& cplSiteName &

HP's New Risky Business

Ray Le Maistre
12/12/2012
50%
50%

HP Inc. (NYSE: HPQ) has unveiled a new pay-as-you-use networking equipment offer to communications service providers (CSPs) that aims to help lift the capex burden from the CSPs and their enterprise customers while generating new business streams for HP. (See HP Unveils Network Advantage Program .)

But as HP executives admitted here in London today, it's a risk for the giant IT vendor, albeit a calculated one. And the company does have some assets that, to a certain extent, mitigate the risks: It has the financial power to entertain the model; it has the product set around which CSPs can build a service offering; and it has a reference customer from day one in the form of Swisscom AG (NYSE: SCM), with the added bonus for HP that it seems to have developed a better engagement model, for the Swiss operator at least, than arch rival Cisco Systems Inc. (Nasdaq: CSCO). (See Swisscom Buys Into HP's Utility Vision.)

The HP FlexNetwork Utility Advantage Program (thankfully not known as FUAP) is based on the following concept: Enterprise users want to upgrade their networks but don't want the capex burden; and CSPs want to offer a broader range of flexible managed services that meet the ever-changing demands of their enterprise customers.

So HP is prepared to provide enterprise networking equipment to CSPs, with no upfront payment, that can then be installed at enterprise locations depending on the end user's needs. The enterprise, once it has agreed a managed services contract with the CSP, then pays only for the ports it uses in any given agreed timeframe (for example, per month) and the CSP then pays HP based on the volume of ports activated.

In this way, says HP, the enterprise does not have any capex costs associated with the managed services it is using (so freeing up the capital it would normally spend on new hardware) and the CSP doesn't have capex costs associated with the managed services it provides using the HP networking gear.

"We are prepared to share the costs and share the risks with our [CSP] customers," stated Nick Watson, vice president of sales, at HP's EMEA Networking division, during a media briefing in London Wednesday. "We're confident this offer is really strong and we expect it to work [in our favor]," he added, noting that this is absolutely not an equipment leasing arrangement.

"Enterprises have always looked at networking as something that sits on the balance sheet as a capital expenditure and a lot of budget is sucked up" simply through investing in the network assets required to keep a business running, stated Mike Banic, global VP of marketing for HP Networking. "But that means there is a lot of under-utilization, a lot of stranded assets that are paid for but not being used," added the HP man.

Model approach
With enterprises and CSPs now becoming more familiar and comfortable with the pay-per-use model, HP believes there's a real opportunity for CSPs to provide their corporate customers with a broader range of flexible IT services that reduces costs and inefficiencies.

So are CSPs interested? Apart from Swisscom, Watson says HP is targeting the "top five" telcos in Europe to become program partners. "We are at an advanced stage with two other operators in Europe and part way along with another two," he said, adding that the model is being taken global by the vendor.

And is it much different from rival offers? In August 2011 Brocade Communications Systems Inc. (Nasdaq: BRCD) launched its Brocade Network Subscription service, which has roughly the same model for its router products. (See Brocade Sells Router Subscriptions.)

The main difference between HP's offer and Brocade's, said Watson, is that "we have a customer."

That was fightin' talk, so we contacted Brocade. Its director of global communications, John Noh, retorted that HP is "grossly misinformed. The fact is, Brocade is seeing good interest among our customers in key targeted segments such as CSPs, data center hosting providers and federal government for our Brocade Network Subscription Services. As to your question specifically, we have already announced customers who have acquired our networking equipment through Brocade Network Subscription," including Rackspace (NYSE: RAX) and Denver-based hosting company PeakColo.

Maybe there's something in this pay-as-you-go lark, then....

— Ray Le Maistre, International Managing Editor, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
From The Founder
Download our complete guide to de-risking NFV deployment in 2016, including:
  • An eight-step strategy to deploying NFV safely, based on input from the companies that have already started virtualizing their production networks.
  • Interviews with leading executives at Colt, AT&T, Deutsche Telekom, Cisco, Nokia, ZTE, Ericsson and Heavy Reading.
  • Flash Poll
    Live Streaming Video
    Prepping for the Future: Upskill U Explained
    During this short kick-off video, Doug Webster, Vice President of Service Provider Marketing, Cisco, and Light Reading’s CEO & Founder Steve Saunders give an overview of Upskill U.
    LRTV Documentaries
    LRTV Report: Mobile Core Innovation

    4|28|16   |   25:32   |   (0) comments


    Hear from multiple industry experts from Deutsche Telekom, SK Telecom, Heavy Reading, Huawei, Cisco, Ericsson, Nokia, NEC and many more about developments in the mobile core as operators virtualize their IMS and evolved packet core systems and prepare for a 5G world.
    LRTV Huawei Video Resource Center
    NFV World Congress Highlight

    4|26|16   |     |   (0) comments


    The highlight of the NFV World Congress contains exciting telecom news. Join us for an inside look at Huawei's ICT 2020 plan and its latest collaboration with industry leaders.
    LRTV Interviews
    Unified Comms Finds Its Voice

    4|25|16   |   03:44   |   (0) comments


    Peter Quinlan, VP of UCC Product Management at Tata Communications, talks about the evolution of the unified communications and collaboration services sector and how voice is now a big part of current developments.
    LRTV Documentaries
    So... What Do We Do Now?

    4|25|16   |   03:24   |   (0) comments


    After a long hiatus, Max Dingman, the CEO of a GeeGhiz, returns for a motivational board room pep talk.
    LRTV Documentaries
    NAB 2016 Highlights

    4|21|16   |     |   (0) comments


    Light Reading's Cable/Video Practice Leader Alan Breznick climbs down from the slots to tell us about the latest news in broadcast technology at NAB 2016 in Las Vegas.
    Between the CEOs
    CEO Chat: Deepfield's Craig Labovitz

    4|21|16   |     |   (0) comments


    In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
    Shades of Ray
    Leading Lights 2016: Shortlists Announced

    4|20|16   |   0:53   |   (0) comments


    The judging is over and the Leading Lights 2016 shortlists have been published -- you can see who made the cut by clicking on this link.
    LRTV Custom TV
    Introducing MulteFire – Qualcomm at MWC 2016

    4|18|16   |   3.29   |   (0) comments


    MulteFire is the latest option for using LTE in unlicensed spectrum. As oppose to its close 'siblings', LAA and LTE-U, MulteFire operates solely in unlicensed spectrum, which enables it to offer the best of two worlds – LTE-like performance with WiFi-like deployment simplicity. In this interview, Sanjeev Athalye, Sr. Director, Product Management at Qualcomm ...
    Between the CEOs
    CEO Chat: Grant Van Rooyen of Cologix

    4|18|16   |     |   (0) comments


    Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
    LRTV Huawei Video Resource Center
    ONS 2016 – Demonstration of Huawei's NetMatrix Multi-Vendor SDN Orchestrator

    4|15|16   |     |   (0) comments


    This demonstration shows how Huawei's NetMatrix SDN Orchestrator (SDN-O) addresses an operator's core service agility needs for services spanning multi-domain, multivendor networks: it includes a demonstration of:
    - Rapid New Service Design: using YANG to model a complex example of multi-domain, multivendor L3VPN network connectivity service that ...
    LRTV Custom TV
    AT&T Wants to Own North Carolina

    4|15|16   |     |   (1) comment


    Venessa Harrison, president of North Carolina for AT&T, tells how the company will expand its GigaPower service beyond the seven N.C. cities it already serves.

  • This blog, sponsored by AT&T, is the second part of a ten-part series examining next-generation broadband technologies titled "Behind the Speeds."
  • LRTV Interviews
    Will NC Be First Gigabit State?

    4|15|16   |     |   (1) comment


    Alan Fitzpatrick, co-founder of Charlotte Hearts Gigabit, spells out the state's progress in at least starting to wire nearly every major market for gigabit service.
    Upcoming Live Events
    May 23, 2016, Austin, TX
    May 23, 2016, Austin Convention Center
    May 24-25, 2016, Austin Convention Center, Austin, TX
    September 13-14, 2016, The Curtis Hotel, Denver, CO
    December 6-8, 2016,
    June 16-18, 2017, Austin Convention Center, Austin, TX
    All Upcoming Live Events
    Infographics
    A new survey conducted by Heavy Reading and TM Forum shows that CSPs around the world see the move to digital operations as a necessary part of their overall virtualization strategies.
    Hot Topics
    Ultra-Broadband Summit, Hong Kong
    Iain Morris, News Editor, 4/27/2016
    GoT Fans Curse HBO (Not Right) Now
    Mari Silbey, Senior Editor, Cable/Video, 4/25/2016
    Analysts More Than Bullish on Comcast MVNO
    Mari Silbey, Senior Editor, Cable/Video, 4/22/2016
    Mitel Asks: What Time of Day Do You Shower?
    Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/25/2016
    Charter Jumps Gun on TWC Restructuring
    Mari Silbey, Senior Editor, Cable/Video, 4/26/2016
    Like Us on Facebook
    Twitter Feed
    BETWEEN THE CEOs - Executive Interviews
    In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
    Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
    Animals with Phones
    Live Digital Audio

    Of all the tech companies in the Valley, Intel has made the most aggressive commitment to building a diverse and inclusive workplace culture. It's doing so by taking concrete, measurable steps, making a large financial investment and through a commitment to complete transparency about its progress. In this radio show, WiC Director Sarah Thomas will be joined by Shlomit Weiss, Intel's Vice President, Data Center Group, and General Manager of Networking Engineering, who will share with us why Intel is tackling this huge challenge, how and to what effect. She will also discuss her unique experiences leading development of Client SOC development in the past and today leading development of all of the chipmaker's silicon hardware for networking IPs and discrete devices and managing a team of 600 engineers across Israel, Europe and the US.