Innovation Acceleration: HPE CEO Whitman Set To Rattle Dell, Cisco With Next-Gen Products, Channel Initiatives

Hewlett Packard Enterprise CEO Meg Whitman laughs when asked how her life has changed from ­five years ago when she took over what was then a debt-ridden Silicon Valley behemoth with me-too products and a demoralized partner network. "My life is better," she says.

Whitman said she is having "way more fun" today running HPE as a smaller, nimble and more agile company with a reignited innovation engine and a charged-up partner community. "I may be the only CEO in America who thinks it is actually fun to have a smaller company as opposed to a bigger company," she said in an exclusive interview with CRN.

It's a long way from the dark days of ­five years ago when Whitman took the helm of a $127 billion Silicon Valley dinosaur with $12.5 billion in debt and a future that was at best uncertain. At the time, Whitman, who had made an unsuccessful run for governor of California in 2010, said she took the job to turn around a Silicon Valley crown jewel that had lost its luster. "I believe HP matters—it matters to Silicon Valley, California, the country and the world," she said upon accepting the job.

[Related: CRN's Coverage Of The HP Global Partner Conference]

By all accounts, Palo Alto, Calif.-based HPE—which will be about a $30 billion company after it completes the spin-off merger of its $20 billion Enterprise Services business with systems integrator CSC—matters again. In fact, partners say both companies are innovating at a breakneck pace on both the product and channel fronts since the historic split into two independent Fortune 50 companies last November.

One sign of that innovation—the development of the fast-selling HPE HyperConverged (HC) 380, which was released earlier this year via a development cycle that went from idea to full-fledged product in just ­ five months. Prior to the split, it would have taken two years to bring that same product to market, said Whitman. "That never happened before at Hewlett-Packard," she said.

"The cycle time on products is much more compressed than it has been in the past. That's important for the partners who now have the most up-to-date offerings on a more rapid cycle than they had in the past."

That faster pace of innovation at HPE, which is growing again for the first time in five years and now has $5.5 billion in cash, will be front and center at its Global Partner Conference, taking place Sept. 12 to 14 in Boston. At the top of the list of new offerings: an Aruba mobile-­first, cloud-­first campus, branch and Internet of Things platform backed up by a new Partner Ready for Networking channel program. Aruba is also unveiling new pay-for-usage/device consumption models aimed at driving lucrative recurring revenue for partners.

Whitman said the Aruba offensive, which is taking its toll on networking rival Cisco Systems, represents the kind of breakthrough innovation that is setting HPE apart from competitors playing catch-up in the wake of the dramatic changes it has made in the business over the past five years.

"I think we are a couple of years ahead of some of our competitors on efficiency and how we run our company," she said.

"You saw Cisco's results [which included a major restructuring in the most recent quarter with plans to eliminate 5,500 positions, about 7 percent of the workforce]. They are doing some of the work we did almost four or five years ago. So I think we have got a head start."

At the same time competitors are scrambling to retrench, HPE is sharpening its focus on business-outcome-based selling with partners. At the Global Partner Conference, HPE will unveil 11 new competencies designed to drive even further transformational consulting over the next several years: data management infrastructure and architecture; application development and transformation; risk management and secure design; incident recovery; threat detection and response; data discovery and assessment; data analytics and business insight; IT automation and orchestration; campus mobility; intelligent workplace; and digital collaboration.

Partners that achieve the competencies will be singled out to work more closely with HPE's direct sales force to drive more business-outcome-based engagements. "We are aligning our program to the way customers are preferring to consume IT and how they are using their IT investments across a blend of Capex and Opex," said HPE Vice President of Worldwide Channel Marketing Chris Ogburn. "This is going to help partners move to how customers are buying not only at the CIO level, but the line-of-business level."

With that in mind, HPE is also for the ­first time ever supporting multiple partner business models, including service providers and software providers, under the Partner Ready Program. The change is aimed at helping partners make the transition to the cloud era with more support for cloud consumption models and line-of-business selling.

Finally, HPE is doubling down on new social media marketing tools and resources for partners—another sign of the all-consuming focus on helping partners win new business. "With the divestiture of [Enterprise Services] we are a 100 percent partner-focused company," said Whitman. "We have no businesses where the partners are not deeply involved, even HPE Financial Services. There is more and more work we are doing with partners to help them provide their customers with a consumption-based pricing model."

The Five-Year Plan: Creating A New Hype

HPE's channel-strong approach to the business began in earnest at Whitman's ­ first Global Partner Conference as CEO five years ago. In fact, Whitman recalls reading the "riot act" to sales reps and partner business managers in an all-hands meeting at the show after seeing a survey that put the company at the bottom of the list in partnering scores. "We are just not going to run the ship this way," Whitman told employees.

That "pivot hard back to the channel" in those early days has provided the foundation for the HPE turnaround, said Whitman. "Five years later we are at the top of the partner surveys," she said.

In fact, one of the pillars of a detailed ­ five-year plan that Whitman delivered shortly after taking the CEO job was a no-holds-barred commitment to selling through partners. "We had sent more than mixed signals to the partners," Whitman recalled. "I think we kind of told the partners, ’You are actually not that important and we are more of a direct company.'"

At her first partner conference address, Whitman made sure it was clear to both partners and HP sales and partner reps there would be no more wavering with regard to channel commitment. Then she laid out the plan to remake the company with a turnaround plan that she architected, communicated and delivered upon every step along the way, hand-in-hand with partners.

Among the mainstays of that five-year plan: a hefty investment in both new research and development to drive innovation—the lifeblood of the company—and new sales tools for partners.

Rick Chernick, CEO of Camera Corner Connecting Point of Green Bay, Wis., No. 333 on the 2016 CRN Solution Provider 500, said Whitman has delivered a turnaround for the ages. "She promised a five-year turnaround plan, and she delivered. She did exactly what she said she was going to do," he said.

"Remember, when she started off the company was under water; the ship was sinking. Resellers were scared. The employees were scared. She gave everybody the confidence to right the ship and no hands jumped off the deck. Everybody trusted her, and she delivered."

Chernick credits Whitman with having the courage to reinvent HPE as a smaller, sharply focused next-generation infrastructure market leader with innovative products like 3Par and Aruba. "HPE is now a smaller company that can run faster and do more," he said. "You need to keep reinventing yourself so you can continue to be here for your customers. I have seen humongous companies go away because they didn't change."

Chernick, who saw firsthand the weight of the $12.5 billion in debt on HPE, expects Dell to be under enormous pressure with its debt load. "It took HP five years of focus and innovation to get out of debt," he said. "How long is it going to take Dell to dig out of $70 billion in debt? I can tell you this: I wouldn't want to have that debt."

The Coming Battle With Dell-EMC

The HPE strategy to get smaller and move faster in the enterprise market sets up an epic battle with Dell, which as of press time is finalizing the largest acquisition in IT history—the $67 billion acquisition of storage market leader EMC and its virtualization subsidiary VMware. The blockbuster deal creates a $75 billion behemoth with 200,000 employees.

Whitman sees the Dell-EMC integration giving HPE a competitive advantage as it moves faster to deliver more technology breakthroughs, like the Synergy Composable Infrastructure, hyper-converged infrastructure and next-generation technology services.

"I'm certain they'll bring some new technology to the fore, but their major play is a cost takeout play because they are running a private equity play," said Whitman of the Dell model going forward. "[Private equity firm] Silver Lake owns 25 percent of that company. Silver Lake is going to get their money out of this thing. The way you justify a deal of this magnitude is you have to sell off assets to pay down the debt, and you've got to rip costs out." Whitman said Dell making the strategic decision to go bigger is a risky strategy given the ever-increasing pace of change. "The market is moving at lightning speed. Agility—the ability to develop new products in five months—is, I think, going to be a really important factor in degree of success," she said. "And we are not distracted by all the integration of a big company."

A Partner Renaissance

Mark Kelly, president of the U.S. division of OnX Enterprise Solutions, one of the top enterprise companies in the world, said Whitman's shift to a "channel-first" model backed up with hefty innovation investments is paying big dividends for partners. He expects to see 15 percent to 20 percent sales growth in New York-based OnX's $100 million-plus HPE U.S. business with robust 3Par and HC 380 sales and a growing Aruba business. OnX's U.S. business has more solution architects and sales reps focused on HPE than any other vendor.

"The partner-first attitude from [Whitman] and the team has been a breath of fresh air," he said. "It is exciting to see how much our business has grown with HPE and how much we are doubling down on the future with HPE."

Kelly said Whitman's focus on investing for the future has made all the difference for partners. "In the marketplace we are in today, innovation is key," he said. "What HPE has done over the last few years building out the portfolio has been pivotal to our relationship and the value we bring to our customers. You look at HPE a lot differently now. It's not just a compute and server company. It's a great storage story, a great network story, along with a very robust software portfolio."

Kelly also credits HPE Vice President and General Manager Americas Sales Scott Dunsire for driving improved field sales engagement with the HPE sales force for partners like OnX. "It all starts with Dunsire," Kelly said. "He has been a game-changer for us. His leadership has really brought the relationship to where it is today. That help in driving engagement in the field and connecting the dots with us has caused us to double down on what was already a successful relationship."

Kelly, who two years ago visited the garage where Hewlett-Packard was founded as part of a briefing with Whitman, said her passion about the importance of the company as one of the founders of Silicon Valley is palpable. "She is very passionate about how the company was started, what it meant early on to the industry and what it could mean to the industry," he said. "That type of passion and investment in innovation and building out the portfolio today is what has made HPE so successful and positioned it well for the future."

Anexinet, an HPE Platinum partner based in Blue Bell, Pa., is also benefiting from HPE's innovation acceleration—bolstered by its own sharp focus on driving faster business outcomes for customers. Anexinet's HPE sales are up 20 percent over the past year, powered by products like the new HC 380, said Anexinet Chief Sales Of­ficer John Kolimago.

"We have lots of choices in the hyper-converged market," he said. "We can sell Cisco's HyperFlex technology, Nutanix, EMC's VxRail, but none of those hit the sweet spot like the HC 380. Its underpinnings are the DL380, the most prolific and No. 1-sold server platform in the world. There are literally millions of them that have been sold globally. There is no comparison."

HPE competitors that are attempting to build hyper-converged offerings without their own storage offerings simply do not have as compelling a solution for customers, said Kolimago. "HPE has the DNA in compute, storage and fabric. We see that as a real big advantage in the hyper-converged marketplace."

Anexinet is also having great success with HPE's FlexCapacity channel offering, which is aimed at providing cloud-based economics for on-premise solutions. "It's really cool," said Kolimago. "HPE is putting their money where their mouth is putting assets on the floor for the customers, and as the customers' needs and usage grows, the solution grows with them and they are only paying for what they are using."

HPE is also working closely to drive sales hand-in-hand with HPE's Plano, Texas, inside sales team, said Kolimago. "We see HPE leading the pack of all of our vendors in helping us create new opportunities," he said.

That ability to create new opportunities is also paying off for Open Systems Technologies, Grand Rapids, Mich., No. 150 on the 2016 CRN SP 500. Michael Lomonaco, director of marketing for OST, expects the solution provider's HPE business to grow as much as 30 percent this year, in large part as a result of that channel commitment, combined with HPE's sharp focus on next-generation data center. "You have got to know your space and create value," he said. "That is what [Whitman] has brought to HPE. We love the data center. There is still a lot of business there."

Whitman's decision to get smaller and sharply focus HPE has put the company ahead of competitors who are scrambling to make major business model changes that HPE has already completed, said Lomonaco. "What [Whitman] and the team did to restructure the company three years ago was brilliant," he said.

"You are seeing HPE competitors now reorganizing, shedding workers and others making major acquisitions almost daily. HPE already knows who they want to be when they grow up."

Tempe, Ariz.-based IT Partners, one of HPE's top enterprise partners, for its part, expects to grow its HPE business at an 18 percent rate, driven by the hybrid computing product portfolio, said IT Partners President and CEO Steve Tepedino.

Tepedino sees HPE charging ahead even faster in the future to dominate the hybrid computing infrastructure market with aggressive moves like the Enterprise Services spin-off merger, the recent $275 million acquisition of SGI and the restructuring of the HPE sales and marketing organization. "How fast HPE is going to move in the future is still in front of us," he said. "I think we are going to see HPE move quickly to respond to opportunities in the market."

Whitman restored the soul of HPE, Tepedino said. "Before Meg, the company was looking for leadership, trying to decide where it was going and what it was going to do," he said. "Meg has brought that all together. She has been a very entrepreneurial, steady hand. It's been a great run. The big question on everyone's mind now is: How much more Meg are we going to get?"

Tepedino said it is natural for partners to be a little uneasy that the end of the Whitman era could be in sight. "Her job was to restore the iconic brand, and she has done that," he said. "That is why everyone is worried. She did what she said she was going to do—the balance sheet has been repaired. The company is healthy, stable and has cash to do things. We know nothing is forever."

When asked directly about her plans for the future and whether she is committed to continuing to lead HPE, Whitman said she is having fun running the smaller, more agile and innovative company. "I feel like we are making real progress," she said. "So I don't have any near-term plans. We'll see what happens over the next couple of years. I originally told the board I would stay ­five years. Obviously, I will stay longer than that."