HP ends Hitachi relationship

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Well, this maybe a bit premature and I don’t have any insights in Leo’ s agenda but when you apply some common sense and logic you cannot draw another conclusion than within the foreseeable future this will happen. “And why would that be?” you say, “They (HP) have a fairly solid XP installed base and they seem to do sell enough to make it profitable and they also have embarked on the P9500 train”.

Yes, indeed, however take a look at it from the other side. HP has currently 4 lines of storage products, the MSA inherited thru the Compaq merger which comes out of Houston and specifically targeted at the SMB market, the EVA, from the Digital/Compaq StorageWorks stable, which has been the only HP owned modular array which has done well in the SME space, the XP/P9500 obviously thru their Hitachi OEM relationship and, since last year, the 3-Par kit. When you compare these products they do have a lot of overlap in many areas especially in the open systems space. It is therefore that the R&D budgets for all the 4 products eat up a fair amount of dollars. Besides that, HP also has to set aside a huge amount of money for Sales, Pre-Sales, Services and Customer support in training, marketing etc to be able to provide a solution of which a customer will only choose the one which fits their needs. So just from a product perspective there is a 1:4 sales ratio. I don’t even mention the choices customers have from the competition. For the lower part of the pie (MSA & small EVA) HP heavily relies on their channel but from a support and marketing perspective this still requires a significant investment to keep those product lines alive. HP just has released their latest generation of the EVA but as far as I know has not commented on future generations. It is to be expected that as long as the EVA sells like it has always done the development of it will continue.

With the acquisition of 3-Par last year HP has dived very deep in their money pit and paid 2.3 billion dollars for them. You don’t make such an investment to just keep a certain product out of the hands of a competitor (Dell in this case). You do want this product to sell like hotcakes to be able to shorten your ROI as much as possible. Leo has quite some shareholders to answer to. It then depends where you get the most margins from and it is very clear that when you combine the ROI needs of 3-Par and the margins they will obviously make on that product HP will most likely prefer to sell 3-Par before XP/P9500 even if the latter would be a better fit for the solution needed by the customer. When you put it all together you’ll notice that even within the storage division of HP there is a fair amount of competition between the product lines and no R&D department for either of those want to loose. So who needs to give??

There are two reasons why HP would not end their relation ship with Hitachi, Mainframe and Customer demand. Neither of the native HP product have Mainframe support so if HP decides to end the Hitachi relationship they will certainly loose that piece as well as obtaining the risk that same customer chooses the competition for the rest of the stack as well. Also if XP/P9500 customers already have made significant investment investment in Hitachi based products, they most certainly will not like a decision like this. HP, however is also not reluctant to make these harsh decisions. History proves they’ve done it before. (Abruptly ending and OEM relationship with EMC as an example.)

So, if you are an HP customer who just invested in Hitachi technology, rest assure you will always have a fallback scenario and that of course is to deal with Hitachi itself. Just broaden your vision and give HDS a call to see what they have to offer. You’ll be very pleasantly surprised.

Regards,
Erwin

(post-note 18-05-2011) Some HP customers have already been told that 3-Par equipment is now indeed HP preferred solution they will offer unless Mainframe is involved.

 (post-note 10-07-2011) Again more and more proof is surfacing. See Chris Mellor’s post on El Reg over here

About Erwin van Londen

Master Technical Analyst at Hitachi Data Systems
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