Looking at the figures from analysts like Gartner and IDC, one could be forgiven for thinking that HPE is in a spot of trouble; according to the latest reports, the company is trailing behind its main rival Dell Technologies in revenues and market share across both servers and storage.

You would imagine HPE would be concerned about this; its market share has shrunk over the past year whilst Dell’s has expanded, and this trend doesn’t show any immediate signs of stopping. Dell has gone from strength to strength since it swallowed EMC in 2016, while the last few years have been turbulent for HPE, to say the least.

However, the company appears to be weathering the storm. New CEO Antonio Neri seems like a strong and confident leader, its recent financial results have been showing improvement, and recent announcements about its intentions to simplify its channel programme have met with approval from partners.

Now that HPE has regained some stability, surely it’s looking to retake its position at the head of the infrastructure market? Yet, according to Mark Linesch, vice president of strategy for HPE, the company isn’t remotely concerned with whether or not it holds the market crown.

«Yeah, Dell’s got a couple of points of share according to Gartner – big deal,» he tells Cloud Pro.

«We’re not worried about Dell in servers at all. They’re a tough competitor, and we take them very seriously, but no – why would we worry about Dell getting a couple of points on us in servers? Who cares?»

Instead of chasing rankings, he says, the company is focusing on delivering maximum value and satisfaction to its customers, trying to help them solve their business problems by building the best infrastructure it possibly can.

This might sound like excuses from a company hoping to save face after losing the top spot that it held for so many years, and that may well be the case. However, downplaying its traditional infrastructure to a certain extent may actually be a sound strategic move for the vendor.

«I think it’s important that at this time of its existence – a new CEO, spin outs complete, et cetera – that HPE demonstrate to the market that it can set realistic goals and achieve them, or over-achieve, even,» says 451 Research co-founder William Fellows. «I don’t think that needs to be about catching Dell.»

On the other hand, Forrester senior analyst Naveen Chhabra warns that Dell is one competitor that shouldn’t be underestimated.

«While there is no doubt that HPE is gaining customers and market share, it absolutely needs to keep an eye on the market momentum,» he says. «Dell has forged a great number of technology partnerships, has a great ecosystem internally and externally.»

Dell has its own share of issues, but nothing notable enough that HPE should not be worried about Dell. Dell has a formidable family of technology offerings across its multitude of businesses.»

A shift to the ‘Intelligent Edge’

Both experts agree, however, that the biggest imminent threat to HPE is not Dell – or any other vendor, for that matter. Instead, it’s the industry’s growing shift towards the cloud.

As cloud infrastructure becomes more robust, more affordable and more popular, HPE needs to change up its strategy. To borrow a phrase from its sister company, it needs to reinvent itself.

HPE is doing this, counterintuitively, by embracing the cloud – or at least certain aspects of it. In particular, it’s adopting cloud-like service models for its on-premise infrastructure, offering consumption-based pricing for its hardware customers through HPE GreenLake. Using its traditional infrastructure business as a bedrock, the company is hoping that it can build long-term services and subscription-based revenue models that will sustain it going forward.

In addition to this new cloud-style go-to-market model, HPE is also putting considerable weight behind what it calls ‘the intelligent edge’ – the mish-mash of connected devices, peripherals, networking hardware and industrial equipment that comprises everything that’s not in the cloud or in the data centre. The company is ploughing $4 billion into the intelligent edge over the next four years, and has indicated that it’s a significant strategic priority.

According to Chhabra, while this is is a smart play for the company, it’s not without its risks, and he cautions that the market still isn’t totally mature.

«There is no doubt that the edge business is growing and hence almost all the large infrastructure vendors are putting their bets on ‘expected developments’ on the intelligent edge,» he says. «However we still need that to mature to levels where their independent and collective losses by adoption of public cloud can be offset.»

«In my humble and honest opinion, the messaging and focus on ‘the intelligent edge’ is directional and still at corporate levels. I don’t see concrete evidences of the developments – like technology and go-to-market partnerships, solution development, et cetera – that the infrastructure vendors are making. These developments are important and critical to ensure they are either ahead of the market, or take the leading position and create a niche for themselves.»

It’s true that HPE is no longer the market leader in server shipments, and that isn’t set to change any time soon – but that might not matter. Market trends suggest that as the traditional on-prem infrastructure business is increasingly eaten by the cloud, pivoting to emerging technologies is going to be the only way that companies like HPE are going to remain relevant.

CEO Antonio Neri says he’s playing the long game with his strategy, and that makes sense. Duking it out with Dell over market share may have been the way things worked with the old HPE, but that’s not the game any more. The two companies may well end up competing on the battlefield of edge computing – Dell has made significant investments in the area itself – but when it comes to old-school infrastructure, HPE may have to lose the battle in order to win the war.

Image courtesy of HPE