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September 12, 2014

Lenovo and Huawei servers could outperform HP’s in the West

Hyperscale customers are considering lower-cost models.

By Amy-Jo Crowley

HP server systems are set to struggle to compete against lower-cost models from emerging vendors like Huawei, Lenovo and Tawain’s Quanta, an analyst firm has suggested.

According to Gartner, the hardware giant currently holds 25.1% of the worldwide server market in revenues, up 3.2% from the same period last year.

However, Errol Rasit, Gartner’s research director for Data Center Dynamics, told CBR this could change as leading Chinese players target "hyperscale customers" in mature markets with servers that have similar features as more expensive ones from HP.

"Probably HP’s biggest challenge is to look at how to compete with the emerging vendors from the far east, typically Chinese organisations like Huawei and Lenovo, but also manufacturers headquartered in Tawain like Quanta, who have hit the headlines recently because they are selling custom system designs to companies like Facebook for example," he told CBR in a briefing.

"The reason why a Facebook or a Twitter has chosen what we class as ‘self-build’ servers is that they want to reduce the cost of delivering the service to their customer.

"So if HP is to grow in this marketplace, it’s going to affect their profitability because it’s an absolute margin opportunity. It is basically transitioning to a lower cost model. Therefore HP has to keep its investors happy that it can transition to those sort of markets and be successful in enough volume in order to maintain profitability."

He added: "But the bigger challenge for HP is that as the larger more traditional customers, like the banks, finance industry and government start to consider purchasing systems at lower cost points and perhaps consider alternative suppliers, than that will threaten obviously their mainstream server business and profitability."

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HP this week released its ProLiant Gen 9 series, an upgrade from its current Gen8 stock, which it claims assures faster deployment, lower operational costs, increased storage space and ease-of-use.

Other Gen9 servers will be released over the next 18 months, with the current DL360e and 380e rebranded as the 160 and 180.

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