HPE bets $650m on hyperconvergence with SimpliVity acquisition

HPE has acquired software-defined, hyperconverged infrastructure vendor SimpliVity in a $650 million all-cash deal as the tech giant lumbers towards the growing hyperconverged segment.

While still in the early days, the hyperconverged segment is slowly beginning to make its way towards mass market penetration, as the prospect of a hybrid cloud environment becomes a more realistic objective to many decision makers. HPE has estimated the value of this market to be currently in the region of $2.4 billion, though growing at a rate of 25% CAGR to reach $6 billion by 2020.

“This transaction expands HPE’s software-defined capability and fits squarely within our strategy to make hybrid cloud simple for customers,” said HPE CEO Meg Whitman. “More and more customers are looking for solutions that bring them security, highly resilient, on premise infrastructure at cloud economics. That’s exactly where we’re focused.”

Since the acceptance of cloud computing in the mass market, there has been a shift in mentality. Early adopters and over-enthusiastic CIOs were initially pitching a total-cloud proposition within their organizations, and while this may be achievable for some, for the majority it is simply a buzzword. A hybrid environment is more realistic, both from a financial and practical implementation perspective, giving rise to hyperconverged IT systems.

While the term hyperconverged does sounds fantastically buzzy, it does answer the needs of numerous companies around the world who are struggling with legacy IT systems. Hyperconverged systems combine compute, storage and networking into a single system, providing one point of support, while reducing the need to expand in-house capabilities. There aren’t many savings from a CAPEX perspective, but it does reduce support cost for OPEX. Individual components of the system can be scaled to requirements without having to rip and replace infrastructure components, making it a useful transition through to the world of software and cloud computing.

Although it may not be considered the ‘sexiest’ area of the IT industry, it is certainly one with potential; HPE has been chasing the hyperconverged dragon for some time, but it’s not alone. EMC has its VxRail and VxRack offerings, VMware has VSAN, Huawei has FusionCube and Cisco has HyperFlex.

Despite the competition in what is a relatively finite market for the moment, this move from HPE has been on the cards for the last couple of months. Non-core software assets were spun off in an $8.8 billion deal last year, with the intention of merging the units with Micro Focus to create a new corporation, as well as SUSE acquiring its OpenStack and Cloud Foundry assets.

It would appear Whitman has had the HPE team on a strict diet to slim down and refocus wholly on the hyperconverged segment, and while she may have attracted some scepticism in the past (see HPE execs manage to keep straight face during expert spin class) this looks to be some pretty savvy business.

Last year, it was reported HPE was considered the acquisition for between $3.8-3.9 billion, and its last round of funding saw the business valued in the region of $1 billion. Considering HPE has had a chequered past when it comes to paying the right amount for a company, this does seem to be a pretty good deal for Whitman. Light Reading has more analysis on the deal here.

The split from HP Inc. last year was supposed to give HPE a new lease of life, though the business has struggled to find itself in the cloud world since. The growing hyperconverged market could be a route back to former fortunes, though with Cisco, Huawei, EMC and co. circling as well, it won’t be an easy ride.