Better Together: Vantara Plots IoT Success

Last week ($81 billion annual revenues and more than 800 subsidiaries, with products including consumer , electric power generation as well as IT) announced it was combining its former storage/IT business unit (), together with (BI software) and Hitachi Insight Group (IoT products and services), into a new unit focused on the /IT/IoT space. The new venture, Hitachi Vantara, also unveiled a number of products, services and partnerships focused on most of IT’s — and business’ — hot buttons, including Big Data and analytics, , , appliances and .

So was this a bold move to combine assets that have a lot more potential upside in a US-based, IoT-focused business, or a desperate attempt to pump new life into stagnating segments? HDS may be the dominant member of the IoT troika, but with only a tiny share of a barely growing enterprise storage market, the grass looks much greener in an IoT market expected to reach between $1.2 to $2 trillion by 2021, with double-digit compound annual growth.

The research data varies wildly, but it is certain that IoT is going to be a huge opportunity for the foreseeable future:

73% of executives are either researching or currently launching IoT projects;

-manufacturing-based IoT connections grew 84% between 2016 and 2017, followed by energy & utilities (41%), transportation and distribution (40%), smart cities and communities (19%) and healthcare and pharma (11%);

-the retail IoT market is forecast to surpass $30 billion by 2024;

-the manufacturing IoT market is forecast to surpass $150 billion by 2024;

-the IoT platform market (i.e. ’s ) is expected to grow 35% per year to $1.16 billion by 2020; and,

-project-based IoT services represented the highest percentage of market opportunity in 2016, and will gain nearly one point of market share to 56.7% by 2021, approaching $30.8 billion, with the Americas (52.2%) and EMEA (34.4%) substantially outperforming Asia/Pacific (13.4%) last year.

It would appear to be very good news — at least potentially — for Hitachi, because it’s name was nowhere to be found in key players in the Persistence Market Research study. The featured vendors were: IBM, Microsoft, AT&T, Apple, Google, General Electric, Samsung, Comcast, Intel, Cisco Systems, Oracle, Hewlett Packard Enterprise, Fujitsu, Qualcomm Technologies, Honeywell International, Accenture PLC, ARM, Amazon Web Services, SAP SE, Zebra Technologies, and Texas Instruments.

From Data Storage to Business Outcomes

Vantara represents a change in how Hitachi, or at least some of its IT assets, are presented, said analyst George Crump, StorageSwiss. ‘It does not want to compete with Dell and HP for storage deals. It wants to compete with GE and other large conglomerates.’

He noted that the exhibition hall ‘oozed solutions’, or as Vantara calls it “outcomes”. There were exhibits focused on traditional data center and basic cloud issues, most were dedicated to solving specific industry problems. Crump added that Vantara is not “niching down,” focusing on just one industry; with its scale ‘it can focus on all of them and cross collaborate between them.’

I reached out to several other analysts for their thoughts on the significance of Hitachi’s announcements, and where does Vantara go from here. Storage guru Mark Peters, Enterprise Strategy Group, believes the new products and renewed emphasis on the traditional HDS side of things were important.

“After all, laying out a great strategy is like having a great new house design: successful realization requires money and a good foundation too! As to the strategy itself I think the coming together of the various component companies into Vantara is actually significant because (aside from it being a big deal inside a typically conservative Japanese run global company) it means a doubled-down commitment to the ‘big picture IT/OT’ that Hitachi has been promoting/defining/refining for the last year or two. It’s not a change as much as an affirmation.”

Charles King, Principal Analyst, Pund-IT, agreed the focus on delivering unified industrial IoT solutions was significant.”The former aims to leverage the success and strength of HDS (particularly its storage unit which accounts for over half of the company’s $4-billion annual revenues) to the betterment of its other products and services. The fact that HDS’ CEO and COO will retain their same roles in the new org bolsters that argument.

“The focus on industrial IoT isn’t especially surprising since that’s the same destination most other IoT-bound vendors are heading for. But Hitachi’s favored status in Japan and the strength of its brand in Asia should give it a leg up in those attractive markets.”

However, King is uncertain as to the unit’s future. “HDS has enjoyed great success in enterprise storage markets but it’s not clear to me whether or how many benefits the new company can extract from that energy. Other more sizable companies focused on industrial IoT and some, including Dell EMC and IBM have larger, more granular solution and service portfolios for industrial IoT than Ventara. The company needs to come out of the blocks quickly to demonstrate what the new organization can offer and why customers and markets should care. Otherwise, it runs the risk of being seen as a cosmetic strategy without any real substance.”

ESG Senior Analyst Terri McClure, who attended Hitachi Next 2017 along with Peters, was also optimistic about Hitachi’s makeover. “The new structure gives the Vantara team an opportunity to focus on a different competitive landscape than they faced separately – and in a much stronger position. Longer term, HDS will no longer be duking it out with Dell EMC, NetApp, IBM and HPE for the (shrinking) data center infrastructure dollar. Pentaho won’t be evaluated head-to-head with Qlik. And Lumada won’t just be evaluated against GE Predix. They will be able to knit together the infrastructure, analytics and insights into an end-to-end solution.”

However, there are a couple of big challenges, she said:

“Assuring traditional HDS customers that they are not being abandoned. This is a big revenue stream for the company (I don’t know for sure but I believe the biggest revenue chunk of Vantara comes from traditional HDS business). They can’t let that dry up.

Sales force transformation. The IoT landscape they are selling into is very different than data center sales – and selling an end-to-end solution very different than point products. This is one thing they couldn’t do as separate companies but can execute on now.”

Overall, McClure thinks the new venture is better positioned than before. “The new products and partnerships are important to keep the ball moving forward – they’ll need to keep innovating at the product level to stay competitive at the solutions level. But I think the big takeaway here is the new company.”

Deep Thoughts

I found it somewhat perplexing that Vantara, which consists of three business units with combined annual revenues in excess of $4 billion, is looking ‘to boost IoT revenues by 20% from 2106 to almost $1 billion in 2018’. There are reasons why I became a journalist instead of a scientist, but for a company purportedly focused on IoT, this along with the following numbers, doesn’t add up.

Vantara, which will be based in the Bay Area, will employ 7,000 people (about a of third of Hitachi’s IT workforce), and will invest $2.8 billion over the next three years to build out its IoT business. IoT reportedly accounted for $5.4 billion of Hitachi’s sales in the fiscal year ended March 2016, about 6% of total revenue.

“Our strategy is to bring industrial IoT expertise, our software and ability to manage and run technology” stated Vantara Chief Solutions and Services Officer Bobby Soni. “We don’t think many companies are in a position to pull all those things together.”

Must be new math. Go figure. Go Vantara.

DISCLAIMER: Hitachi looked after airfare and accommodations, and some of these companies are represented in my stock portfolio.

Author: Steve Wexler

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