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Why HP’s Enterprise services offer little hope in its turnaround

Anupama Shukla

Overview: Hewlett-Packard's 3Q14 earnings and strategies (Part 4 of 14)

(Continued from Part 3)

HP’s Enterprise Service segment

Hewlett-Packard’s (or HP) (HPQ) Enterprise Service segment includes data center management, IT security, cloud computing, workplace technology, networks, unified communications, and enterprise service management. The technology services division focuses on helping organizations improve their IT operations and transition to new technologies like virtualization, cloud computing, and converged Infrastructure.

Enterprise service’s decrease revenues

HP’s enterprise services division’s revenues reported 6% year-over-year (or YoY) decline to $5.59 billion. The key account’s revenue softness in the new signings caused the fall.

The previous chart shows the Infrastructure technology solutions and application business services’ contributions toward the consolidated HP enterprise services revenues.

Increased adoption of cloud

Enterprises are adopting “cloud” at a rapid pace. Cloud-based systems are expected to be more agile and responsive to the changing business environment. Cloud and hybrid integration solutions are gaining momentum. Businesses are choosing to shift from on-premise software to the cloud.

HP’s customized offerings in cloud space

HP has a dominant presence in the hardware industry. It’s comprised of the servers, storage, and printing industries. To benefit from the cloud’s rapid penetration and adoption, HP plans to invest $1 billion in the next two years. It has introduced:

• “HP converged solutions” or “sharks,” an infrastructure management platform
• “HP Helion,” an OpenStack-based cloud system. Through HP Helion, it plans to provide value-added services in the software and services segment. OpenStack is an open source project that unites data center automation efforts to control and provision networking/storage/computing—means servers—under one graphical users interface (or GUI) covered logic
• “HP 3Par storage,” server is designed to meet the challenges posed by social, mobile, analytics, and cloud (or SMAC)

Managed private cloud offering for federal agencies

HP’s Enterprise Services launched Managed Private Cloud for Public Sector. It’s part of the Helion cloud infrastructure portfolio. It operates across private, managed, and public cloud networks as well as traditional IT. It complies with several federal certification programs, including the Federal Risk and Authorization Management Program (or FedRAMP) and the Defense Department’s Enterprise Cloud Service Broker certification.

Market Research Media expects the federal cloud computing market to be worth more than $10 billion by 2020. It’s expected to grow at a compound annual growth rate (or CAGR) of 5% during 2015–2020. It will be driven by the federal agencies’ transition to mobile and other cloud services. In April 2014, Amazon Web Services (AMZN) gained FedRAMP approval to provide cloud services to the Army and Navy. Oracle (ORCL) gained FedRAMP certification in May 2014. Microsoft (MSFT) and AT&T (T) are other cloud providers under the FedRAMP program.

Continue to Part 5

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