News Stay informed about the latest enterprise technology news and product updates.

HPE pays $650 million for SimpliVity hyper-convergence

The long-awaited HPE-SimpliVity deal cost HPE $650 million for the hyper-converged pioneer. The buy gives HPE an installed base, as well as data reduction and protection features.

Hewlett Packard Enterprise's acquisition of SimpliVity Corp. gives HPE data reduction and protection features that...

are lacking in its homegrown hyper-converged products.

HPE Tuesday said it will pay $650 million for SimpliVity, a hyper-converged pioneer that launched about a year after market leader Nutanix. SimpliVity hyper-convergence never came close to the market share that Nutanix parlayed into a 2016 initial public offering. But SimpliVity did have a strong reputation for data deduplication and compression, using both software and a hardware accelerator to shrink data.

Hyper-converged infrastructure (HCI) combines compute, storage and hypervisor into one box. HPE, which sells servers and storage, is a natural fit for the market, but its early attempts failed to make a dent.

"It's a prerequisite for HPE to have a good hyper-converged product," said Arun Taneja, consulting analyst for Taneja Group Inc., in Hopkinton, Mass. "The game is on, and HPE was not in the game. This makes HPE relevant again in the overall IT infrastructure game. It puts them back in the storage game. That missing piece was too important."

SimpliVity's data reduction features attracted HPE, which lacked them in its HC 380 and HC 250 platforms built on StoreVirtual software and ProLiant servers. Paul Miller, vice president of marketing for HPE's software-defined and cloud group, said he expects the deal to close within 30 days. HPE plans to sell SimpliVity OmniStack software on ProLiant DL380 servers by mid-April.

The roadmap for late 2017 includes ProLiant servers with the HC 380 interface and SimplilVity software, with a merger of the SimpliVity and HC 380 products by the end of the year.

SimpliVity OmniStack software and OmniCube appliances also feature virtual-machine-centric backup and WAN-optimized replication for disaster recovery.

SimpliVity claims around 1,300 customers have purchased its OmniCube appliance or OmniStack software running on servers from Dell EMC, Cisco, Lenovo or Huawei.

"We'll do our best to support them, but we plan to migrate them to ProLiant servers," Miller said of current SimpliVity customers.

Miller said HPE focused on usability from the start with HCI, whereas SimpliVity went for enterprise data services.

"Where we were limited was our roadmap around storage features, like dedupe and compression," he said. "SimpliVity was the leader in that space, bar none. They architected their software-defined storage with enterprise data management services in place. Built-in backup and recovery comes with their product. We want to go into the enterprise, and we're putting together a best-of-breed product with enterprise data management services, scale and performance."

Miller said HPE had data reduction on its roadmap, but buying SimpliVity delivers it faster.

HPE will eventually eliminate the OmniCube's hardware accelerator and do all the data reduction in software. "It's a cost burden" to add a hardware card, he said. "We can engineer that out."

Most SimpliVity customers use VMware hypervisors, although OmniStack also supports Microsoft Hyper-V. Miller said HPE also had Hyper-V support on its roadmap, but only supported VMware in its HCI appliances.

Miller would not say how many of SimpliVity's 750 employees would be offered jobs at HPE, but he said HPE's "intent is to maintain engineering teams and everybody we need to support the product." He would not discuss whether CEO and founder Doron Kempel and SimpliVity executives would join HPE.

Rumors preceded HPE-SimpliVity deal

Following months of rumors that HPE would buy SimpliVity, the deal came as no surprise to many OmniCube customers. Joe Zazzaro, CIO of PeoplesBank in Holyoke, Mass., replaced HPE servers and Dell EqualLogic storage with SimpliVity OmniCubes over the summer.

He said mergers and acquisitions are a regular part of business, both in technology and banking. Zazzaro said the Dell-EMC merger shows that not even the largest storage companies are safe from being acquired.

"Most of us in the industry were nervous about Dell buying EMC. Even people at EMC were nervous about that," Zazzaro said. "I've been through a couple of mergers in banking; we're used to that. You just move on and survive. SimpliVity is a very driven company, and we were intrigued by their technology. We felt it was safe to go with them."

Will HPE-SimpliVity start a wave?

The deal is the first acquisition of a hyper-converged startup by a major vendor. Until now, HPE's competitors entered the market through partnerships with hyper-converged software players.

Dell Technologies gained VMware's vSAN hyper-converged software through its $60 billion acquisition of EMC, and it uses vSAN in its vXRail HCI appliances. Dell EMC also sells Nutanix software through an OEM deal. Cisco sells a HyperFlex hyper-converged system through an OEM deal with Springpath, and Lenovo partners with Nutanix, SimpliVity and a handful of other hyper-converged software vendors.

If there was a surprise from Tuesday's deal, it was the acquisition price. SimpliVity raised $275 million in funding since 2009, and was valued at more than $1 billion in early 2015.

Nutanix's market cap is $4.3 billion, leading to speculation that SimpliVity was worth more than a billion dollars. But SimpliVity's revenue is a small fraction of what Nutanix generates. Industry sources put SimpliVity revenue at around $40 million for the third quarter of 2016 and around $130 million for the 12-month period ending in September. Nutanix reported revenue of $167 million in the third quarter of 2016, its first as a public company.

HPE estimated the HCI market at $2.4 billion in 2016 and forecasted it to grow to close to $6 billion by 2020.

"The purchase price seems a bit low to me," said Krista Macomber, senior analyst for Technology Business Research Inc., in Hampton, N.H. "It's possible that SimpliVity recognizes how crowded and challenging the hyper-converged platforms market is quickly becoming, and the potential value inherent in tapping HPE's mature, proven server R&D [research and development] and go-to-market models."

Macomber called the acquisition partly a "land grab" for HPE, because it can go after the installed bases of competitors, such as Dell, Cisco and Lenovo, which sell SimpliVity software.

"It is also a move to enhance innovation in areas such as storage utilization, which is key considering the need to reduce the cost structure and innovation in storage is a leading factor influencing customers' decisions to migrate to hyper-converged platforms," she added.

The HPE-SimpliVity deal leaves hyper-converged appliance vendors Pivot3 and Scale Computing and software-only players Stratoscale, Maxta and a few other smaller companies on the market. Potential buyers include IBM, NetApp and perhaps Cisco and Lenovo if they want to own all their HCI technology instead of partnering.

Pivot3 CEO Ron Nash said the HPE deal shows how hyper-convergence has disrupted the traditional IT market.

"Anytime you have a big wave that disrupts the status quo of IT companies, all the big companies will think, 'What am I going to do with this? It's too big a market, I've got to attack it,'" Nash said. "They can't sell legacy products to the market like they do today."

Next Steps

What does the HCI market look like today?

How hyper-convergence enables the SDDC

HCI to look more like CI in 2017

PRO+

Content

Find more PRO+ content and other member only offers, here.

Essential Guide

Hyper-converged infrastructure options, vendors and installation tips

Join the conversation

6 comments

Send me notifications when other members comment.

By submitting you agree to receive email from TechTarget and its partners. If you reside outside of the United States, you consent to having your personal data transferred to and processed in the United States. Privacy

Please create a username to comment.

What does the HPE-SimpliVity deal do for HPE's standing as a hyper-converged vendor?
Cancel
This puts HPE in a great position, with Simplivity's unique Data and I/O reduction along with DR. HPE can leverage their R&D and sales arms quite well.
Cancel
Acquisition is the first step, perhaps the easiest. Successful development is pivotal; then pricing then how to effectively support. We'll see...
Cancel
They need to do this to compete with Dell/VMware/vSAN... but will the software continued to be supported on other non-hp servers as VMware VSAN does or will they try to lock-in customers to sell it just on HP servers?
Cancel

One of the main reasons we purchased the Simplivity solution over the other players was that they had a hardware accelerator. If that goes away then they will be just another all-software solution, and Nutanix is dominating in that space. Why would they want to take on the giant head-to-head when they already have a leg-up on the rest of the field. Next thing you know they will get rid of the Simplivity's RAID within the nodes and only go with RAIN like the other major players. It just doesn't make sense.

Cancel
Maybe good for VDI, DaaS, dedupe, backup. Wonder if it can offer features in Big data space.
Cancel

-ADS BY GOOGLE

SearchDataCenter

SearchCloudStorage

SearchStorage

SearchNetworking

SearchVMware

Close