How HP's Dave Donatelli Plans to Win the Next Generation Data Center

I spent much of my Monday at HP getting briefed by Dave Donatelli who heads the server and storage unit, which has been growing 25 percent year over year in what has been a very difficult market. What has given him a competitive advantage is that he manages the only unit in the market that blends competitive lines of servers, storage systems and networking, which has been growing organically at 50 percent year over year and 227 percent largely as the result of the 3Com acquisition.

There are three founding components to this impressive growth: One is that HP aggressively uses its own technology but, and the second is that HP, by having all three hardware legs, has been able to both better integrate and better reduce the number of redundant elements in its integrated solutions. The third is that at the core of HP's solution are servers that have to compete in the most price-sensitive and lowest margin segment of the three, driving efficiencies that HP argues no one else can match.

HP has two exposures: It doesn't have telephony, which could become a problem as Cisco scales into its space over the at once decade, and HP is light on software, which is why it hired Bill Veghte - one of the most highly-regarded Microsoft executives - and has Leo Apotheker as its CEO, partnered with Ray Lane as its new chairman of the board. Bill was largely responsible for Microsoft's most successful software launch since Windows 95, Windows 7.

Step back and take a look at what might be termed "the straightway generation of the glass house," which is being driven by three entities: Acadia, a joint project between EMC, Cisco and VMware building on a concept called "VBlocks" or packaged data centers; Microsoft, which is exploring the idea of packaged data centers; and HP, which is integrating storage, networking and servers into single solutions that both embrace Microsoft's solution and mirror Acadia's.

This is manufacturing 101 and one of the ways other high-volume industries, like automotive, keep costs down. To illustrate, a cooling assembly, rack or power supply can be used interchangeably for storage, networking and server rack mounted systems, which drives up the manufacturing volume of those elements, lowers service and manufacturing inventories and in doing so lowers the manufacturing, logistics and support costs.

The most impressive aspects of this is that

One of the most impressive aspects of this is that by integrating the elements, not only can you interchange them in the rack, now what if not would be a shopping cart of wiring and networking gear, can but be cut down into two little boxes, which dramatically cut installation costs and both service cost and complexity.

On top of the hardware, HP has a management solution that blends storage, network and server management into a single console allowing the coordinated management of all three areas with drag-and-drop ease of use. As a result, HP, when bidding on a blended at once generation data center solution comprising all three elements, can argue savings of between 30 percent and 50 percent over alternatives. This savings is what creates its rapid growth and success. HP couldn't have even conceived of doing this if it hadn't first aggressively moved to deploy its own research internally and there is a good lesson in that.

With VoIP (Voice over Internet Protocol) technologies, the environments are becoming integrated. But, the networking market at the core of this is comparatively high margin and is exposed to aggressive price competition. To boot, there currently is a trend to abandon PBX-like innovation and move to virtual cloud-based services tied to cell phones.

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