Dell, HP and Cisco: three IT giants trying to reinvent themselves, and three events to showcase their progress so far. I’ll be on the road for the next few weeks, attending: Dell Enterprise Innovation Day, Austin, Texas, May 28-29; HP Discover 2015, Las Vegas, Nevada, June 2-4; and Cisco Live, San Diego, California, June 7-11.
Almost 18 months into its return to being a privately held company, Dell’s success must be measured by company statements and industry metrics in key markets like PCs, servers and storage. Michael Dell, who took his $57-billion (2013) company private for $25 billion (75% of it; the rest going to private equity firm Silver Lake) in October 29, 2013, said he didn’t care for a life under the eyes of Wall Street. “Been there, done that.”
Dell wants to offer complete IT solutions, products and services, but at lower prices than his competitors, primarily IBM and HP, and increasingly, Cisco. Not the lowest price, just a better price than his bigger competitors, a strategy that powered the company’s success in PCs and servers, back before the commodity wars broke out.
The approaching HP makeover has three objectives, according to Technology Business Research: abandon the conglomerate strategy; enable two very different businesses to find their own ways; and make it easier to partner, merge or even potentially sell one business or the other. Potential buyers of one of the more manageably-priced offspring include Dell, Cisco, IBM or EMC.
Along with PCs, printers will make up one half of the upcoming corporate makeover, and will become HP Inc., $57.2 billion in revenues, $5.4 billion operating profits, 9.4% margins and 1.7% growth in the trailing 12-months after 2Q13. The other half, Hewlett-Packard Enterprise (HPE), is a $58.4 billion enterprise-focused servers, services, software and cloud company, with $6 billion operating profits, 10.2% margins and a slightly more anemic 0.4% growth.
Then there’s Cisco, networking’s 800-pound gorilla, which has had recent success in datacenter servers, and expects more with the advent of the Internet of Things (AKA Internet of Everything). At December’s 2014 Global Editors Conference, John Chambers said Cisco is “moving more and more to be a software company”, as well as “more and more a services company”.
He said the company made a big push on security 18 months ago, and 12 months ago it was collaboration; and now its data and analytics. “We aren’t there yet, but boy, this is one big step.”
The “big step” was Cisco Connected Analytics for the Internet of Everything, a ‘comprehensive data and analytics strategy and solutions portfolio’. Chambers said data analytics was “the one area we were missing”, and combining it with IoE is intended to position the company for a big chunk of the $19 trillion IoE market expected to be available during the next 10 years. Which is not to say that connecting 50 billion things – “on its way to 500 billion” (Chambers) – isn’t good news for either the networking or data center infrastructure portions of Cisco’s not-so-little ($47.1 billion FY14) IT kingdom.
So where do are three amigos go from here? There’s no love lost between Dell and HP. When Dell was engaged in a bitter battle to go private, HP said its archrival had “a very tough road ahead,” and said that it would “take full advantage” of the opportunity presented by the disruption to Dell’s business. A year later HP CEO Meg Whitman said Dell’s failure to follow through on a pledge to turn over 200,000 accounts to channel partners is the kiss of death.”
Dell’s turn to return the love came when HP announced it planned to split its company into PC/printer and enterprise businesses this coming November. Dell CFO Thomas Sweet said the planned split up could create confusion among its business clients, giving his company an opportunity to grab market share. “The confusion and uncertainty creates opportunity,” he said. This follows Michael Dell’s comments that HP would be distracted by the split and there would be “chaos” in the separation.
Similarly, HP and Cisco, once BFFs, had a major falling out in 2009 when Cisco announced it was entering the server market. Since then, its Unified Computing Systems have been growing at 30% a year. That’s pretty impressive when server shipment growth for the most recent reported quarter (Q4 2014) saw year-over-year growth of 4.8%, and just 2.2% for the year.
HP has been pushing back, with server innovations like Moonshot and the air-cooled Apollo 6000, and water-cooled Apollo 8000 series, and a major push in Cisco’s bread-and-butter networking space. Last month HP announced its latest set of new Cisco killers, this time for the campus networking market.
While still far behind Cisco in the networking market, HP has been riding the software defined networking bandwagon, hoping it proves to be Cisco’s kryptonite. A recent Infonetics study showed that 72% of North American businesses plan to have SDN live in the LAN by 2017.
HP and Cisco – along with Juniper, Microsoft and VMware – were identified as the top 5 SDN vendors. Infonetics also reported that the Data Center and Enterprise SDN market soared 192% in one year.
These are three big organizations, with big dreams, and big challenges ahead of them. They also all have big opportunities in such huge growth markets as SDN, analytics, and IoT. And while the margins will never be what they used to be, servers, storage, networking and devices will continue to generate billions of dollars of revenue annually, and Dell, HP and Cisco plan to continue to take more than their fair share.
DISCLAIMER: I will be attending these events courtesy of Dell, HP and Cisco.