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HP Retreats From Public Cloud

Rather than challenge Amazon, Google, and Microsoft as a cloud computing provider, HP has decided to focus on competitions it can win.

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[Editor’s Note: This article was updated at 1:13 p.m. ET on April 10.]

As HP works on dividing itself into two companies, it seems to be of two minds about its commitment to providing cloud computing services.

On Tuesday, Bill Hilf, HP SVP of cloud product management, told The New York Times that "it makes no sense for us to go head-to-head" with the likes of Amazon, Google, and Microsoft in the battle to sell on-demand computing to businesses.

Yet the following day HP issued a statement to ComputerWeekly saying what sounds like the opposite. "HP is not leaving the public cloud market," the company said. "We run the largest OpenStack technology-based public cloud in the US. This has to do with not competing head-to-head with the big public cloud players."

HP did not immediately respond to a request for comment. But the company's disappointing revenue – $26.8 billion, down 5% in Q1 year-over-year – suggests why it might move away from the thin margins of the public cloud.

In October 2014, when HP discussed its intention to self-divide, the company said its Hewlett-Packard Enterprise offshoot would build upon a foundation of enterprise hardware, services, software, and its OpenStack Helion cloud platform.

Helion provides public, private, and managed cloud service, but it's the company's private cloud implementations that merited mention by HP CEO Meg Whitman during the company's Q1 2015 investor call. She highlighted HP Enterprise's engagement with delivery firm TNT, which involves "consolidating and virtualizing its IT infrastructure and moving some functions to an HP Helion managed virtual private cloud environment." She also pointed to research firms Forrester and IDC recognizing Helion private cloud services in China and HP's US government private cloud.

(Image: HP + Photoshop)

(Image: HP + Photoshop)

Without the scale of Amazon, Google, or Microsoft, HP can't really compete as a public cloud provider. The big companies have cut prices to the bone.

HP could have tried to compete by making an acquisition, as IBM has done with SoftLayer, but the company has opted to look elsewhere for profits. It signaled its intention to focus on more lucrative aspects of the cloud business last year when it bought Eucalyptus, which provides tools for building private clouds that work with Amazon's APIs. It will still be dealing with clients who have a presence in the public cloud, but it wants to engage with those clients in other ways.

"HP is outsourcing the public cloud for hyperscale computing," said Lauren Nelson, an analyst with Forrester Research, in a phone interview. In a follow-up call, she stressed that HP is not exiting the public cloud market completely.

Nelson said that Dell did as much two years ago and struggled with market perception after that. And Rackspace backed away from pure infrastructure-as-a-service last year.

Nelson said HP is struggling to tell its story as it steps back. She also noted that the OpenStack Foundation, which oversees the OpenStack open source cloud computing software platform, may face questions about the positioning of its public cloud, "if HP does minimize or eliminate its public cloud services, given that the promise is future portability and less vendor lock in."

In an email that arrived after this story was filed, Mark Collier, COO, OpenStack Foundation, said that, HP's plans aside, he sees the ecosystem evolving product lines to serve customers, with different delivery models suited to the markets they address. He pointed to numerous public clouds around the world running OpenStack.

He also said the market is adopting OpenStack for specific applications. "Enterprises and service providers with specific problems to solve are embracing OpenStack in private and hybrid scenarios because it gives them either a heightened degree of control over the infrastructure, or because vendors are offering compelling services running atop OpenStack," he said, noting that the shifts made by early supporters of OpenStack reflect what their customers say about how they want to employ OpenStack as part of their cloud portfolio.

Collier said that the OpenStack community includes hundreds of vendors beyond Rackspace.

"With regard to interoperability, we're making a big push in that direction, introducing interop testing of all 'Openstack Powered' products this year (this includes both public and private clouds to ensure interop between them)," said Collier. "We’re also updating the way we organize all of the OpenStack projects, starting with a tightly defined core for interoperability, while better describing the many optional components that rely on that core according to the specific application use cases they’re built to serve."

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Thomas Claburn has been writing about business and technology since 1996, for publications such as New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and television, having earned a not particularly useful ... View Full Bio

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Gigi3
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Gigi3,
User Rank: Ninja
5/8/2015 | 4:18:57 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
"Yes, customers can leave whenever they want and can buy competing solutions too, but I was more concerned about how HP viewed this move.  Are they OK with customers leaving?  Most companies try to retain customers in some capacity.  If you start losing customers because they see themselves outgrowing your offerings and don't want the trouble of migrating again in the near future then you're doing your competitors a great service. "

SaneIT, you are right, companies/vendors want to hold back all their customers. It's a trust factor and trust is build upon business and mutual understanding. Am not sure how HP is going to handle such situations.
SaneIT
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50%
SaneIT,
User Rank: Ninja
5/5/2015 | 8:08:11 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
Yes, customers can leave whenever they want and can buy competing solutions too, but I was more concerned about how HP viewed this move.  Are they OK with customers leaving?  Most companies try to retain customers in some capacity.  If you start losing customers because they see themselves outgrowing your offerings and don't want the trouble of migrating again in the near future then you're doing your competitors a great service. 
Gigi3
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0%
Gigi3,
User Rank: Ninja
5/5/2015 | 6:34:02 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
"That's my concern here, will they just let customers grow out of their solution if the best thing for their customer is a public cloud solution?  Are they quietly building a hybrid solution with their current customer base and we'll hear about this in the months to come?  I can't imagine that HP is settling for a solution that may end up not being broad enough for it's customers."

SaneIT, customer always have their own choices; whether to pick and puck from different vendors or get in from a single vendor.
SaneIT
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SaneIT,
User Rank: Ninja
4/28/2015 | 8:29:28 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
"has to make sure that they can scale up to the customer expectation or satisfaction."

That's my concern here, will they just let customers grow out of their solution if the best thing for their customer is a public cloud solution?  Are they quietly building a hybrid solution with their current customer base and we'll hear about this in the months to come?  I can't imagine that HP is settling for a solution that may end up not being broad enough for it's customers.
Gigi3
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Gigi3,
User Rank: Ninja
4/28/2015 | 3:34:39 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
"that makes sense but they also have a pretty solid solutions base which the cloud offerings were/are part of.  To me it sounds like they only want to service part of that group now or that they feel like they can service enough of their current customers with their private cloud solutions that they don't worry about the ones that they might lose.  It is just a bit odd to see them pulling back now when we're seeing more hybrid solutions emerge. "

SaneIT, for an entry with new solution/service, that's fair enough. Supporting the existing customers and later expanding the base is a good strategy, but has to make sure that they can scale up to the customer expectation or satisfaction.
Gigi3
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0%
Gigi3,
User Rank: Ninja
4/28/2015 | 3:28:07 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
"You're right; we can't forget about the cost component. "

Ariella, thanks. The ultimate aim is better quality at affordable price.
Ariella
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Ariella,
User Rank: Author
4/27/2015 | 8:47:40 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
@Gigi3 You're right; we can't forget about the cost component. 
SaneIT
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50%
SaneIT,
User Rank: Ninja
4/27/2015 | 8:33:35 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
@Gigi3, that makes sense but they also have a pretty solid solutions base which the cloud offerings were/are part of.  To me it sounds like they only want to service part of that group now or that they feel like they can service enough of their current customers with their private cloud solutions that they don't worry about the ones that they might lose.  It is just a bit odd to see them pulling back now when we're seeing more hybrid solutions emerge. 
Gigi3
100%
0%
Gigi3,
User Rank: Ninja
4/27/2015 | 7:32:01 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
"The way it reads HP is still going to have larger scale cloud services but they won't aimed at the masses it sounds more like they are trying to build a customer base for their private cloud then grow them into bigger products as needed.  It makes me wonder how they are going to sell it though when customers are asking about Azure, AWS, etc."

SaneIT, getting a new set of customer is not so easy, especially when competition is high. Eventhough they have prominent role in hardware industry; they are too late with cloud business. When customers are comfortable with the running partners/vendors; its difficult to get new business from them.
Gigi3
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0%
Gigi3,
User Rank: Ninja
4/27/2015 | 7:21:06 AM
Re: If you're not a public cloud provider, you may not be a private cloud supplier either
"Yes, that's the important thing. Companies have to distinguish themselves to customers. It's better to do something different than be just anotehr one among many offering the exact same thing."

Ariella, services or products should be unique and cost effective also.
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