Solution Providers: HP Is Upping The Server Ante Against IBM, Cisco

Hewlett-Packard is taking a more aggressive stance against the server business of rivals IBM and Cisco Systems.

HP solution provider partners told CRN that the vendor, which had been walking away from some competitive opportunities for its industry-standard server (ISS) business by pulling back on aggressive pricing, is again willing and ready to help partners win deals they had been forced to leave.

That includes asking partners to bring HP all competitive ISS opportunities for possible action, and providing a 10 percent up-front target incentive for competitive install base accounts, said Rich Baldwin, CIO and chief strategy officer at Nth Generation Computing, a San Diego-based solution provider and longtime HP channel partner.

[Related: Gartner Q4 Server Shipment Data: HP Beats Dell Again]

Baldwin said he is not sure this is actually a formal program, but it is in step with other moves HP is making to build its server and storage business.

Cisco with its UCS server line has become HP's biggest enemy and is a fierce competitor willing to provide customers with a free UCS chassis to get started, Baldwin said.

"At last month's VMware Partner Exchange, VMware talked about its federated partners, including EMC and Cisco," he said. "From that point of view, HP has to keep an eye on Cisco, which is building more and more parts of the data center."

Meanwhile, much of IBM's x86 server business is in transition to be sold to Lenovo, making it easy for HP to talk to IBM customers about their server requirements, Baldwin said.

An extra 10 percent in margin to go after such server business is a pretty big incentive on top of the other margin opportunities, including a 5 percent new business bonus, Baldwin said.

Changes in Cisco's relationship with its large technology partners such as EMC and VCE provide opportunities for HP's server business, said Bob Venero, CEO of Future Tech, a Holbrook, N.Y.-based solution provider and HP partner.

Among those are the Project Mystic collaboration between EMC and VMware to build a converged appliance, a move which calls Cisco's relationship with EMC and VMware in the VCE joint venture into question, Venero said.

"VMware creates Mystic with EMC, and where's Cisco?" he said. "If I'm Cisco, I'm thinking, 'What's going on?' "

NEXT: New Server Opportunities

The IBM-Lenovo relationship also creates new server opportunities for not only HP, but for any major server vendor, Venero said. "HP wants to take advantage of FUD from the opportunity," he said.

While incentives for selling servers are always helpful, the fact is that few deals are done based on servers only, said Chris Case, president of Sequel Data Systems, an Austin, Texas-based solution provider and HP channel partner.

"We bring our customers servers, storage, networking, VMware and our services," Case said. "Unless there's some giant server deal, the reality is, servers are the smallest piece of the deal. If there's a bunch of networking and storage, we can get good discounts, which also extend to the server side."

Another HP solution provider, who asked to remain anonymous, said that HP's incentive moves over the year are in a way similar to small adjustments on the thermostat to adjust to changing temperatures.

"When HP wants changes, it changes the discounts," the solution provider said. "If HP is comfortable, the discounts fall. Typically, when HP is targeting a Cisco or a Dell or another vendor, we see a relaxing of the thresholds business manager approve against."

But because servers are in some ways commodity products, getting customers to change brands with financial incentives often works, the solution provider said.

"If a customer buys 100 Dell servers this batch, and 100 IBM servers next batch, getting an order for 100 HP servers later is not an issue," the solution provider said. "Blade servers are more sticky. Only one manufacturer's blades fit in the chassis. But with IBM selling part of its x86 server business to Lenovo, and with Dell going private, it's actually easy to walk into a company and say, 'Now's a good chance to look at your server infrastructure. This is something you will be using for the next five years.'"

HP was unable to directly respond to CRN requests for further information. However, an HP spokesperson, in an emailed statement, wrote, "We are providing technical and financial tools to help our partners transition their customers to HP."

PUBLISHED MARCH 19, 2014