Hewlett Packard Enterprise Company (HPE) Earnings Call Transcript & Summary

This is Marcus Kupferschmidt, Director of Investor Relations and Business Intelligence. On behalf of HPE Investor Relations, we are pleased you have chosen to join us to learn more about the HPE GreenLake Central experience and as a service business. Today is the first of a series of updates where we will outline our product capabilities, customer feedback and over time, highlight product road map and development milestones. Joining us today are 2 leaders of GreenLake, Scott Yow, Vice President and GM, Hybrid Cloud Services and Software; and Erik Vogel, Global Vice President of Customer Experience, HPE GreenLake. Before Scott starts, I will review the forward-looking statements. You'll hear some forward-looking statements in today's discussion. These are based on risks and assumptions that are described in our annual report on Form 10-K and Form 10-Q. Our actual results could differ materially, and we assume no obligation to update. More details can be found on our website, investors.hpe.com and our recent 2Q earnings press announcement dated May 21. And with that, let me turn it over to Scott.

Marcus, thank you so much. And as Marcus mentioned, I joined here today with Erik Vogel. So wherever you are around the world, good morning, good afternoon, and good evening. And as Marcus had mentioned, I lead the technology and development teams for GreenLake. And for the next 30 minutes or so, we'd like to talk to you about a lot of the exciting capabilities that we're bringing to the table from a GreenLake perspective. GreenLake, we've been working on this for a couple of years now and it really delivers that cloud experience to all of your apps and data. From a customer perspective, we now have over 1,000 customers with GreenLake and we continue to see incredibly strong growth for the service. Bringing a fully automated point-and-click experience to GreenLake has been part of our strategy for quite some time. And today, I'm actually pleased to let all of you know that GreenLake Central is now generally available to all of our existing customers as well as newly made customers, bringing that cloud experience to the enterprise data center be it at corporate headquarters or the branch office or a colo facility and increasingly even at the edge. So over the last 2.5 years, we've been really quite busy building our portfolio on hybrid cloud IP. We have done a number of acquisitions, some of them like Cloud Cruiser and CTP. More recently, MapR and BlueData. But we've also been organically pulling together experts from across the company into a unified development team. Hybrid environments are complex and GreenLake Central's goal is to bring a level of simplicity and transparency to managing these estates. We have specific modules within GreenLake Central that provide insights into cost, and you're going to see a lot of this in the demo. What's being spent where? How much am I spending on my workloads in public cloud and private cloud, being able to provide guardrails and controls around departments to be able to set budget. We have modules for compliance to understand what data is being accessed by whom, right? And is that data being monitored and managed in a way that's compliant with frameworks like HIPAA or GDPR, ISO and so on and so forth. And we bring a level of automation, we've spent a lot of investment over the years in being able to build out automated infrastructures, particularly in public cloud. And with GreenLake Central, we allow our customers to use and leverage all of that existing automation and dropping in sort of right into their GreenLake environment, I'm going to show you a lot about how that works. But having said all of that, I'm going to go ahead and perhaps pass this to Erik for a little -- for a couple of minutes to talk about the overall experience. And then we're going to go ahead and jump into a demo. So Erik, do you want to take it from there for a couple of minutes?

Absolutely. Thanks, Scott. So back in October at our Security Analyst meeting, we presented some data showing the growth potential of the on-prem as a service, the market opportunity. And really, this is about cloud and SaaS really moving our customers to accept and now start to demand as a service models for everything on-prem. Our customers wanting that same cloud experience for the workloads that cannot move to cloud. So these are workloads with significant data gravity, significant complexity or would require significant re-architecture, where it's difficult to build an ROI model or a TCO model for moving those off prem. So there's still a vast majority of workloads that will need to reside on-prem. And like I said, our clients are really demanding and driving us to provide that as a service cloud-like experience for those applications that need to reside. And really, that's the crux of our everything-as-a-service pivot that we talk about is how do we start moving into that space, into that large, high-growth market segment and meet the needs of our customers. And what you're seeing on this slide is that move if you think about where we started with GreenLake early on around flexible capacity, very much product-led within the customer environment or on-prem. With what we're launching and what we have now to offer around HPE GreenLake Central, we are really moving now into a true as a service led model for our customers that sits in the customer environment, but also in a colo facility or at their edge location. As you can imagine, with the edge locations needing significantly reduced latency, local processing capability, local storage capability these are things that customers are not able to get from cloud today, and this is something we are addressing directly with HPE GreenLake and GreenLake Central. So as I mentioned earlier, we are moving up the vertical access to an as-a-service solution. This brings significantly more capability and a drastically different experience than a traditional hardware model. For instance, GreenLake Central provides a unified experience between on-prem and public cloud, allowing GreenLake to offer consistent governance and process controls regardless of where the applications and data reside. This experience extends to provisioning and management of on-prem assets that is consistent to what our customers are already doing in the public cloud. And the metering of usage on-prem and pay-per-use billing allows our customers to get true OpEx cloud pricing based on the actual usage. And this is different than charging on other metrics such as energy consumption or even just using flat fees. Additionally, HPE Container Platform, part of the Ezmeral-branded software platform will support non cloud-native apps so customers could enjoy dynamic cloud experience on-prem. And we're giving them persistent storage, which, up until this point, has not been native to containers. And this really reflects our innovation in this space. Another element is ML Ops, where we are providing a complete solution that includes hardware, software stacks, training and the services necessary to really allow our customers to quickly access key machine learning capabilities that they are demanding, all with that same cloud-like experience in same cloud cost model. So as we take a look at the market and where it sits today, as we move to that, everything-as-a-service model, we are giving the customers that as a service experience that they have demanded, we did a survey of over 1,000 of our customers. And what we found was when they talked about their cloud experience, most of them, 97% said it met exceeded or greatly exceeded their expectations. And 80% of them had high expectations going in. So what we've been able to do is kind of replicate that as a service experience for our clients that they love and give them that true as a service experience with GreenLake and GreenLake Central. And we're moving there from our position of strength, from our knowledge of the customer environment of the traditional and legacy workloads and really being able to take that to our clients with this experience. And understanding those legacy and traditional workloads are very, very important since the bulk and the majority of workloads still reside on-prem. So if we look at the advantages of GreenLake and what our customers are getting and the value that they are getting, we are seeing these benefits driven very, very quickly. Because of the rate we can deploy this and the rate at which our customers can achieve these business benefits. We had a study commissioned, and we have some really interesting data points that we found one of the big ones is the 30% to 40% CapEx savings because we eliminate the need for overprovisioning. Typically what our customers would have done in the past is provision for a 3-year peak. This is especially important for us in the COVID era we are in now as a lot of our customers are looking to preserve liquidity. Also because the capacity is directly available to them, they can turn it on when it is needed. We are increasing and speeding the time to market. Right now, we're seeing customers being able to accelerate that by 75%. So increasing the speed and time to market because the capacity is available, and it can be turned on immediately. That buffer capacity is sitting there for them ready to use. And of course, once they start using it, then it adds to their bill and they begin to pay for it. But again, reducing significantly time to market and time to provision. Because of the fully managed service, we're reducing the unplanned downtime by 85%, a significant reduction for our customers and something that we're looking at very closely. And again, because it's standardized and managed for us. And resource savings of 40% because we're taking on that burden of managing and monitoring the environment. We can really help reduce the IT resource spending. And again, our typical clients are saving at least 40% with resource costs. So I'll cover the first customer example here, and then I'll turn it back to Scott to talk about the second one. The first one, and this is fairly typical of what we're seeing. We have a large EMEA-based global industrial company that was really looking at consolidating a set of regional data centers into a fewer number of global data centers. And really, what they wanted to do is standardize on a select set of platforms with flexible consumption across those data centers. And they chose HPE GreenLake because of the consumption model, but more importantly, because of the cloud experience that's delivered on-prem. So now across those global data centers, it's a consistent experience. It's a highly automated experience. They don't have to worry about all the infrastructure and all the bits and pieces underneath, but rather, they just get what they need, which are the virtual machines and the instances in a consistent fashion globally with a consistent interface and a consistent experience. And we're not only doing it in their data center, but also in their colo facilities. So it's consistent across data centers, colos and in the near future, we'll be expanding that to their edge locations and manufacturing locations. Also, the other important consideration was they wanted an integration with their public cloud environment. So just like every one of our enterprise customers, they are also using public cloud. This gives them a single access point that unifies everything they're doing on-prem with their public cloud environments. So I'll turn it over to Scott to talk about the second example, which is a financial services company.

Yes, absolutely. So if we think about some of the expertise that we have here at HPE, one of the services that they offer to clients was to be able to perform audits into their hybrid environment. And we essentially have very highly trained and specialized engineers go into a customer environment, look at where all of their workloads and data are placed, monitor usage and access and essentially provide a report, right, on whether or not these environments were compliant with various different frameworks. And what we've done over the last couple of years is take that knowledge and experience and codify that into a set of tools for GreenLake Central that constantly monitors thousands of individual data flows, comparing that to various different public compliance frameworks to be able to give an at-a-glance view on whether or not the hybrid environment is in compliance or not. So this particular large financial services company is using GreenLake Central to monitor data access, storage and usage of their platforms across a global environment, where they have data spread across multiple different data centers being accessed around the globe, they now have an automated way to be able to verify that their operations are in compliant with frameworks like GDPR, right? And ISO and NIST and so on and so forth. So this has been a tremendous value because this tooling can run across the entire hybrid environment. They don't have to look at it with a lens of just what's happening in public cloud versus what's happening in their data centers. They have one place to look at and understand what's going on in their environment? Are they in compliance or not? And as you'll see in the demo that I go through a little bit later today, it's all done in plain English. So it's very easy to understand. You don't have to be a software developer or a technical auditor to be able to look at and understand how to remediate and how to understand whether your environment is from a compliance perspective. So go ahead, back to you, Erik.

Great. Thanks, Scott. So let me start walking through the digital experience. So one of the key learnings we had, when we talked to those 1,000 customers that I mentioned earlier, when we asked them what they loved about the experience, words came back such as it's easy. It's fast. It's intuitive. It's consistent, it's complete. So we have recognized that we need to provide that type of end-to-end digital experience for our customers. So we have built what we're calling the GreenLake experience, the digital experience to really augment our sales teams. And this is becoming a digital go-to-market platform that we can directly position to customers as well as leverage for our sellers in a traditional selling motion. So if you look at what you're seeing here, this is essentially our front door for GreenLake. And this will be available at hpe.com/greenlake. This is where customers can come in and really begin to understand the GreenLake solution, what GreenLake is, how it works, and what offerings are available to them. And there's a lot more to it, I'll cover in just a minute. But this really represents sort of that new digital go-to-market motion. And the experience is really based on what our customers have become familiar with from the other cloud providers and leading SaaS providers. So we've studied very carefully what they're doing. We work with our customers to understand what they're looking for, and this really lines up to exactly what they expect. We don't have to spend time teaching our customers how to navigate or find what they're looking for. We are making it very easy for them and very intuitive. So after the customer moves from the front door, they're able to get to essentially the list of services, and this represents our HPE GreenLake portfolio. We bring a set of offerings together under each one of these service options. You'll notice how we have this categorized. And again, what we're trying to do is make it very quick and easy for our customers to come in, learn about the service options, learn about the workloads that are available to them, see -- get the information they need to understand the business value that this can create for them, all within a single, centralized digital experience. And again, very familiar to what our customers are used to as we talk about that as a service experience. This is part of it, the whole self-service motion, which is critical to as a service, we are now enabling as part of this GreenLake experience. So if we were to click on one of these service options. So if I were to click on this, customers can then get into what we call our conversion page. And this is where we're giving the clients everything they need to make that buying decision in one place. Again, easy to see, easy consume, easy to understand. And we're providing this, again, as a way to move away from a more traditional sales motion where we rely on a seller to go out face-to-face with a customer. But as we're learning with as a service and our customers have expressed this, they want it themselves. They want to do it themselves. They want to learn about it themselves. They want to understand it themselves. And then they will engage with a seller or an account team member, when they have additional questions or when they need follow-up or something that's not clear to them here as part of this as a service experience. And what we've been able to do with the GreenLake experience is not only augment our traditional direct sellers but also extend this to our channel and to our partners. So our partners will be able to leverage the GreenLake experience as well as they go and sell this into their customer base. So this is not simply something for direct customers but also for our indirect and channel led customers as well. I will also note that we have really put a big focus on the go-to-market for the as a service experience. We recently hired Keith White, who was instrumental in building the Azure go-to-market solution to help drive the new GreenLake business unit we've created. So what you will see is a lot of that as a service motion, a lot of that as a service go-to-market, really embedded not -- again, not just from a direct standpoint but also a channel perspective. So it's all going to be coming together for direct and channel partners. So customers can then get into technical documentation, ROI, TCO calculators. These are very important for different personas. And one of the things we'll be able to do with this experience is really personalize it for the persona. One thing you will notice that you probably have not seen in the past from us is the pricing capability right from this page. So we are providing transparent pricing estimates to our customers via GreenLake experience. And again, it's a price not for infrastructure. This is a price for the service itself, which is a bundled price that includes the infrastructure, the services, the management, everything together. We are just offering it to them then as a service. Our customers can also request a trial environment, the try-and-buy concept, the free trial also critical to as a service. So the last thing that you'll notice on that slide is the ability to log into GreenLake Central. So once a customer has purchased GreenLake, they've purchased a trial, they can then access GreenLake Central. I'm going to turn it back to Scott to do a quick recap on what we have covered so far and summarize what you have seen so far, and then we'll move on to the demo of GreenLake Central.

Yes, absolutely. Yes, thank you, Erik. So just to recap. So when we think about GreenLake Central and what we're achieving here, it's about bringing that cloud experience to the entire hybrid estate, not just public cloud, but within the data center within the colo and increasingly moving more into the edge. And that experience really is about being able to leverage automation tools, to have a modern DevOps environment and embed a lot of the open source capability as well, that's available in the market today. As I had mentioned earlier, there's a lot of technology that we've been both building internally and acquiring through a number of acquisitions over the last couple of years. And we've embedded all of that as well has been partnering with a number of leading firms to be able to bring that GreenLake Central experience to our customer environments. Increasingly, moving forward, we see containers as being a very disruptive technology, being able to both provide better efficiency and a way to manage workloads that's consistent across various different cloud environments. So you're going to be seeing a lot more coming to GreenLake from a container perspective. We're going to be partnering with a number of very large Tier 1 software providers to provide workload-optimized experiences within GreenLake. And we're going to see some of those for what you would expect things like SAP, right? We're going to be doing a lot of work with machine learning and AI and having an end-to-end ML Ops solution within GreenLake Central, that again, brings a lot of open source technologies, along with IP that we have, technologies like MapR and BlueData and making that all available as part of the as a service experience. But rather than talk about it for too much longer, why don't I go ahead and switch over to my browser here, and we'll show you a little bit of GreenLake Central. And the first thing I would point out is we talk a lot about personas. And the big one piece of feedback we have when we were talking to our customers is that there's just tons of data out there and a lot of existing environments are very rich in terms of what they can provide in terms of data. But it becomes, sometimes, very difficult to curate and navigate these environments. So we spend a lot of time within GreenLake Central to create this concept of personas. And depending on who you are, when you log into the system, you will have access to different modules within GreenLake Central. So what you wind up seeing here is that more or less a superset of a number of the different tools we have in GreenLake Central. But just bear in mind, as I go through this, that if you're working in finance, you'll see components of this around charges, cost. If you're an IT executive, you can look at your KPIs, it seems like uptime and so forth. And if you're dealing with things like a compliance officer, you can at a glance look at the widget and understand where your hybrid environment is at in terms of a public compliance adherence perspective. So GreenLake Central is built in what we call a widget-based view. Each of these widgets represent really a dynamic real-time front end to a set of applications. And again, one of the challenges that has come back to us in terms of feedback from customers is simplicity and transparency even with basic functionality like senior bill. And so with GreenLake Central, we provide a very simple view of what your actual usage is and what your projected charges are going to look like. But as we click on this, we've really put a lot of time into making this as simple and transparent as possible. So you can see in here an accordion-based view and as we go into this, there are opportunities to even dive further. So for example, let's say that you are in finance, you want to understand a bit more about how to set a budget for various different teams, groups or technologies or even just understand where spend is coming from. Within GreenLake Central, we can look at spend as correlated across the entire hybrid environment, might be in AWS, Azure or on-prem. And as we go into the tool, we can correlate that spend by technology type. So you can see here, what am I spending on compute? And if I open this up, what am I spending on AWS compute? What am I spending on my GreenLake ProLiant compute? We can look at this by application type, what am I spending on various different databases, Lambda, ElastiCache, SQL databases and so on and so forth. And then we can also view this by group. And as you can see in here, we can correlate by operations, we can have development test teams and actually be able to run reports. Again, across the entire hybrid environment, understand where that spend is coming from. So of course, having that information allows us to very simply create budgets, and we can create a budget, we can look at what historical performance is and use that as an indicator for what we should set the budget target to be going forward. And then alerts can be set up here so that the individual developer, the development manager or team leader can have SMS alerts, e-mail alerts as various separate workloads are encroaching on those budgets that have been set, providing that level of governance around where spend is coming from and absolutely targeted toward preventing that end of quarter end of year sticker shock that we've all come to here. Now one of the other elements of within GreenLake Central that we talked about is compliance. And within GreenLake Central, we spent a lot of time to really break down what is or can be an incredibly complex set of activities around understanding how the various different compliance frameworks are being adhered to. And just as important, how to remediate failures, right? That may be existing in those audits. If I click at one of these failures, for example, I'm going to click on the cloud trail log file is enabled. You can see on the right, we use plain English. What is the name of the rule? Obviously, it failed. Where is it failing in this particular scenario? It's in AWS. What frameworks does that rule adhere to? And if we scroll down here, we give a very simple sort of plain text English explanation for how to remediate this. And this remediation can happen, either the customer can do it themselves. HPE Pointnext, one of our service representatives can do it for them. And increasingly, as we build out GreenLake Central, we create the ability to automate this remediation, where there'll be a button here that you can click on to actually have GreenLake Central go and implement this change. Now I'm going to go ahead and move into our private cloud module. So in this demo environment that we have, this module is representing a set of GreenLake instances that are stood up in one of our demo data centers. And you can see in this particular cluster that we have running, there's 25 different instances running, it's a really modest implementation of GreenLake 26 CPUs and so on and so forth. If I go ahead and open up this module and look at the instrumentation behind it, what comes up is a provisioning dashboard. And what would you -- what do you sort of see inside of here? Basic things like what is your latency. What is my utilization in the environment, the demo environment. So we're only 2% utilized, we have lots of CPU, lots of storage, lots of memory available. But it also gives us a dashboard for how customers can onboard in a very simplified fashion very simplified workloads into GreenLake. Now capacity declining has always been something that's been challenging for IT environments. And of course, with GreenLake, we take on the role of managing capacity on behalf of the customer. So as part of a -- being a GreenLake customer, we have a Pointnext engineer that's assigned at GreenLake -- to their GreenLake account. And they're sitting down with our customers to understand not just obviously what current usage is, but participating in their discussions to understand what's coming down the pike. And with GreenLake, we always have a base level of capacity that we install in our customer environments and then the ability to burst. It's usually between 20% and 30% additional capacity that we make available to burst. But as we go into that, it's very important to make sure that we are curating an environment that there's always additional capacity available for growth or new workloads that go on to GreenLake. And for that, we have a fairly sophisticated set of tooling that we have available to go in and look at what is my usage in these various different parts of GreenLake that are deployed. Based on this data, we can then work with the client to understand, hey, we see a spike in usage, right? Does this mean that we should be looking at making sure that we have more storage capacity installed in the next couple of weeks in your environment. Or if usage is going down, we can have an understanding of why that's the case. Is that a trend? Is that an anomaly? Are there opportunities to move additional workloads into the GreenLake environment? And in addition to having all of this information available, more or less at fingertips from a usage and capacity perspective, it also allows us to have a level of automated insights that we can bring into their environment. So for example, we've identified over 100 different areas for cost saving. We have underutilized AWS instances. We have recommendations that are made for, hey, maybe you want to shut this down and move that workload and combine it with something else in order to save spend, and so on and so forth. So again, I talked about simplicity and transparency. This is all geared toward achieving that end goal of making that hybrid environment as simple as possible to manage, being able to bring a complex set of information and data back together in a way that's easily consumable and that is curated based on who you are in the organization and what data and information you need to have access to. With that, I'd like to thank all of you for your time. I know everybody is super busy these days. Thank you for your time. I don't know of Marcus, if you have any closing comments or Erik before we end the discussion here.

Thanks again, Scott. On behalf of HPE Investor Relations. I want to thank Scott and Erik for their time today and thank our listeners for spending some of your time with us today. Have a great day.