Hewlett-Packard and Foxconn are promising to blur the lines in the server industry between the traditional global OEMs (i.e. Hewlett-Packard, Dell, IBM) and the ODMs (i.e. Foxconn, Quanta, Wistron etc.) with the announcement of their joint venture agreement to bring a new line of servers to the market.  After a number of months of market anticipation, Hewlett-Packard and Foxconn have launched the Hewlett-Packard Cloudline product family: a cost-optimized, no frills solution specifically for large cloud service providers (CSPs). Download our paper for details on Hewlett-Packard Cloudline and what it means for the industry.

Large cloud service providers (Amazon.com, Facebook, Rackspace Hosting, and others) continue to undergo rapid growth as consumers have an insatiable demand for more data and online services.  Running these services requires massive amounts of datacenter capacity and a service provider business model where profit and loss are tied directly to the IT and to the datacenter.   With this in mind, the large service providers are laser focused on cost of their datacenter equipment and have large-scale, in-house expertise to manage their servers, networking, and storage infrastructure. These customers know exactly what they need to for their IT equipment and aren’t shy about making suppliers compete for their business.

(Credit: HP)

(Credit: HP)

In a desire to keep their server costs low, the largest of these companies now bypass the traditional server providers like Hewlett-Packard, Dell, and IBM and buy their servers directly from the Taiwanese companies (ODMs) who have designed and manufactured servers on the OEMs’ behalf.    The ODMs have been gaining significant server market share over the last several years in the cloud service provider segment at the expense of traditional server brands.  In addition, the ODMs are creating a huge amount tension in the market by transitioning their business models from trusted OEM suppliers to fierce competitors.

Rather than sit back and watch the ODMs take away their business, Hewlett-Packard decided to take matters into their own hands by partnering with one of the largest of these ODMs and a preferred long term supplier– Foxconn.  The blurring of these historical lines between OEM and ODM has the promise to create a product offering that provides the best of both worlds — the time-to-market agility and cost-optimized focus of Foxconn with the economies of scale, global reach, world class integration, and service/support of Hewlett-Packard. Hewlett-Packard Cloudline is designed specifically for large cloud service providers and available for direct order from Hewlett-Packard in large volumes.

Cloudline will not compete for business in the traditional enterprise space that the Hewlett-Packard ProLiant brand services today since enterprise customers generally require servers with broad software certifications, advanced systems management tools, and the latest bells/whistles that make their servers extremely reliable and easy to service.  With this in mind, Hewlett-Packard ProLiant will continue to be the premium choice in the Hewlett-Packard industry standard server product portfolio for enterprise customers.

The Hewlett-Packard/Foxconn joint venture is a good move for Hewlett-Packard and provides the company with additional credibility in the cloud service provider server market.  This partnership has the potential to create a hybrid model for large service providers who want cost-optimized servers that are backed by the service, support, and reach of a leading global server brand.

The new partnership and Cloudline brand of servers promise to stir up the server industry. Cloudline is the first joint server product line between a major OEM and ODM. And Cloudline is also the first cost-optimized product line branded and sold publicly by an OEM that truly mirrors what the ODMs have in market today.  Competitors like Dell, Cisco Systems, Lenovo, and leading ODMs are sure to react with new product lines, aggressive sales tactics, and possible competing joint venture agreements.

To read more about Hewlett-Packard Cloudline , download our paper here.

– credit Forbes.com

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