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Summary:

Hewlett-Packard’s long-promised cloud builds on an OpenStack foundation as well as Akamai, and ActiveState technologies. Should it matter that this IT giant is relying on IT from other companies?

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photo: HP

Much of Hewlett-Packard’s new cloud relies on non-HP technology. The foundation is OpenStack; the content delivery network (CDN) is from Akamai; and the latest piece, unveiled this week, is a Platform as a Service from ActiveState.

That outsourcing of key technologies from a company once known for its “invent” motto, is jarring to some. Others think it’s weird given the tens of billions HP spent on technology acquisitions in the past few years. With all that tech in-house, why send out for more?

But long-time tech industry observer Marty Wolf, president of martinwolf Global M&A Advisors, says times have changed. It would be foolhardy for HP to field its own technologies in all the areas it’s attacking unless it can offer the best-of-breed solutions across the board. “That’s impossible,” he said.

Instead, HP’s “special sauce” lies in its services and consulting capabilities but most of all in its customer relationships. Customers are gold, he said.

“The saving grace for traditional tech companies is if they don’t have IP and recurring revenue, they still have a chance to create value if they aggregate customers and give them more solutions — not products per se,” he said. Those solutions could include home-grown and third-party IP as well as services, aka customer hand holding.

And, as any IT exec will tell you, services are higher margin than hardware.

In theory, HP could do all that — it still has many long-standing customers, many probably weighing cloud options. That’s the good news. The bad news is that those customer relationships have been sorely tested by the management turmoil over the past several years that have seen CEOs come and go, often under a cloud and open speculation that the company should be broken up. It doesn’t help that HP’s $14 billion acquisition of services firm EDS four years ago hasn’t panned out — in August HP took an $8 billion write off related to that purchase.

Critics say that this write off, and the subsequent $8.8 billion write off related to the Autonomy acquisition last quarter leave two key areas — enterprise services and enterprise software — as huge question marks for the company. I mean any business who sees its primary IT provider take nearly $20 million in charges in six months has to be concerned.

Now that HP’s full cloud is available, we’ll start to see if enterprise customers will move to it.

  1. I see no reason for HP to try and create it’s own CDN right now. In the future HP could augment Akamai using HP cloud locations and possibly lower the overall cost that HP pays for the CDN that they sell.

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  2. Vinod Shintre Friday, December 7, 2012

    keeping a watch on you guys

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  3. freddie kruger Monday, December 10, 2012

    HP is done in 5 years. Breakups and spinoffs will rule. $13 stock is expensive for a dog like this. There are much better and nimbler competitors in every field HP is in. The real HP died when Hewlett and Packard retired. They have no Integrity.

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