HP has finally conceded defeat in the public cloud wars, admitting that it just doesn't have what it takes to do battle with the likes of Amazon, Google, and Microsoft.
"We thought people would rent or buy computing from us," HP cloud boss Bill Hilf told The New York Times on Wednesday. "It turns out that it makes no sense for us to go head-to-head."
The startling admission comes mere months before HP is due to split into two companies. Come November, HP's PC and printer honcho Dion Weisler will be the new CEO of HP Inc, while current HP CEO Meg Whitman will become chief exec of the newly created HP Enterprise, a company dedicated to serving businesses' data center needs.
Don't expect public cloud to be one of HP Enterprise's major offerings, though. According to Hilf, HP will focus on providing private and hybrid cloud infrastructure to companies, while at the same time acting as a supplier to public cloud providers like Microsoft and Rackspace.
Not that this should come as any surprise to anyone who has been following the nascent cloud market. For all its boasts about operating "one of the world's largest OpenStack public clouds," HP's public cloud offerings have always paled in comparison to its better-established competitors. Gartner's 2014 Magic Quadrant for cloud infrastructure-as-a-service characterized HP as a "niche player," with less ability to execute than Fujitsu or VMware.
HP's real core enterprise business is selling servers, storage, and networking equipment to companies for use in their own data centers. Little wonder, then, that HP prefers to cater to customers that want to build their own clouds, rather than use Amazon's.
HP's got a cloud it wants to sell you
The problem HP faces is that companies who want to build "Google scale" clouds are increasingly turning to so-called white box ODMs to build their servers, rather than buying off-the-shelf kit from big vendors. Amazon hasn't bought a name-brand server in years. And Facebook, through its leadership in the Open Compute Project (OCP), is showing other companies that they don't need major-label expertise to get what they need for their data centers.
Less ambitious companies, however, may not want to go over the financial and logistical hurdles of dealing directly with Chinese manufacturers. For them, HP has come up with Cloudline, a new range of servers with OCP-style specs. But even HP's close partnership with Taiwanese mega-manufacturer Foxconn can't change the fact that the margins on such products must necessarily be razor-thin.
HP's current idea is to sell customers a combination of hardware infrastructure and the software to tie it together. It's even borrowed a buzzword from Oracle to describe these integrated offerings: "engineered systems."
"We had a lot of guys who knew how to sell boxes, and they've had to learn how to have conversations about downloading apps and developing software," Hilf told the NYT. "Meg has put out a charter that will make truly engineered systems that we build top to bottom for customers."
The trouble is, Oracle has struggled to grow its engineered systems business. And while HP has continued to sell industry-standard servers at a healthy clip, revenues for its technology and enterprise services divisions and its software group have been down in recent quarters – suggesting fewer companies think they need HP's help to set up and run their infrastructures these days.
In light of all this, for HP to disavow any public-cloud ambitions should be seen as a good thing for the soon-to-be HP Enterprise. With so many challenges facing it just to get its core business back on track, it will be all eyes on Whitman once the split happens later this year. ®