Last week at HPE Discover 2018, HPE announced its entry into the cloud managed service provider (MSP) market with the introduction of its Greenlake Hybrid Cloud. For those with an eye on the cloud MSP market, this is a significant entry into a highly fragmented multi-billion dollar market by a provider with a combination of product and service assets that few existing MSPs can match. HPE is just getting started in this market, so it was careful to position this announcement as an incremental step in addressing its customers’ cloud management needs as opposed to an attempt to immediately position as a cloud MSP market leader via a specific acquisition or new technology launch.
HPE’s approach may be understated, but the implications of its vision are clear if it can successfully build out its capabilities and scale its global delivery. HPE seeks to become a top services provider for the multi-cloud environment enterprises recognize they will continue to be managing long-term across a variety of public and private cloud infrastructures. Beyond the services revenue opportunity for HPE’s PointNext business, this strategic effort could help HPE accomplish multiple company-level goals: shift its solutioning approach in customer engagements from product-led to services-led, secure a presence as a top vendor in enterprise strategic planning of infrastructure and operations, and win customer preference for its hybrid cloud services for public cloud and private infrastructure products.
Cloud Managed Services for enterprise
There are three core elements to addressing cloud managed services needs in enterprises: consulting services, management services, and operational services. There are many players in this market and each has strength in one or two of these areas. None are strong across all three yet. HPE has as good or better an opportunity to execute in differentiating through strength in all three as any existing cloud MSP.
Cloud consulting services involve professional services for planning cloud strategy and executing specific initiatives. This can span from strategic selection of platforms, tools, and infrastructure providers, to tactical planning of complex application and data migration initiatives across infrastructures. HPE acquired its way to strength in this area for public and hybrid cloud over the past year with its acquisitions of Cloud Technology Partners (CTP) in the US and RedPixie in the UK. These firms are scaling out their public cloud practice strengths within the broader HPE PointNext global team of over 25,000 staff members who have existing strength in private infrastructure.
HPE President and CEO Antonio Neri discusses the acquired CTP and RedPixie services teams during the Discover 2018 keynote RHETT DILLINGHAM
Cloud management services focus on ongoing control of cost, compliance, and security in multi-cloud infrastructure use. Enterprises are rushing to benefit from rapid application development via cloud infrastructure. The challenge becomes managing the increasingly distributed responsibility across developers and operators for controlling costs, maintaining compliance, and ensuring implementation of security best practices. Ask a group of large enterprise IT leaders to list their biggest challenges and multi-cloud management will emerge high on their list — as evidenced, for example, by senior technology leaders from Citi, Fidelity, FedEx , Gap , Uber , and more at the recent ONUG conference, a top cloud user gathering for enterprises. Multi-cloud management requires tools to deliver ongoing visibility into cloud spend by organization and adherence to compliance policies — ideally coupled with analytics for insights into available optimizations. HPE delivers these types of services via its OneSphere SaaS cloud management platform, which it released into general availability earlier this year. I detailed the types of multi-cloud management value OneSphere delivers in research earlier this year. In the context of Greenlake Hybrid Cloud, OneSphere is also likely to serve as PointNext’s future platform for automating the implementation of consulting services plans (e.g., cross-cloud migrations) and operational services tasks (e.g. multi-cloud identity and access management).
Cloud operational services involve managing infrastructure operations through monitoring, alerting, and acting on failures, as well as dealing with performance issues, resource scaling needs, and more. This is an area the CTP, RedPixie, and existing PointNext global operations teams have delivered on to a degree but not in the breadth and depth of existing MSPs (such as those that entered the cloud MSP space based on prior cloud and/or managed hosting strength). In attending HPE Discover 2018 last week, I was most specifically looking to understand what steps HPE is taking to build out this aspect of its offer. What I found was a strong vision of synergy between the PointNext / CTP and OneSphere efforts. CTP’s Minimum Viable Cloud framework for building out customer solutions, such as cost management and compliance, reconciles very well with OneSphere’s capabilities. These should enable PointNext’s near-term operational services build-out on the Greenlake Hybrid Cloud offer with starting focus on AWS and Microsoft Azure for public cloud and Microsoft Azure Stack for private cloud.
HPE introduced Greenlake Hybrid Cloud starting with support for AWS, Microsoft Azure, and Microsoft Azure Stack cloud infrastructures.
Cloud Managed Services market
This starting scope ties back to HPE’s modest initial positioning of Greenlake Hybrid Cloud — it starts with a few top areas of enterprise services interest and will build out breadth in solution types and depth of operational services based on where it sees the most demand. This was naturally HPE’s answer to questions about future support for Google Cloud, OpenStack, VMware, and others.
The immature, fragmented mess that is the cloud MSP market provides good opportunity for this type of entry. Best practice approaches to cloud adoption have evolved very rapidly in the first decade of cloud platform use in terms of methods and tools for development and operations. Enterprises are still racing to learn, adapt, and evolve to cloud-native methods of DevOps, CI/CD, and microservices architectural implementation, along with tools like container orchestration. This results in continually evolving decision-making on what degree they want and/or are able to staff and train themselves to manage their cloud infrastructure and platforms, versus leaning on a cloud MSP as an ongoing partner of their operations team.
For MSPs focused on operational services, this makes it challenging to sort out which organizations just need initial or periodic project-oriented consulting services for developing their cloud strategy, training in best practices, and achieving a self-reliant operational capability, versus ones that will value an MSP as an ongoing operational partner. This market dynamic advantages MSPs with strength in consulting services to serve the project-oriented needs — where any resulting operational services opportunity is upside. This is why global SIs have emerged as some of the existing market leaders. It plays similarly to HPE’s strengths with its starting offer. HPE is a long-time partner with SIs, such as Accenture , who it will now be partially competing with, so those partnerships are set to evolve. While there is significant overlap, I expect HPE will cede more of the opportunities that focus on business strategy consulting (e.g., digital transformation) and business/vertical-specific application development to the SIs, while the SIs cede more of the opportunities focused on control and operation of multi-cloud infrastructure to HPE.
The reaction of HPE’s more direct competitors will be interesting to observe over the next year. Neither Cisco, Dell EMC , or anyone else has made moves the way HPE has acquired and built assets to address this market, so entry based on their existing consulting services would be a significant stretch for their services teams. HPE is far from fully built out to deliver on all the types of cloud MSP opportunity, but in an underserved, fragmented market where the customers and vendors are still sorting themselves out, HPE has a real opportunity to seize on the solution needs it can immediately address and build out from there. Its exclusive starting focus on Azure Stack for private cloud seems most specifically limiting, but HPE CEO Antonio Neri claimed in Q&A at Discover that HPE is already a substantial market share leader in Azure Stack. I expect support for VMware could follow soon since HPE OneSphere already supports VMwareVMW -0.37% along with AWS and Azure.
From a company perspective and in line with broader themes at Discover, the more HPE can deliver as an MSP, the more it accomplishes its broader strategic goals of shifting to greater services-led customer engagement in solutioning and securing a strategic advisory seat in enterprise infrastructure and services decision-making. At last year’s Discover, HPE elevated its PointNext services business to much greater importance, and this year it doubled down with its high-profile services announcements. In the past year, HPE’s Greenlake Flex Capacity showed services thought leadership in private infrastructure delivery and consumption models through consumption-based billing of customer infrastructure usage enabled by creative monitoring of usage. Then HPE’s OneSphere enabled broader hybrid and multi-cloud services solutioning via a SaaS platform. It will be interesting to see how well HPE can execute this next services step with Greenlake Hybrid Cloud in operational services expansion into a growing, multi-billion dollar cloud managed services opportunity.