Hewlett Packard Enterprise partners delivered a record 55 percent increase in GreenLake on-premises cloud service orders during the most recent quarter, even in the midst of supply chain constraints, said HPE CEO Antonio Neri.
“Our channel partners continue to perform better in as a service [for us than the direct sales team],” said Neri in an interview with CRN Tuesday after HPE reported total as-a-service orders growth of 39 percent for its third fiscal quarter, ended July 31. “This was the largest order performance in a quarter ever, with more partners transacting than ever before … The momentum in the channel is clearly higher velocity, faster growth than the total number [for HPE], and that is very positive.”
HPE partners, for their part, said they continue to see increasing momentum as more customers embrace the GreenLake pay-per-use on-premises cloud services platform.
San Diego-based Nth Generation, one of HPE’s top partners and No. 294 on the CRN Solution Provider 500, recently closed its biggest GreenLake deal ever—a multimillion-dollar deal with a school district that was anxious to get predictable pricing in an on-premises cloud services consumption model with the ability to scale up easily, said Nth Generation Co-President and CTO Dan Molina.ADVERTISEMENT
“More and more of our expert solution advisors have now seen the level of success that a GreenLake solution can provide customers,” he said. “That is driving more momentum for our GreenLake business.”
Besides the success attracting new customers, Nth Generation is also seeing customers add more GreenLake cloud services to run their busineses, said Molina. “We are seeing customers expand their GreenLake footprint,” he said. “For one of our customers, GreenLake has become a community cloud.”
What’s more, an increasing number of customers are looking at inflation as a significant factor in choosing GreenLake, which provides a predictable multi-year cost for on-premises infrastructure services, said Molina. “People are worried about inflation,” he said. “People don’t know what’s coming. It’s a breath of fresh air for customers to be able to to consider an IT solution like GreenLake that tames inflation.”
That inflationary cost of IT issue has become an concern for customers that have moved to public cloud and seen their monthly cloud computing bills soar, said Molina. “We hear consistently that the bills started reasonable and then over time really rose at an uncontrollable rate,” he said. “What happens is they see cloud sprawl and egress fees.”
Molina praised the bold vision of Neri moving the complete HPE product portfolio into an everything-as-a-service model. “HPE is delivering everything as a service as Antonio promised,” he said. “Under Antonio, HPE has put all of the company’s time and resources into what he has promised us. The momentum is stronger than it has ever been, and HPE is doubling down on it. Clients are choosing hybrid computing.”
The record channel performance in the quarter came as HPE doubled the number of net-new GreenLake logo wins, driving an annualized revenue run rate of $858 million, up 22 percent from the prior year.
The ARR (annualized revenue run-rate) performance in the quarter was “limited” by supply chain constraints that hindered the ability to do all the GreenLake installations HPE had booked for the quarter, said Neri. “Clearly the supply constraints had an impact across the board,” he said.
HPE’s 86 percent year over year growth for GreenLake orders shows “enduring demand” for HPE’s GreenLake business “even while supply constraints limited some installations,” said Neri.
HPE expanded gross margins by half a point sequentially during the quarter, with non-GAAP gross margin of 34.7 percent, up 50 basis points sequentially, matching the highest gross margin the company has delivered since it began it as a service sales offensive in 2019.
The supply chain issues that have plagued HPE and other companies “remained largely unchanged from the last few quarters, with certain components still in tight supply, which limited shipments,” said Neri.
HPE has responded by steering demand to products that do not require supply-constrained components, along with implementing multi-sourcing options and product design changes, said Neri.
That said, Neri said he expects the supply chain to “remain challenged” into next year even as HPE sees “some early signs of potential easing” in the near term.
New orders during the quarter exceeded HPE expectations, said Neri, pushing the company’s sales backlog to yet another record level. That backlog is up 96 percent year over year. “That is significant considering that for the previous four consecutive quarters we have grown orders 20 percent or more year over year,” he said.
The record backlog includes Aruba order bookings of more than 15 percent for the seventh consecutive quarter. “We continue to see robust customer demand in the market and a high-quality durable sales pipeline,” said Neri. “Our HPE GreenLake customer base is growing, and our customers are voting with their workloads and data.”
Among the HPE GreenLake wins in the quarter were a deal with Japan Card Network, a leading Japanese credit card payment network provider, which expanded its GreenLake contract to add a 100 percent fault-tolerant platform running on HPE NonStop servers.
In addition, the Steel Authority of India expanded its adoption of GreenLake during the quarter to increase productivity and reduce energy consumption by modernizing its SAP environment with HPE GreenLake, said Neri. That will enable the Steel Authority to reduce its data center footprint by 60 percent.
Overall, HPE reported non-GAAP earnings per share of 48 cents on sales of $7 billion. That compares with non-GAAP earnings of 47 cents per share on sales of $6.89 billion in the year-ago quarter.
With the sales backlog expected to be roughly flat in the next quarter with “no meaningful cancellations,” HPE expects to meet its goal of achieving Fiscal Year 2022 revenue growth of three to four percent adjusted for currency and the longer-term two to four percent compound annual growth rate, said HPE Chief Financial Officer Tarek Robbiati.
What’s more, HPE remains committed to its three-year ARR compound annual growth rate (CAGR) target of 35 percent to 45 percent growth from Fiscal Year 2021 to Fiscal Year 2024.
HPE partners, for their part, said HPE’s long-standing leadership position in the as-a-service on-premises market is driving increased hybrid computing sales growth.
C.R. Howdyshell, president of Cleveland-based Advizex, No. 104 on the 2022 CRN Solution Provider 500, said he sees increasing momentum with GreenLake in the Advizex everything-as-a-service model sales charge. “We see our customers’ desire for everything as a service increasing,” he said.
Advizex recently closed two net-new GreenLake deals, said Howdyshell. In one case, a religious organization that had been using Advizex cloud managed services was interested in outsourcing all of its infrastructure services on a single monthly bill as part of a move to a complete everything-as-a-service model.
“Our success with our Advizex cloud managed services opened the door to GreenLake,” said Howdyshell. “This is an extension of our cloud managed services to include infrastructure. It’s a new hardware customer for us and HPE. They bought into our Advizex everything-as-a-service model.”
Mark Graham, vice president of partner development for Trace3, No. 36 on the CRN Solution Provider 500, said GreenLake has been the “gold standard” for on-premises cloud services consumption.
Trace3 is seeing strong growth with HPE, said Graham. “Their ability for us to offer managed services around their products is unique,” he said. “It is extremely partner-friendly.”
Overall, there has been a growing interest and embrace of on-premises cloud as-a-service solutions, said Graham. “We are all benefitting from all boats rising in this tide,” he said.
Hybrid cloud solutions overall are growing at a breakneck pace, with Trace3’s on-premises cloud services consumption sales pipeline up 4x compared with the year ago period, said Graham.
“What excites us is the ability to wrap our managed services around it and offer our clients more than just a stack but rather a true solution,” he said. “If the economy slows or if the recession ever comes for us, managed services and an on-prem consumption model is the way we help our clients hedge against the recession. There is a lot of momentum with on-premises cloud, and that momentum is going to continue.”
Another area where Trace3 is seeing strong growth is with its FinOps team which is helping customers drive cost savings through IT optimization, said Graham. In fact, Trace3’s FinOps team is driving on average 37 percent cost savings for each engagement. The FinOps practice—along with the benefits of on-premises cloud services—will be among the highlights of the Trace3 Evolve customer conference, taking place Oct. 5-6 at the Cosmopolitan Hotel in Las Vegas.
In some cases, Trace3 is seeing some customers move from public cloud to an on-premises cloud service to save an “incredible amount of money,” said Graham. “We have seen real success stories with ROI under 12 months,” he said. “When it becomes a subscription it is an easy way for people to move workloads.”
Pat O’Dell, general manager and managing partner for Clinton, N.J.-based CPP Associates, said his company’s GreenLake sales pipeline remains strong.
“We are hoping to close at least half a dozen opportunies in the next six months,” he said. “HPE has done a really good job with Quick Quotes. They realize that agility and speed is important, and they are making strides to assure custom-configuration GreenLake deals are done at the same pace as Quick Quotes. That is key to success for partners to scale their GreenLake business.”
Neri, for his part, said HPE’s GreenLake edge-to-cloud as-a-service strategy has made HPE “more and more relevant” to customers. “We have crafted a strategy at HPE that is winning in the marketplace,” said Neri. “I’m confident in our ability to execute on our commitment with strong demand, a solid pipeline and a unique edge-to-cloud offering that is delivering revenue growth and expanding gross margins and operating margins.”
HPE shares were up three percent or 35 cents per share to $14 in after-hours trading. That spike came after HPE shares closed down seven cents to $13.65 Tuesday.LEARN MORE: Cloud Infrastructure | Cloud Platforms | Cloud Security
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