On this episode of the Futurum Tech Webcast – Interview Series, I am joined by Malcolm Ferguson, Distinguished Technologist at HPE and Scott Thomson, HPE GreenLake Cloud Services Specialist for conversation around cloud strategies and why colocation is making more sense these days.
A Colocation Cloud Journey: Exploring the Acceleration of Colocation Strategies
In our conversation we discussed the following:
- How the pandemic has impacted cloud strategies
- The trends driving the acceleration of sourcing colocation facilities
- The challenges customers are seeing with colocation facilities
- How HPE GreenLake’s Edge-to-Cloud platform has helped organizations transition their IT to a cloud experience
It was an excellent conversation with several insightful tidbits. If you are interested in learning more about how HPE is enabling colocation, be sure to check out our latest research brief on the subject.
Watch my interview with Malcolm and Scott here (and subscribe to our YouTube channel if you’ve not yet done so)
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Daniel Newman: Hi, everybody. Welcome back to another episode of the Futurum Tech Webcast. I’m your host Daniel Newman, principal analyst, founding partner at Futurum Research. Very excited about this interview series edition of the Futurum Tech Webcast. We’re going to be talking to leaders within HPE’s GreenLake team, focused in on colocation. Very interesting topic. I have some great questions and some great guests, and I’ll be bringing them on in just a moment. Now, as always, before I do that, a quick disclaimer for everyone out there, this show is for information and entertainment purposes only. So while I will be talking to and about publicly traded companies, please do not take anything I say on the show as investment advice. Excited to have these guests. Without further ado, thank you, HPE. Let’s welcome Malcolm and Scott to the show. Malcolm and Scott, welcome to the Futurum Tech Webcast. How are you?
Malcolm Ferguson: Great. Thank you
Scott Thomson: Very well. Thanks for having us.
Daniel Newman: All right. Great to have you guys. Malcolm Ferguson, distinguished technologist. Scott Thomson, worldwide sales lead on GreenLake colocation. Why don’t you guys just give a quick background, so everybody out there that’s listening and meeting you all for the first time gets to know a little bit about you. Malcolm, I’ll start with you.
Malcolm Ferguson: Sure. Thanks Daniel. So I came to HPE a little over 13 years ago. It’s been a whirlwind, but I was a customer prior for 15 years. So I used to purchase HPE assets for a company called Verizon Business. And then, prior to that, a company called Terramark that Verizon acquired. Terramark was in the data center colocation business, as well as managed services business. So I led a team of implementation engineers there, and we would deploy cloud infrastructure for their customers. So I have a passion for the colo industry, and that’s why I’m really focused on it with colo and GreenLake.
Daniel Newman: Welcome to the show.
Scott Thomson: Thanks for having us. I’m Scott Thompson. Like you said, worldwide sales lead for GreenLake with colocation. So I’ve been with Hewlett Packard Business for 15 years. I started in our office in Scotland, and it was in the early days of managed print services. What I would like to say is the original consumption model of HP and the family of companies here, of course now we’ve evolved over time and we’ve changed a lot and undoubtedly I’ve changed a lot. And here we are working in HPE GreenLake business. I specialize a lot in partnerships, and we have some great partners with our colocation partners. The combination of that, and my background, and consumption services has really led me here. It’s a pleasure to be here and talking about this great offering we’ve got today.
Daniel Newman: Yeah, it’s going to be a lot of fun, and we are going to definitely dive into the offering, but I also always love to take advantage of having super smart guests that have been through this last couple of years. I love talking about trends in technology, the broader transformations that are going on. let’s start with a warm up question here and talk a little bit about… We are finally starting to see the light at the end of what has been a multi-year pandemic. We’ve had ebbs and flows. We’ve had moments where normalcy looks like it’s in the windshield and only to be taken back by various strains that have plagued our world. But this pandemic for a positive, and if you had to find a positive, has been a really great accelerator of the digital transformation across many businesses. Let’s start with you, Malcolm. How did you see the transformation and the pandemic kind of come together to drive cloud and cloud strategies for companies?
Malcolm Ferguson: Our theme at HPE is we’re digital transformation first. We’re not cloud first. I really feel the whole “cloud first” statement is kind of foolish. It really doesn’t mean anything. Digital transformation is what it’s all about. So our own company, for example, is powered by SAP. That’s the platform that powers our business. We actually run everything on it, right? So we have built, what’s called a common cloud platform that we sell all our products through. It powers our supply chain, our business analytics, marketing sales, et cetera. And that cloud platform is identical to what Apple runs on, Microsoft runs on, Adobe. Apple sold $400 billion worth of products last year. They didn’t do it in their stores during a pandemic, right? They did it through their SAP powered, common cloud platform.
And that same platform that we’ve built and designed, we used our own Pointnext consultant team. And they’re now with a major auto manufacturer in the US, building a common cloud platform for them. So it’s about digital transformation, and our big shift is to move to everything being delivered as a service. So the analogy I use is: You may have an iPhone, and your iPhone you own outright. You bought it a hundred percent. It’s your asset. Apple sold it to you. Well, what if apple, your next phone, gave you a new phone? And it was owned by Apple, and they had for storage on it: 50%. And you didn’t pay for that until you used it. You don’t use iTunes anymore, right? To update your phone, you use the iCloud, right? Your phone gets updated at night, gets updated and patched and backed up automatically. That’s what we’re doing with our entire portfolio.
We built our own version of iCloud, and it’s called GreenLake Central. This is a huge transformation for our company. It grew over 40% year, over year, last year in revenue, and it’s what our customers want. The beauty now is we’re coupling our assets, our compute and storage and networking products with the data center. And that’s why we partner with the top colo providers on the planet, because without a data center, you don’t have GreenLake, right? Now customers want to get out of the data center business, as well as the infrastructure business, and have it all managed and delivered as a service under a single contract. And that’s what we’re doing.
Daniel Newman: Yeah, absolutely.
Scott, as you were out and about, probably frequently, prior to the pandemic, and you were doing your sales motions, the pandemic completely shifted. I have to imagine, where Malcolm kind of gave it a technology and digital transformation lens, your entire motion probably became very different as you were trying to figure out. Because as companies needed this stuff, the way you went about getting it in play and getting it sold and built and developed had to have been very different.
Scott Thomson: You couldn’t be more right. Everything changed. I think the last thing that I was out was March 2020, so it’s been a while. And I think that the key word to consider in that is uncertainty. I didn’t know in March when it was announced here in the UK that we had three weeks of a lot of time. I thought, “Three weeks? How are we going to deal with that?” Here we are 18 months later. Things are a little bit easier, but we’re not even clear yet on exactly what’s happening, where and when. And that uncertainty transfers into business, as well. It’s affected our customers greatly. The one thing that they don’t want to be doing is paying for things that they’re not going to be using. Or paying for things that they may be not able to scale up at the speed that they want to. Or, indeed, scale down when times are tough. Or freeze things the way they are.
Business is so uncertain. Some businesses are really flourishing in this dynamic and others are seeing a real contraction of what the requirements are. And given that flexibility is absolutely key. It goes beyond just the services that we provide typically as an organization and goes into other areas like their real estate, like other investments that they have to make and consider that they’ll knock on from that. That’s changed for our customers, and what we have to be is ready to address those needs. Whenever we are looking to bring something to market as an organization, we’re doing it based on what customers demand is. Stories like this really make a lot of sense from the perspective that customers want a flexible experience.
They want a pay as you go experience. They want something that’s managed for simple, agile, and pay as you go. All those elements are something that HPE have been building for a long time, putting together through our own capabilities and also through our partners. The likes of the Equinix, CyrusOne partnerships we have in colocation, that allow us to flex right beyond the model that we would’ve had to traditionally with GreenLake. And go into to giving customers that flexibility and agility and area that we wouldn’t otherwise touch. Those are powerful messages, to take our customers and give them a more holistic view and answer the needs that they’re developing as we travel through these uncertain times.
Daniel Newman: Yeah, you hit on a bunch of different things that I’ve been paying attention to. I’ve worked with your GreenLake team for a number of years. I’ve worked strategically across the HP organization as an analyst, as an outsider and as an advisor. And I think going back to 2018, when Antonio first talked about moving everything to as a service, he was onto something early. And of course, we’re now seeing that trend getting validation through almost every major IT infrastructure. OEM having this same approach. And of course, the public cloud providers caught that early. But the thing is, is the workload placement and the workload distribution is still painting a fairly robust picture for prem-based services. But I think anybody that’s consumed anything… You mentioned Malcolm, the iCloud. We’ve all become very fond of being able to subscribe to things.
So there’s this blend of things that have this. It’s an amalgamation of consumption and consumer activity, combined with operational efficiencies and price efficiencies that we’re trying to gain along with implementation and the ability to… I think as you guys are both alluding to just kind of spin up what you need when you need it and only pay for exactly what you need. That’s the mega trend that drove everything.
So one of the areas that we are working on, specifically this pod and this conversation, and we wrote a paper and we’ll put that in the show notes, but it’s really about the growth of colocation. Because somewhere in the middle of all this, right, you want things on-prem, but not necessarily your prem. The idea of prem, a lot of people think of a data center in the middle of your office, but that’s not really what prem means.
No, and that’s why colocation, at least as far as we’ve seen as an analyst firm, we see this as a big growing opportunity. But there’s also challenges. So, Malcolm talk about that with me. Talk about the growth and the challenges and what your customers are seeing. And why they’re deciding to colocate.
Malcolm Ferguson: First of all, there’s an IT sustainability issue. Many of our customers who had their own data centers as HP did, right? So we’ve moved out of our four legacy data centers into two colos this past two and a half years ago. So we exited data centers that were over 15 years old and our newest products they need more power density. They don’t need a five KB rack. They need a 15 or 20 KB rack. And if you fill an old data center with racks with that kind of density, you’re going to have about half of it empty as a result, which is completely wasteful, right? For the environment for the company’s costs, et cetera. So we cut our IT footprint by roughly 30% or 40% by moving out of old data centers into colo. And think of the electric savings over five years, the carbon benefits over five years, right?
We had one customer this past year that moved into a colo under Greenlake, and the IT sustainability benefits were the equivalent of taking 417 cars off the road every year. That’s real ammo they can take back to their leadership and their board of directors, who have goals around IT sustainability. So these colo partners that we’ve signed up with have a market cap of over $130 billion. This is a huge industry, right? And their real estate investment trust, meaning they’re set up to build data centers financially. Our customers are not REITs, right? They don’t have the tax benefits to be dealing and maintaining and expanding data centers. So they’re all getting out of the data center business. Now, our own IT transformation I discussed earlier is around SAP. Plus, we have a private cloud and enterprise analytics and backup and DR of all that data. The environment is split where we have about 70% of our applications running in the colo cages, and about 30% outside of the colo cage using the colo connectivity for things like as a service software, right?
We do have some public cloud assets, but the majority, we call our crown jewels of data, run in our private colo cages. Our customers want that same benefit. They want out of the data center business, but they want data center and workloads as a service for those crown jewels of data and apps, that 70% typically… In a secure, private swimming pool environment versus put everything in the public swimming pool cloud, right? And not have the compliance and security that I need. Plus, typically it’s going to cost a lot more. So it makes no sense to just lift and shift everything into Azure, AWS, right? Our customers are smarter than that. They run the numbers and they’re like, “Wait a second. I can run the majority of my applications and workloads to the highest level, managed by HPE powered by HPE, including a colo of choice. And it’s going to be less expensive. It’s going to be more secure. It’s going to have control. I can choose what version of SAP I’m on and dictate that to HPE. I can determine what level of security HPE has and what I have.”
I don’t know if you heard, but early this summer, Microsoft announced that they’ve given over many of their customers’ data to the Department of Justice, without even telling the customer because they’re under a gag order. So that means if I was using Azure for email, or data, or whatever, they can literally take my data and give it to the government without telling my legal right? That’s pretty scary. So we have customers that are aware of that. As a result, they’re holding back critical data in a private environment, secured and controlled by them. But the infrastructure powering it, including the data center, is all a single contract with HPE, powered by HPE. So it’s a great combination for them.
Daniel Newman: You bring up a really good point about the data, the privacy, the security of the data. We’re seeing rising trends like confidential computing that have come more “in Vogue” recently because data in motion is always the most at risk. But in terms of what you’re specifically talking to, you’re really just talking about the compliance and governance. This has been a significant limiting factor for public cloud, especially in highly regulated industries where there’s just certain data that is not yet trusted to be placed in public cloud, based upon regulatory. So that might be something like HIPAA or FINRA. And we, of course, have seen that’s why mainframes are still big business.
As much as people want to act like the mainframe is dying, it’s not. We still need robust, secure, reliable available technologies. So what you guys are building, in many ways, is the best of both worlds. That is what people want in consumption. They want in control plane. They want in easy to access, scale up, scale down, pay for what we use, as I mentioned before. But at the same time, there are so many concerns, whether it’s meeting sovereign, data sovereignty, meeting the compliance requirements, geographic redundancy. And again, I do truly believe, Malcolm and Scott, we will get more and more multi-cloud, but that is an evolutionary period. And trust you did make a great point.
But as you’re out there and you’re talking to customers and you’re helping them find the opportunities to partner with you guys on this colocation services. What are some of the use cases where you’re gaining a lot of traction?
Scott Thomson: Great question. It’s varied. We’re talking to our customers from a GreenLake first perspective as a business now, because that’s the demand that’s in the market. GreenLake, as you know, you mentioned yourself, Antonio’s announcement in 2018 to drive everything to this model by 2022, available through the portfolio, we’re getting really close to that and really close to that achievement. But there are trends already, right? Malcolm touched on, many of our customers are realizing, “Well, hang on a minute. We’re not in the data center business. So let’s get into the data center business.” So that’s where we’re seeing this trend of collocation, but we’re seeing other trends as well. And you touched on some of it around compliance and governance. The fact of the matter is that almost every customer using the public cloud loves the experience.
The challenges our customers are seeing in the market is that they want that experience as: Number one, we want a cloud experience. Number two, we can’t have a cloud experience for everything because compliance, governance, data gravity, applications that aren’t ready to move, whatever it might be. A number of different reasons that just can’t be achieved. Doesn’t stop them from wanting the experience. And thirdly, we want to be out of the data center business or we want to limit our investment in data center, for sure. So those three seemingly conflicting points need to be addressed, right? And our HPE GreenLake cloud services model is seeing that coming to life through… Malcolm mentioned already SAP is a key workload for us as a business. It’s a key workload for many of our clients, and that ERP system space and beyond is very important for our customers. SAP, huge partner for us. There’s more SAP deployments on HPE infrastructure than the next three competitors combined.
SO people are safe in the knowledge they can do that on an HPE platform, but they now want to be somewhere that’s in proximity to their CSP providers, they’re cloud providers. Because they’re not living in a GreenLake, only world or a public cloud, only world. They’re living in a hybrid, multi-cloud environment, and guess where they all live. All those CSP providers live in colocation facilities. So the proximity to them and the ability to direct connection to your cloud providers is limitless benefits for our customers, in terms of providing that cloud on ramp, but also adjacent businesses. So many customers are making the choice to go to, what we could describe as these hubs, through colocations.
Then we’re in a position where customers in adjacent businesses that you want to work with and transact with and speed up that transaction speed, you can do. You can cross connect right into those businesses by being in a colo facility. So it’s a really powerful message for a number of workloads, but we’re seeing it particularly around that SAP space. We’re seeing it coming up around relating workloads like VDI, like DR as a service. These are the type of experiences that customers are looking to have, not in a public cloud and equally not in their own data center, physical facility. But consuming a manner that gives them a cloud experience, gives them agility, gives them simplification, gives them something that’s managed for them. Maybe leveraging our management services, our advisory and professional services to tell them to work with them, to understand what the right mix of cloud services is. Whether that be either GreenLake cloud or any of the other cloud providers that they may be working with in the public cloud domain.
And finally, they want that pay as you go model, right? They want that ability to flex up and flex down and to bring that to, not only the infrastructure, but up to the layer of the workload itself at the VDI level or the SAP level. With some of our storage as a service place, you think about hybrid cloud file storage services in GreenLake powered by Cumula, replication, Armand backup for Oracle databases or Enterprise file storage. It’s all available there. Don’t have to have it on your premise. Don’t have to have it in the public cloud. Don’t have to have any egress, because with HPE GreenLake, there’s no egress.
Daniel Newman: Yeah, you bring up a lot of really good points and I appreciate you kind of tying it all together for us. I think there’s a level of pragmatism in this of getting core workloads and core applications that run your business into the environment that’s going to enable them to be run best. I think you started the conversation, Malcolm specifically, kind of talking about not focusing on cloud or not any sort of tech, but about this transformation. And if you want to take the architecture of digital transformation out, we’re really talking about outcomes.
We’re talking about technology as an enabler of outcomes. And I think that’s what this service and really much of what you’re building organizationally at GreenLake, I believe, is set out to accomplish. We’ve only got a minute or two left. Malcolm, I’d love to pivot back to you to kind of take us home here. What’s the trend line going forward here? What are the opportunities. How does this colocation business grow? What’s going to drive that?
Malcolm Ferguson: You were right. It’s about solving the customer problems. Again, I was a customer for 15 years. And as an employee of this company, I’ve always felt I need to represent the customer. We have so many great use cases where success for our customers, as far as specifically around GreenLake… That the customer I mentioned who had the consolidation of the equivalent of taking 417 cars off the road every year. That project was SAP focused. But with SAP, you almost always have a private cloud that’s part of that, where all the applications run. They have a VDI environment. They have an enterprise analytics environment. They have backup, disaster recovery. So they also have a lot of legacy infrastructure that we had to pull through and land inside the cage with their new workloads and their existing workloads. But the beauty is now they’re no longer maintaining a data center and having to maintain the cage and the connectivity and cross connects and failed hardware and replacing failed hardware.
All of that’s being handled by HPE, and we helped with the migration, the go live. And we did it all during a pandemic. And these colo providers are excellent to work with. They’re able to get these cages up in a couple of weeks, right? For our infrastructure. And they have guaranteed power delivery. There was a major winter storm that hit here in Texas, and the facility this customer was in never even went to generator. And we were having rolling power outages all around this facility, right? So customers get an IT sustainability win for dramatically compressing the environment with new infrastructure, in a building that’s able to handle that compression of infrastructure, with guaranteed power delivery, multiple levels of security to get to their cage. The entire solution’s being delivered as a service, so anybody waving a cloud flag at the company, the cloud first flag can and say, “Fine, this is, this is just as much cloud first as any cloud, except for it’s a better cloud.”
It’s a private, secured, controlled, managed cloud for my workloads, and it’s lower cost. And if I ever want to walk in the cage and take a look at the workload, I can do it. The customer can come right on in and take a picture or videos of… Here’s the environment for GreenLake.
You’re never going to get to do that if you put your workload in a public cloud ever. They won’t let you even know where the building is. So this is a great solution, but the key is partnering with these colo providers. Because as Scott mentioned, the connectivity they have, the benefits there, they’re set up financially to own data centers and build data centers and all those cost savings go right back to our customer.
Daniel Newman: Yeah, you hit so many things there, both of you. And I want to, first of all. Just thank you, because it was really great to have you on. Just a couple of closing remarks before I let you guys go: I think in the end, it’s going to be about balance. I think we certainly, any company out there including HPE, is very considerate of the interdependence between public and private and hybrid. It’s why you’ve built such a robust hybrid architecture, because you’re not sitting here saying nothing’s going to the public cloud. You’re just sitting here saying, “Look. We have to have a solution for those workloads that are not best placed in the public cloud.”
We’ve seen increasing discussion from everything from major venture capitalists to industry analysts, to just thought leaders in the cloud space, all talking about better thinking around the financial implications of public cloud, right?
There was a time where, I think, everyone was like, “Hey, it’s all going to the public cloud.” Well, I think now we’ve realized that’s not happening. It’s not to say public cloud won’t keep growing. But the TAM of all of this is going to continue to grow, because people need their applications. They need to be available. They need to be redundant. They need to be scalable because business will grow on tech, on communications, on networking, on applications and, of course, experiences that drive.
So again, Malcolm, Scott, thank you so much for joining me here on the Futurum Tech Webcast. It was great to have you. I hope I can have you guys back again soon.
Scott Thomson: Thank you. Great to be here.
Daniel Newman: And there you have it everyone. Great conversation about HPE’s colocation businesses on GreenLake. This is a very interesting space.
I see it as a growth area. I’m very interested in continuing to follow how that business develops. I think both Scott and Malcolm made some really great points. For the chief technologists and leaders and companies that are making decisions on where workloads need to be placed, this certainly is a significant consideration.
With that, I’ve got to say goodbye. I want to thank everybody for tuning into this episode, hit that subscribe button, follow us here on the Futurum Tech Podcast and Webcast. We appreciate our community. You can definitely listen to us on Apple and on Spotify and SoundCloud. And if you want to watch the video, check us out on YouTube. But like I said, it’s time to say goodbye, so we will see you later.