HPE CEO Antonio Neri Says GreenLake Is ‘On Fire,’ Ups Forecast For Recurring Revenue

Hewlett Packard Enterprise CEO Antonio Neri Thursday told Wall Street analysts that the GreenLake pay-per-use cloud service is “on fire” as the company raised its forecast for recurring revenue.

“Customers are coming to us,” said Neri, speaking about GreenLake’s go-to-market momentum. “I mean, it is not like I have to make a tremendous amount of effort to present GreenLake. Our pipeline is just amazing. That is why we are seeing consistent [GreenLake] growth every quarter. We are very bullish about this business.”

HPE is now forecasting a three-year compound annual growth rate of 35 percent to 45 percent for annualized recurring revenue (ARR), up from the prior 30 percent to 40 percent forecast.

At the same time, HPE said GreenLake is driving higher margins, with the ARR percentage of software and services set to soar from 61 percent in fiscal year 2021 to 77 percent of $2.3 billion in Fiscal Year 2024.

Neri said HPE’s channel partners are driving the GreenLake transformation.

“I was just with our channel partners two weeks ago, and they [told me] two things: your vision and strategy is perfectly aligned to the customer needs, and GreenLake is on fire,” said Neri, referencing his appearance at the Best of Breed Conference hosted by CRN parent The Channel Company earlier this month. “And when I bundle all this together it gives us the confidence that we are going to continue to drive this momentum.”https://5f6c58259752051adcf1f6565696b2fe.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

HPE has added more than 200 new enterprise GreenLake customers over the last year. That brings the total number of GreenLake customers to 1,100, representing a lifetime total contract value of more than $5 billion.

The HPE recurring revenue is “high quality and high margin,” said HPE Chief Financial Officer Tarek Robbiati. “HPE GreenLake is a unique offering with an edge-to-cloud platform that gives customers full control over their data through a unified cloud experience,” he said. “Beware of imitations out there! There is much more in GreenLake than a simplistic hardware leasing model.”

HPE is also forecasting accelerated growth in its as-a-service business—which includes storage, compute and networking infrastructure—to 40 percent to 50 percent CAGR through fiscal year 2024, up from the previous forecast of 35 percent to 45 percent. That as-a-service revenue is now expected to hit $3.5 billion in fiscal year 2024, amounting to 12 percent of sales.

Robbiati pointed out that unlike some competitors, HPE does not include “the benefit of future M&A” in its as a service growth rates.

For the overall business for fiscal year 2022, HPE is forecasting 3 percent to 4 percent revenue growth with an increase of Non-GAAP operating profit of 10 percent to 15 percent and free cash flow of $1.8 billion to $2 billion.

HPE shares closed Thursday up 18 cents to $14.76. In after-hours trading HPE shares were up an additional four cents to $14.80.

“The demand is super, super strong,” said Neri. “It goes back to the megatrends I talked about earlier. Connectivity is off the charts. Obviously cloud experience for all the applications on-prem is very, very strong with GreenLake. And anything that has to do with data insight is exploding.”

Neri said he has been “pleased” by the partner response to GreenLake. “When I showed up at the channel conference I was actually very pleased and surprised to see everyone in the channel talking to me about GreenLake, GreenLake, GreenLake,” he said

Partners, for their part, said HPE has a significant lead in the on-premises pay-per-use cloud service market with GreenLake, which is gaining momentum in the channel. In the most recent quarter, channel orders were up a whopping 152 percent.

Mike Strohl, the CEO of Entisys360, No. 135 on the 2021 CRN Solution Provider 500 and one of HPE’s top partners, said he sees increasing momentum around the HPE GreenLake consumption-based model.

“We have been at this with HPE for a while,” said Strohl, noting that his company’s recurring revenue is growing at a mind-boggling rate. “Everything is now a recurring revenue model for us in one form or another. Everything we are doing is a consumption, cloud, managed service or multi-year subscription deal.”

Strohl credited HPE with being well ahead of competitors with the GreenLake consumption model. “HPE has built a great partner program around GreenLake,” he said. “They are by far the best at building a consumption-based model for partners. They have stayed true to their commitment to partners.”

Paul Cohen, vice president of sales for New York-based PKA Technologies, New York, one of HPE’s original Platinum partners, said PKA is seeing an “exponential increase” in its GreenLake sales pipeline.

“We are closing deals at a fast pace,” said Cohen. “We are very pleased with the support we have gotten from HPE both with marketing and [HPE] Pointnext services. The technologies we can include in a GreenLake deal make it extremely attractive for customers.”

The barrage of ransomware breaches is driving more enterprise customers to embrace the GreenLake on-premises pay-per-use cloud model, said Cohen.

“The on-premises cloud experience is resonating with customers, especially in today’s world where security is such a high priority,” he said. “Keeping their most valuable asset—data—on-premises is critically important to customers. The public cloud is extremely vulnerable. Customers don’t want to put all their eggs in one basket in the public cloud. It is just too risky. They are embracing a hybrid cloud strategy. They like the operating expense, pay-for-what-you-use on-premises cloud model with GreenLake as the cloud that comes to them.”

The GreenLake model is a channel game-changer providing high-margin opportunities to land and expand with additional GreenLake services and change orders, said Cohen. “GreenLake is a high-margin recurring revenue stream for us,” he said. “It is an extremely attractive model for HPE partners.”

Neri said HPE is “years ahead” of competitors who have begun to move into the as-a-service market. That HPE pay-per-use market leadership is “resonating with customers,” he said.

“Not one customer that has landed on GreenLake has gone backwards and said ‘Now I need to scale down,” he said. “Everyone keeps adding new capacity.”

In fact, Neri said, a number of customers have moved from compute elasticity with GreenLake into data services and then the edge. “That’s the power of GreenLake,” he said. “It’s a true edge to cloud architecture where we provide customers one integrated experience where they can learn, try and buy and also run their [IT] environment.”

Customers are seeing reductions in both IT operating expenses and capital expenditures with GreenLake, said Neri. “This is all coming together at the right time,” he said. “But we need to continue to fuel the momentum with more innovation.”

Neri said he expects new HPE CTO Fidelma Russo, the former general manager of cloud service for VMware who joined HPE last month, to have a significant impact on the GreenLake innovation march. “She has a tremendous track record,” he said. “We are so bullish [about GreenLake] that we are putting everything we can behind the platform.”

HPE is moving a feverish pace to accelerate the GreenLake sales offensive with new “coverage and compensation” changes aimed at driving faster growth as HPE moves to deliver the full HPE portfolio in an as-a-service subscription model by the end of 2022, said Neri.

Neri said early next year HPE will introduce marketplaces where HPE partners can add their own service offerings for GreenLake. “That is why GreenLake is so unique because it is an open platform,” he said.

Neri said he is spending nearly all of his time accelerating the as-a-service pivot with GreenLake. “There is an engineering component associated with that, a go-to-market component and a business model innovation [component],” he said. “[Robbiati] leads day to day to make sure we deliver against our commitments. We both believe this is going to be a very good year for us with a pivotal transformation in our ability to create shareholder value and maximize that value over the long term.”RELATED TOPICS:

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