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Telefónica Ditches HPE as Virtualization Lead

Mitch Wagner
12/24/2015
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Telefónica is having buyer's remorse about Hewlett Packard Enterprise as the lead technology provider and systems integrator for its "Unica" network virtualization program: The service provider has cancelled its contract with HPE and has re-issued its tender.

It's a huge blow for Hewlett Packard Enterprise 's ambitions in the comms market, but it has a chance to redeem itself as it is allowed to submit a fresh bid.

The appointment of Hewlett-Packard (as it was then) as the lead vendor partner for Telefónica SA (NYSE: TEF)'s ambitious, multi-vendor Unica virtualization project was big news when it was announced at Mobile World Congress in March 2015, as Telefónica is a leading and highly influential network operator inits SDN, NFV and telco cloud strategy. (See Telefónica Unveils Aggressive NFV Plans.)

The decision to ditch HPE and start the process again, confirmed to Light Reading by the Spanish operator, shows just how hard it is going to be for large telecom operators to find partners that can fulfill their requirements and help build an open, non-proprietary next generation network.

Telefónica wants a lead integrator that can bring IT and telecoms expertise, integration know-how, work with other suppliers to develop an interoperable, virtualized infrastructure and even supply some of its own New IP technology. (The recent NFV interoperability test results published by Light Reading show how hard it is to get multiple vendors' NFV technology to work together -- see EXCLUSIVE! NFV Interop Evaluation Results.)

Telefónica's decision is a massive setback for HPE. Being awarded the prime role as integrator and as the supplier of its OpenNFV platform stack (comprising server, software, orchestration and networking technologies, including its HP Helion OpenStack system) was a major coup for HP when the Unica deal was announced at Mobile World Congress in March this year. (See Telefónica Taps HP for Unica NFV and Telefónica Selects HP OpenNFV Platform for UNICA Infrastructure.)

But HPE clearly bit off more than it could chew: Telefónica's decision that the IT and networking giant wasn't up to the job will call its virtualization and integration credentials into question. The Spanish operator declined to elaborate on the reasons for its decision to seek a new lead partner but industry chat suggests that HPE was unable to deliver on its promises, particularly in relation to delivering a multivendor, open architecture that would allow Telefónica to introduce or swap out virtual network functions from new or different vendor suppliers with the minimum of integration effort. Instead, HP was focusing on its own products for the projects.

The rejection from Telefónica would be a big deal at any time, but it's particularly bad timing now, as HPE is getting a fresh start in the world. The company was Hewlett-Packard at the time of the contract award. It split in two on Nov. 1, with Hewlett Packard Enterprise taking the IT, cloud and networking business and HP Inc. (NYSE: HPQ) the PC and printer business. (See Networking Shines in HP's Gloomy Final Earnings and HP to Split Into Two Companies.)

Should it wish to do so, HPE has the chance to atone as it is eligible to re-bid for the position it just lost. Somehow, though, it seems rather unlikely that Telefónica will give HPE a second chance.

Light Reading has contacted HPE for comment and is awaiting a response.

So the big question now is -- Who Might Replace HPE at Telefónica?

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief and Ray Le Maistre, Editor-in-Chief, Light Reading. Got a tip about SDN or NFV? Send it to wagner@lightreading.com.

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sauroma1ae@gmail.com
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sauroma1ae@gmail.com,
User Rank: Light Beer
1/15/2016 | 11:21:30 PM
Re: not surprised
Let's face it, everyone can't be a "software company". Someone has to own, manage and maintain the hardware. Thus, in order for telco's to become a software/service providers they have to outsource the core networks. It is conceivable but unlikely in a short term.
kq4ym
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kq4ym,
User Rank: Light Sabre
1/10/2016 | 2:05:15 PM
Re: not surprised
The upselling can indeed be irritating. But, I would guess the HP consultants have lots or pressure to do it. Not only for the commissions but the guy above them is putting the pressure on for more sales. How to keep the balance correct is probably not an easy decision.
DHagar
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DHagar,
User Rank: Light Sabre
12/30/2015 | 1:06:38 PM
Re: Telefonica's HPE Ditch
BonneO, that makes sense.  Which is also why I believe HPE is making a mistake.  Telecos can become software companies and the lines blur very easily.  If HPE were to establish a platform of end-to-end capabilities, that would not be easy to replicate. 

Maybe Telefonica will take your advice?
Bonne0
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Bonne0,
User Rank: Light Beer
12/29/2015 | 11:00:28 PM
Re: Telefonica's HPE Ditch
Maybe it's a hint that, for telco giants, to rely on a partner to do this is a mistake. you may need to transform yourself to a software company and do most of it by yourself..  "Transform to software company" sounds familiar?
sauroma1ae@gmail.com
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sauroma1ae@gmail.com,
User Rank: Light Beer
12/28/2015 | 4:21:44 PM
not surprised
This is so typical of large IT shop sales tactic. HPE sales folks couldn't break their own old habit of upselling more HP gear. This might be the case for any other big network vendor unless, perhaps Telefonica writes very specific restrictions into the contract/bid.
DHagar
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DHagar,
User Rank: Light Sabre
12/28/2015 | 2:10:26 PM
Re: Telefonica's HPE Ditch
MitchWagner, I believe that is a mistake as well.  I thought the purpose of the HP split was to enable them to truly focus on their core capabilities and to play to their strengths - this is not a great start.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
12/28/2015 | 10:33:48 AM
Re: Telefonica's HPE Ditch
Seems likely that HPE believes it can make more money pushing its own products than being a systems integrator for other people's. This may prove short-sighted of them, and doom their attempt to enter the comms market. 
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
12/28/2015 | 10:26:58 AM
Re: Telefonica's HPE Ditch
HPE is one of several companies that are taking the strategy that they're strong in the enterprise, which gives them a foothold on carriers' internal enterprise networks, which they think they can leverage to get on the network side of carriers. Dell and VMware are also pursuing the same strategy. HPE becomes a cautionary tale for them. 

Interestingly, I haven't heard a peep out of HPE about this. Sure, it's the holidays but you'd think SOMEONE would be checking email over there. 
nasimson
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nasimson,
User Rank: Light Sabre
12/26/2015 | 5:34:02 AM
Will haunt HP till some time
Oops. Buyers remorse after 8 months! ? Someone would surely have lost a job at TELEFONICA. And a bunch at HP ENTERPRISE.
DHagar
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DHagar,
User Rank: Light Sabre
12/24/2015 | 5:17:14 PM
Re: Telefonica's HPE Ditch
Steve, interesting!  Are they future Virtualization Leaders?
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