Hewlett Packard’s Bet On A Flash Future

Hewlett Packard Enterprise (HPE) announced a new SimpliVity appliance. With the recent acquisition of Nimble Storage Inc. for $1.2 billion, I’m curious to see how Hewlett Packard Enterprise (HPE) will utilize the data storage provider. Nimble had a value of $750 million. So even if HPE wants to expand its presence in the fast-growing flash storage business, why would HPE spend a $450 million premium on a company that loses $.30 on every dollar?

Antonio Neri discussed in a blog post how Nimble fits in well with HPE’s overall goal of making “hybrid IT” easier. With many companies moving to a hybrid environment of cloud and on-premises, flash storage is becoming more important because they are better than disk-based drives due to higher performance and lower latency. However, this comes with an expensive price tag.

The overall flash market was estimated at $15 billion in 2016 and is expected to reach nearly $20 billion by 2020, with the all-flash segment growing at a nearly 17 percent CAGR. From a market perspective, HPE gets a great product in InfoSight analytics and a route into public cloud storage for hybrid IT, along with 3Par. However, Nimble seems to be a small business solution and the way storage fundamentally exists is changing, as there are numerous technological transformations in the field. The migration from disk-based to flash storage systems is what’s fueling growth in the industry, but storage seems like it’s a commoditized product.

Companies don’t seem to want to switch to an all-flash array, which is what results in the highest CAGR. The reason is that not all of customers’ data is valuable enough to them at any given point in time to be held on flash, a form of very expensive storage. Flash storage will definitely be there, but the other half of enterprise data may be some homegrown combination. Tiered solutions with a sprinkling of open sourced projects rule so Nimble may just be a play in the HPE is betting that the combination of flash and disk is the future of enterprise storage.

An interesting storyline is what HPE will do with InfoSight, which by many accounts (including, Dimitris Krekoukias) seems to be years ahead of the competition when it comes to predictive analytics. InfoSight automatically detects 90% of all issues within a customer’s infrastructure, and resolves over 85% of them. Every company would want better technical support with fewer man hours. Also, the platform has years of data on Nimble’s 10,000 customers which is just gravy for HPE.

The possibility of Simplivity selling a data center appliance that combines storage, computing, and networking in one box could be interesting. There are a bunch questions to be answered but if Meg Whitman President and CEO, HPE can deliver on her statement, “Nimble Storage’s portfolio complements and strengthens our current 3PAR products in the high-growth flash storage market and will help us deliver on our vision of making Hybrid IT simple for our customers”, HPE may ride the trend towards converged storage and computing.

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