE continues to evolve technical solutions for a dispersed workforce

HPE’s VDI portfolio is not new but is increasingly valuable to its customers as remote work looks like a more permanent situation than initially anticipated

As of April HPE had rolled out a series of VDI solutions that enable customers to adapt to the growing workforce and garnered a significant number of new customers. This week’s announcement at Workplace Next rides the momentum that highlighted use case-specific VDI offerings, allowing customers to customize their experience based on the type of worker and the size of the remote workforce. With these inputs, HPE can optimize newly designed VDI configurations that are dependent on each type of worker and customize pricing, billing and delivery.

Kaddoura explained that customers “need access to their data centers in a very secure way, and in a highly cost-optimized way as well,” and highlighted GreenLake as the cloud that can be implemented in a customer’s data center, colocation facility or edge. Additionally, she noted that what HPE has done is “brought together the best of our Pointnext Services, our software management layer, as well as HPE’s rich portfolio of hardware to create that cloud experience.”

While the announcement of HPE’s GreenLake virtual desktop cloud services was the banner topic woven throughout the event’s discussions, HPE’s rich ecosystem of partners was highlighted as key to optimizing the rollout of these latest features. For example, in addition to offering VDI from Citrix (Nasdaq: CTXS), HPE can now include VMware (NYSE: VMW) Horizon as well as NVIDIA (Nasdaq: NVDA) virtual GPU (vGPU) technology for more cumbersome workloads. The extension of HPE’s partnership with Wipro was also announced, enabling delivery of hybrid cloud and VDI solutions “as a Service” through HPE GreenLake.

Yadavalli expanded on the partnership between Wipro and HPE explaining how the relationship will allow Wipro to leverage HPE GreenLake across its managed services portfolio, offering a pay-per-use model that is subscription based and easily consumable. The aim, said Yadavalli, is to “bring hyperscaler capabilities to customers on-premises or on hosted infrastructure,” which will enable customers to “fast track their workplace transformation efforts by eliminating the need for upfront capital investments and provisioning costs while enjoying the benefits of on-premises control, security and compliance.”

On Nov. 10 HPE sponsored Workplace Next, a series of discussions on the trends and impacts of the reimagined workforce as a result of the COVID-19 pandemic, featuring a cross-industry panel of experts and executives. During the virtual broadcast, business leaders from various industry roles, including human resources, real estate, healthcare and manufacturing, discussed not only the workplace challenges and trends resulting from the pandemic but also highlighted the opportunities a remote work mandate have unveiled. HPE is a prime example of an enterprise that has addressed the challenges of remote work internally while reorienting its portfolio of solutions to enable as seamless a shift as possible for customers. Additionally, with the discussion of the reimagined workplace as the backdrop, HPE notably leveraged the event to announce expansion of HPE GreenLake VDI cloud services, which included several updates to its workforce strategy for the digital economy.

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.

HPE telco vertical ‘key gateway’ for future growth

“According to analyst firm Technology Business Research (TBR), the vendor’s previously ‘marginalised’ Communications and Media Solutions (CMS) has received new life amid the global business transformation sweep. 

“In particular, the changes prompted by 5G, edge computing, artificial intelligence (AI) and automation will become a ‘key growth pillar’ for HPE as new opportunities emerge in the telecommunications industry.

“In particular, the vendor is in a prime position in the management and orchestration (MANO), 5G core and digital identity spaces, TBR claimed. 

“Although the proportion of CMS revenue is relatively small, TBR principal analyst Chris Antlitz claimed the unit is ‘reestablishing itself’ and now receiving the necessary funding and support to drive this.” — ARN, IDG Communications

Continue reading

HPE’s CMS unit reemerges as a software-centric contender in the new network architecture

TBR perspective  

TBR believes HPE’s CMS unit has the potential to become a significant disruptor in the telecom space. CMS, which had been marginalized in prior years while Hewlett Packard Co. split into HP Inc. and HPE and as HPE executed divestitures, restructurings and developed a new strategy, has received new life after obtaining corporate sponsorship from HPE’s relatively new CEO, Antonio Neri, and CFO, Tarek Robbiati, who was formerly the CFO at Sprint (NYSE: S). CMS leadership reports directly to Robbiati. With the C-Suite and board of directors providing corporate support, the telecom vertical will become a key growth pillar for HPE going forward, given the technology transformation and business model transformation that is being prompted by 5G, edge computing, AI and automation. 

The CMS unit represents only a small percentage of HPE’s total revenue, but the unit is a key gateway into emerging opportunities that are impacting the telecom vertical. CMS is reestablishing itself in the market as a growth engine for HPE corporate and is receiving the funding and support required to drive its portfolio, particularly in the management and orchestration (MANO), 5G core, and digital identity spaces. TBR believes CMS is positioned to be a key vendor in the new network architecture, which will be microservices-based, cloud-native and distributed.

CMS faces some notable hurdles, including the negative perception of its capabilities that followed the bad press it received as a supplier and the prime systems integrator for Telefonica’s (NYSE: TEF) software-defined transformation initiative back in 2015. The company was eventually replaced by several other suppliers. TBR believes the lingering effects of this situation have hindered CMS’ growth over the past few years, but notes that CMS has put the incident in its rearview mirror and is making significant headway moving forward.

CMS’ mindshare and credibility are moving in a positive direction, and the unit is gaining significant traction in CSP accounts, particularly for its Service Orchestrator and NFV Director MANO offerings. CMS has an impressive roster of CSP customers and has played a behind-the-scenes role in several significant network transformation projects, including SK Telecom (NYSE: SKM) and Vodafone (Nasdaq: VOD). These reference wins will be critical to positioning HPE as a contender in new RFPs, particularly in disruptive areas such as MANO and 5G core.

CMS is challenged by OSS domain incumbents like Amdocs (Nasdaq: DOX) and Ericsson (Nasdaq: ERIC), which CSPs will be reluctant to move on from due to possible migration and integration issues. This hesitancy could also prohibit the majority of CSPs from altering their procurement models to adopt more modular solutions, as webscales have done. CMS’ portfolio is increasingly aligned to this trend. The most difficult challenge may be delivering on helping CSPs become more than the connectivity provider or “dumb pipe” in a 5G world. Vendors will be jockeying to deliver this dream, but HPE may be better served focusing on providing the solutions that will enable CSPs to run the most efficient, cost-effective networks possible.

HPE (NYSE: HPE) hosted its first ever North America Communications and Media Solutions (CMS) Analyst Summit in Boston, bringing along top leadership from the company’s CMS business, who delved into CMS’ strategy and portfolio as well as key customer wins and success stories. Following executive presentations, which were interactive in nature, with industry analysts able to pose questions to presenters, analysts received one-on-one time with CMS VP and General Manager Phil Mottram, CMS Chief Technology Officer Jeff Edlund, CMS VP of R&D and Delivery Mark Colaluca, and CMS VP of Product Strategy and Lifecycle Management Domenico Convertino.

With CMS recently emerging from the shadows of HPE’s Pointnext business and retooling its portfolio to align with demand from communications service providers (CSPs), executives were upbeat about CMS’ ability to take market share and compete with highly entrenched incumbent vendors and startups alike.

Deloitte’s willingness to go into unorthodox markets supports growth

“Broad-based investments including low-cost resources and platform-based solutions are among the recent examples of Deloitte’s efforts to expand its addressable market, resulting in improving non-management consulting revenue performance,” says Senior Analyst Boz Hristov.

“While Deloitte is far from reaching revenue diversification compared to the likes of Accenture, the firm is making inroads in unorthodox markets such as outsourcing services. To succeed, though, Deloitte will need to showcase pricing flexibility as it deploys new ways of engaging with clients.”

In his recent assessment of Deloitte’s management consulting practice, Boz noted that augmenting legacy services through investments in legal services, as well as technology partnerships with the likes of Google and ServiceNow, will play a critical role in building and solidifying trust with new and existing buyers, especially as the majority of them fall within the Extension stage of Deloitte’s digital transformation initiatives. Teaming consulting and analytics experts with solutions architects as a core go-to-market strategy will likely not differentiate Deloitte much from rivals. However, the firm’s dedicated investments in regions such as Germany, where consulting sales revenue share surpassed that of legacy audit services, will help build the globally integrated, diversified portfolio Deloitte needs to protect its No. 1 position among TBR’s benchmarked vendors.    

Additional assessments publishing this week from our analyst teams

In 1Q19 VMware experienced another healthy quarter of revenue growth, which increased 12.8% to $2.3 billion. Late 2018 acquisitions helped buoy revenue, as did double-digit cloud management bookings and the reported success of CloudHealth in the quarter. — Cassandra Mooshian, Senior Analyst

In its 1Q19 Hewlett Packard Enterprise Cloud report, TBR discusses the company’s modest 2.8% cloud revenue growth, to an estimated $1.9 billion, and how that underscores Hewlett Packard Enterprise’s (HPE) focus on and commitment to cloud-based hybrid and emerging technologies. HPE GreenLake continues to play a crucial role in HPE’s success, as GreenLake orders grew a reported 39% year-to-year in 1Q19. — Cassandra Mooshian

TBR’s Dell Technologies report deep dives into the performance and strategies of the vendor’s Client Solutions and Infrastructure Solutions groups, while painting the picture of Dell Technologies’ bigger overall strategy. Deeper analysis of some of the announcements that emerged from Dell Technologies World will also be highlighted as well as the ongoing strategic positioning of VMware. — Stephanie Long, Analyst

And sign up now for TBR’s next webinar, Where will hyperconverged infrastructure fit in the modern data center?

HPE buys Cray: Is this the definition of insanity?

We know Moore’s law drives consolidation in the industry. What we do not know, however, is if any two hardware-centric vendors can come together and build a business accretive to the top line. Michael Blumenthal tried this strategy by combining Burroughs and Sperry to create Unisys, and that certainly did not work. More recently Dell acquired EMC, and while jury remains out on that consolidation play, early indications have been positive.

HPE hardware acquisition history

Hewlett Packard Enterprise (HPE) has deployed this strategy multiple times over the years. Today HPE announced it will acquire Cray for $1.3 billion, which equates to $35 a share, or a $5.19 premium over yesterday’s closing price of $29.81. Similar hardware-centric deals HPE has conducted over the years include:

  • Acquiring Apollo after its first-mover advantage in engineering workstations was eclipsed by Sun Microsystems
  • Acquiring Compaq after it had acquired Tandem and Digital Equipment Corporation (DEC), which had likewise struggled as much in business model integration as with technology integration
  • Acquiring SGI, which was hemorrhaging cash but was a strategic HPE OEM partner that HPE could not afford to let fail or be acquired by a rival
  • And now Cray, the last of the venerable high-end niche vendors to double down on higher-margin high-performance computing (HPC)

HPC becomes mainstream as accelerators keep pace with big data compute demands

HPC certainly has growing appeal. That appeal stems from several economic drivers

  • As always, Moore’s law theory gets borne out in reality as cost and form factors decrease to the point where distributed computing (a fundamental tenet of Ken Olsen’s original business plan for DEC in the early 1960s) can be done at the board level if not the chip level. Graphics processing units (GPUs), tensor processing units (TPUs) and field-programmable gate arrays (FPGAs) can keep pace with increasing demands coming from big data analytics.
  • Supply chain excellence and software tuning of these commodity components can allow for custom-designed systems, purpose-built to the compute demands of the HPC customers.
  • IBM certainly keeps innovating in HPC, especially with its RISC-based Power chips suited for analytics.
  • Lenovo has taken a huge bite out of HPE’s share of the HPC space through its design engineering and supply chain flexibility, manufacturing commodity Intel boards at scale through Lenovo’s global manufacturing space. Per Lenovo it went from having none of the top 500 HPC installations in the world in 2014 to having 140 of them in 17 countries in 2018. Much of this success came at HPE’s expense.

Will the acquisition go against type and be viewed as a sane move?

A definition of insanity is to engage in the same activity over and over again while expecting a different outcome. HPE’s history has been to acquire struggling firms in niche hardware areas in hopes of growing share. With fewer and fewer silicon-centric vendors left standing, the odds of success can certainly increase in time.

The Cray acquisition may well aid HPE in stalling Lenovo’s recent successes in the HPC space, but Lenovo’s operating best practices are well suited to commoditizing markets. Supply chain excellence honed to attack the hyperscale market brings decided cost advantage to the HPC space. Talent recruited from Intel and other firms likewise gives Lenovo the software tuning competencies necessary to extract fit-for-purpose performance from commodity chipsets.

Quantum also looms large on the horizon as the next chapter for the high-end compute requirements to help solve the world’s intractable problems. Seven nanometer wafers may not be the end of the line for silicon innovation, but it is certainly getting close. This acquisition seems poised to satisfy the immediate here and now, while once again being eclipsed by niche innovation elsewhere, with that elsewhere coming in the quantum domain in three to five years.

Recent articles have come out suggesting HPE is cutting back on quantum research, intending instead to extract more life out of the traditional computing space with processors for deep learning and analytics. HPE has certainly acquired a company that has been admired for decades as being the “tip of the spear” in silicon innovation. HPC innovations certainly can work for today, but that tip of the spear will be blunted by the inexorable laws of physics, making further silicon innovation increasingly more challenging. Future offerings in what has been Cray’s core market will come from quantum innovators. Once quantum reaches economic advantage over high-end classical computing, the industry will see yet another round of business exits for those vendors lacking transformation fearlessness. Like many of HPE’s other hardware-centric acquisitions, this move appears to have reasonable short-term impact and limited long-term upside.

Commoditization economics and emerging workloads disrupt the data center landscape

Commoditization mitigation strategies require business model shifts and an ever-watchful eye on exascale cloud entrants

Volume or value?

Toward the end of 2018 in the data center market, two distinct vendor strategies emerged: Vendors began either increasing sales volume or selling lower-volume but higher-value solutions. TBR believes that in 1H19, now that vendors have determined their camps, they will begin to craft competitive strategies directly targeting specific peers. For example, Dell EMC has publicly stated its intent to increase its market share in both servers and storage, and we believe the vendor will target key competitors to gain this share. Similarly, Lenovo’s large-scale data center investments imply significant competitive goals.

In February Lenovo unveiled TruScale Infrastructure Services. This directly competes with Hewlett Packard Enterprise’s (HPE) GreenLake and Dell EMC’s Cloud Flex. It also addresses customer demand for private cloud infrastructure that is financed like a public cloud offering. TruScale is available for Lenovo’s entire stack of data center infrastructure solutions. In April Lenovo unveiled a server portfolio refresh, which likely reinforces its TruScale solutions and increases its competitive edge against Dell EMC and HPE.

TBR believes that during the next few months, Dell EMC and HPE will fight back against Lenovo’s marketing tactics to preserve market share. HPE has an advantage in that it is pursuing value-centric data center sales, so it is likely willing to concede less-profitable sales to Lenovo or Dell EMC. Dell EMC’s stated objective to increase market share in servers and storage will increase competition between the company and Lenovo as both aim to scoop up HPE’s lower-margin customers.

ODM participation heats up as commoditization drives provisioning simplicity

Because data center hardware becomes increasingly commoditized as software capabilities become more advanced, we believe data center vendors will increasingly find themselves competing against ODMs, especially for larger deals. Smaller customers will still show a preference for OEMs as they need the additional software and services provided with OEM data center solutions. Lenovo’s manufacturing capabilities give the company an advantage in the hyperscale space, where Lenovo’s past financials illustrated some successes, and enable the vendor to differentiate from its OEM peers.

On the hyperscale front, ODMs are rising to dominance, but OEMs such as Lenovo remain a force to be reckoned with in the space. As cloud becomes an increasingly central piece of IT environments, public cloud providers seek ways to expand their environments as cost-effectively as possible to preserve profits. TBR believes very large enterprises are likely to explore leveraging hyperscale vendors as well for their on-premises environments if it is cost-effective.

Consumption-based pricing models tie to the commoditization march

TBR’s Hyperconverged Platforms Customer Research continues to highlight the correlation between private cloud installments and HCI. Most recent findings indicated that 80% of respondents leveraged their HCI purchase for a private or hybrid cloud environment. Since customers are already turning to HCI for cloud, it is a logical next step for vendors to price HCI like a public cloud solution to deepen the competition.

With their channel partners also engaged, Dell EMC, HPE and Lenovo are the three main players in the consumption-based pricing space. Their solutions are not limited to just HCI, but HCI is one of the solutions that can be purchased in this manner. The key value proposition of consumption-based pricing for data center vendors is the ability to bundle software and services into hardware consumption-based deals. This is likely to boost the margin on the solutions. Further, it guarantees larger deals, as in many cases, these consumption-based pricing deals lock customers in for a predetermined duration that has early termination penalties.

TBR Weekly Preview: March 18-22

In addition to this week’s vendor analysis, TBR Senior Analyst John Caucis will host a webinar Wednesday, March 20, sharing his insights on the state of the healthcare IT services market and the 2019 HIMSS mega-event. 

Furthermore, TBR analysts will be attending several events this week, so be on the lookout for special reports on Accenture, SAP and Oracle as early as next week.

Monday

  • Despite its top-tier innovation and optimistic messaging, Oracle struggles to find incremental growth outside its cloud ERP portfolio. While traction around autonomous database builds, these ERP inroads present an opportunity for Oracle to more effectively craft a story across its integrated cloud applications and platform capabilities. TBR’s initial findings can be accessed today, but read more on the subject in our 1Q19 Oracle Cloud full report publishing in April. (Meaghan McGrath leads TBR’s analysis of Oracle.)

Wednesday

  • HP Inc. delivered corporate growth of 1.3% year-to-year, a significant slowdown after five quarters of double-digit growth. During the company’s 4Q18 earnings call, executives discussed challenges within HP Inc.’s profitable print supplies business, but slowed growth in its commercial printing and overall PC businesses indicates the problem is broader. Slowing consolidation opportunities and rising opposition from its peers in the PC market will increasingly challenge HP Inc., whose PC business composes most of its top line. In addition, the CPU shortage has been more impactful to HP Inc.’s wider portfolio. Read our full report to find how HP Inc. will navigate these challenges throughout 2019, including growing its Device as a Service portfolio and supporting its sales channels to build a bulwark for upcoming PC share wars. (See Dan Callahan for more analysis.)

Thursday

  • According to TBR estimates, Dell Technologies achieved $23.8 billion in revenue, up 8.6% year-to-year in 4Q18. Gross profit increased 20.7% year-to-year, highlighting Dell Technologies’ successful improvement in overall profitability. In TBR’s 4Q18 full report on the company, we will dive into the performance of key business units. Within Infrastructure Solutions Group (ISG), TBR believes aggressive market share expansion in both servers and storage will be a key focus for at least the first half of 2019, which will result in investments in direct sales, ISG’s channel partner program and portfolio enhancements. In Client Solutions Group, Dell Technologies will continue to benefit from shrinking memory prices as well as the CPU shortages, which will drive profitability up during 2019. From a corporate perspective, 2019 will see tightened integration between the vendor’s strategically aligned companies. (See Stephanie Long for more analysis.)
  • In this quarter’s analysis of Dell EMC Services, TBR will highlight how Dell Technologies integrating preconfigured services solutions around core infrastructure technology competencies enables Dell EMC Services to attach profitable and recurring services revenue streams. (Kevin Collupy leads TBR’s analysis of Dell EMC Services.)
  • In 4Q18 Hewlett Packard Enterprise (HPE) reported corporate revenue of $7.6 billion, down 1.6% year-to-year. TBR estimates total cloud revenue reached $1.9 billion, up 3.1% year-to-year, as HPE continued to invest in its cloud portfolio and capitalize on customer demand for hybrid IT solutions. HPE’s leaner business and ongoing restructuring efforts through HPE Next allow HPE Cloud to focus on and invest further in its core areas of strength, namely hybrid infrastructure and edge computing for IoT and telecommunications use cases. (Cassandra Mooshian leads TBR’s coverage of HPE Cloud.)
  • VMware’s top-line growth continues to outpace that of its software peers in TBR’s Infrastructure Management Software Vendor Benchmark. In 4Q18 VMware experienced its strongest quarter since 3Q14, with revenue growth of 16.4% year-to-year to $2.6. Revenue growth was buoyed by strong adoption across VMware’s emerging product lines, with vSAN revenue growing 60% year-to-year and Hybrid Cloud and SaaS revenue growing 35% in the same time period. Further, the company is successfully packaging solutions around hybrid management to increase deal sizes and reported a company-record 23 deals in excess of $10 million during the quarter. (Cassandra Mooshian leads TBR’s coverage of VMware.)
  • Huawei is taking a prominent role in setting standards for 5G and launching solutions to help operators implement 5G services, which has led to key early commercial 5G-related contracts in EMEA and APAC. While security concerns around 5G will persist, Huawei will continue to grow revenue in 2019 largely due to its Consumer and Enterprise business units, which are taking share from incumbents.(Michael Soper leads TBR’s coverage of Huawei.)

Friday

  • According to TBR’s 1Q19 Telecom IoT Market Landscape, TBR estimates global communication service provider (CSP) IoT revenue rose 25.6% year-to-year to $22.3 billion in 2018. Despite sustaining strong revenue growth, TBR estimates global CSP IoT revenue accounted for only 1% of consolidated global CSP revenue in 2018, which is insufficient for most service providers to offset erosion within challenged segments such as legacy network services. To maximize IoT revenue opportunities long term, CSPs are focusing on attracting customers by implementing more cost-efficient network technologies such as NB-IoT and LTE-M, targeting high-value contracts in areas such as smart cities and healthcare, and by positioning to support next-generation IoT solutions integrating technologies such as 5G and edge computing. (Steve Vachon is TBR’s lead analyst covering the Telecom IoT space.)

TBR Weekly Preview: March 11-15

We’re going all over the technology space this week, with reports spanning U.S. federal government IT services to long-established hardware and data center providers, plus a couple of European-centric companies.

Wednesday:

  • Talent continues to be the constraining factor on ManTech’s bright revenue growth outlook. Focus in defense and intelligence segments of the U.S. federal market on innovation creates healthy demand for ManTech’s labor-based technical services offerings, such as R&D, testing and evaluation of emerging technology. As a smaller competitor compared to many of its large prime peers in the federal sector, ManTech acutely feels the resource impacts of the security clearance backlog and overall tight labor market. TBR’s 4Q18 ManTech report, written by Senior Analyst Joey Cresta, will explore how ManTech uses adaptive learning, continuous monitoring software and new leadership hires to address the human capital challenges associated with scaling up its labor base to meet robust client demand.

Thursday:

  • As detailed in our initial response, Lenovo achieved its sixth consecutive quarter of year-to-year revenue gains, reporting $14 billion in revenue in 4Q18, up 8.5% from the year-ago compare, even as consolidation opportunities cool in the PC market. Despite these high notes for Lenovo exiting 2018, the company will still face hurdles over the next two years. Its PC and Smart Devices businesses will have to deal with challenging and shifting PC environments. Data Center Group continues to deliver on its promises, but it remains in the red despite improvements to its bottom line. Lenovo’s Mobile business is still teetering in profitability. Read our full report by Analyst Dan Callahan to find how Lenovo will navigate these challenges and tee up for a seventh consecutive quarter of revenue growth in 1Q19. 
  • Our detailed assessment of Atos will note that the company’s Digital Transformation Factory portfolio accounted for 30% of revenue in 2018, up from 23% of revenue in 2017, positively affected by increased activities with clients in areas such as orchestrated hybrid cloud, Digital Workplace and cybersecurity. As Senior Analyst Elitsa Bakalova will report, Atos’ efforts to position as a trusted partner for clients’ digital journeys are starting to pay off, and the new digital services strategy will shape the company’s activities over the next three years.
  • As reported in our initial response, Hewlett Packard Enterprise’s (HPE) revenue fell 1.6% year-to-year to $7.6 billion. While revenue growth is always a goal, TBR believes HPE is more focused on improving profitability in the near term before it shifts to boosting revenue growth. In our full report Analyst Stephanie Long will dive into the long-term strategy of CEO Antonio Neri and how it will impact 2019. Key cost-cutting initiatives and strategic investments, such as in high-performance computing and the edge, will be likely highlights in 2019.
  • Analyst Kelly Lesiczka will be reporting that T-Systems’ portfolio and organizational investments continue to improve its ability to gain wallet share in newer areas and stabilize revenue growth in 2018. Building out its emerging technology portfolio offerings, such as for IoT using DT’s product offerings, enables T-Systems to provide more comprehensive and personalized solutions to clients and generate larger-scale engagements to accelerate growth.

As promised, we published a new report last week by Senior Analyst Boz Hristov on Accenture Technology, and today published a report on TELUS International from Boz as well as a report on Mobile World Congress Barcelona 2019 by Principal Analyst Chris Antlitz.

While we do not have a webinar scheduled for this Wednesday, the next one will be on March 20 featuring Senior Analyst John Caucis talking about healthcare IT services.

Lenovo unveils TruScale Infrastructure Services, consumption-based data center pricing

In February Lenovo’s Data Center Group (DCG) unveiled TruScale Infrastructure Services. A Hardware as a Service (HaaS) solution with subscription-based pricing, TruScale makes DCG’s entire ThinkSystem and ThinkAgile portfolio available to customers “as a Service” through both Lenovo sales associates and channel partners. For a monthly fee, customers will gain access to data center infrastructure, which can be installed at the customer’s location of choice. Cost will be based on power consumption, as power consumption is a relatively accurate way to measure usage without compromising infrastructure security. The hardware remains Lenovo-owned, -maintained and -supported, and with no minimum usage requirement, customers gain the financial flexibility available through public cloud offerings without the risks associated with taking data off premises. Further, the monthly pricing structure includes installation, deployment, management, maintenance, remote monitoring, system health checks and removal of the hardware once the subscription expires. Pricing details of the solution have not yet been disclosed and are likely to be determined case-by-case. The solution is currently available only in English and priced in USD and Euros.

DCG’s late-to-market status will be advantageous in the consumption-based pricing realm

DCG is a fast-follower in consumption-based pricing, as Hewlett Packard Enterprise (HPE) and Dell Technologies have offered consumption-based pricing for over a year. While these offerings have greater market longevity, as they are typically multiyear agreements, customer adoption remains relatively nascent for consumption-based pricing models. These deals are more complex than traditional hardware sales, and therefore require a mindset shift in some ways to promote adoption, just as cloud did initially. DCG’s entrance into the market times well with customer interest, and the vendor’s later arrival to the space will not prove to be a major inhibitor to growth.

The total inclusion of DCG’s channel partners, in addition to its direct sales force, in providing TruScale, is an asset and distinction for the group. Because Lenovo’s services portfolio is not as mature as that of vendors such as Dell EMC, providing channel partners with this opportunity will prove to be a win-win as it enables channel partners to sell attached services while affording Lenovo a more passive revenue stream. Involving the channel has been an initial challenge for some vendors offering consumption-based pricing as the partners need to be incentivized to pursue it over a traditional hardware sale, in which they would get a lump sum payout versus a subscription-like payout. TBR believes that because Lenovo has arrived to market later than peers with its consumption-based pricing offerings, it was able to work out channel partner challenges before going live with the solution.