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January 18, 2017updated 25 Jan 2017 3:20pm

HPE finally stops selling to buy SimpliVity – but what does the hyperconverged acquisition mean?

Is this a sign that HPE has stopped with its strategy of getting smaller to be more agile?

By James Nunns

After selling off large chunks of its business Hewlett Packard Enterprise has finally decided to spend some money in order to build it back up.

Going out of the company door has been software and OpenStack cloud units as the company re-focuses its business on the server and storage side.

Now, in a move that clearly signals its intention to be the server and storage to go to, HPE is acquiring the hyperconverged ‘unicorn’ SimpliVity for $650 million.

SimpliVity, which had previously been valued at over $1bn, is basically a maker of hardware that combines a computer server and storage with networking, typically known as hyperconverged.

In addition to HPE cementing its focus on the server and storage market, this acquisition advances the company’s strategy to boost its position in the hyperconverged market.

That market was expected to be worth around $2.4bn last year and is predicted to grow at a compound annual growth rate of 25%, making it a nearly $6bn market by 2020.

HPE is saying that the combination of SimpliVity and its own technology will help to deliver, “the industry’s only “built-for-enterprise” hyperconverged offering.”

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Meg Whitman, President and CEO, Hewlett Packard Enterprise, said: “This transaction expands HPE’s software-defined capability and fits squarely within our strategy to make Hybrid IT simple for customers.

“More and more customers are looking for solutions that bring them secure, highly resilient, on-premises infrastructure at cloud economics.  That’s exactly where we’re focused.”

HPE’s seemingly never ending transformation appears to be taking shape. In September last year it sold its software business for $8.8bn to Micro Focus, while in May it spun-off its services business to CSC.

It should be noted that the hyperconverged market that HPE is now betting on is a lot smaller than the software business that it just sold and that market as a whole.

Meg Whitman has dubbed the moves at making the company smaller important, “because I believe speed and agility is important in innovation and go-to-market,” the CEO told Wall Street analysts in September.

The point may be a fair one, goliath tech giants are often criticised for their inability to innovate as quickly as they once did. The strategy of buying smaller and more innovative companies that are helping to forge a path in new and emerging markets has been one that has kept the likes of HPE, Oracle, Dell and many others, ticking along in the past.

The $650 million all cash deal for SimpliVity could be a good one for HPE, the hyperconverged market is receiving a lot of hype, but it isn’t a market that it can stroll to the top of and dominate.

The majority of tech vendors in the server and storage market are to some degree talking about and doing hyperconverged systems. Nutanix for example posted the largest IPO of 2016, which valued the company at over $5bn.

The Simplivity acquisition won’t be a quick and easy win for HPE. The market is growing but a lot of money is going on R&D and building that market. It’s a disruptive industry, not an established one.

However, to buy the unicorn for $650m is something of a coup, especially when you consider the wide ranging reports in November last year that suggested HPE would pay $3.9bn for it.

Within 60 days of the transaction closing HPE said that customers should expect to see the SimpliVity Omni Stack software qualified for its ProLiant DL380 servers,. In the second half of 2017, the company will also offer a range of integrated HPE SimpliVity hyperconverged systems base on the HPE ProLiant Servers.

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