Editor’s note: HPE and SimpliVity would use complementary market traction and innovation to capture accretive hyperconverged opportunities, says Technology Business Research Analyst Krista Macomber.

HAMPTON, N.H. – HPE’s planned SimpliVity buy reflects the need for agile innovation and selling models in a disrupted data center market, and foreshadows further vendor consolidation

Today’s fast-paced, data-centric and always-on business environment requires IT to shift from a cost center to a driver of agility and productivity. As such, IT departments are increasingly turning to hyperconverged platforms in lieu of traditional, costly and cumbersome data center infrastructure to serve a range of mission-critical legacy and next-generation workloads.

[VIDEO: Watch an overview of SimpliVity technology at: https://www.youtube.com/watch?v=xWkMAl2jhEY ]

For its part, long-standing data center industry incumbent Hewlett Packard Enterprise (HPE) plans to acquire hyperconverged platforms pure play SimpliVity for $650 million to accelerate both vendors’ abilities to keep pace with this fast-growing, quickly evolving and significantly disruptive market.

According to TBR’s 2H16 Hyperconverged Platforms Customer Research, global hyperconverged revenues will grow at a 53.1% CAGR from 2015 to 2020 to $7.2 billion, with 32% of customers replacing existing hardware with hyperconverged alternatives and 25% decreasing other areas of IT spend to fund hyperconverged platforms purchases. As a combined entity, HPE and SimpliVity will benefit from portfolio and go-to-market depth and investment scale rivaled by few and needed to keep pace with customer workload deployment patterns and rapidly emerging pain points.

Combined, the two companies generated approximately 20% of global hyperconverged platforms revenues during 2016, according to TBR’s 3Q16 Hyperconverged Platforms Market Landscape — trailing market revenue leader Nutanix but outpacing the remaining range of pure play and multiplatform peers, such as Pivot3 and Dell Technologies, on a combined basis. Furthermore, such a transaction would represent the integration of the globe’s largest industry standard server vendor with one of the most successful innovators and sellers of hyperconverged platforms software in terms of revenue. Integrating SimpliVity’s OmniPath platform with broader, maturing HPE initiatives such as composable infrastructure stands to unlock accretive value to customers in addressing pain points such as those around scalability.

A partner with Lenovo

The planned HPE and SimpliVity deal will immediately impact customer purchase decisions and data center ecosystem alliance models. SimpliVity is not a current HPE partner and, in fact, has sparked growth and influenced the development of the hyperconverged platforms market in large part due to pre-existing deals with HPE competitors including Cisco, Dell Technologies and Lenovo.

These offerings as well as HPE’s current lineup of organically developed, StoreVirtual-based hyperconverged appliances will continue to be supported post-acquisition, per HPE. However, TBR believes an HPE acquisition of SimpliVity will be a land grab for HPE, and as a result anticipates quick integration of HPE’s ProLiant server and SimpliVity’s OmniPath portfolios if the acquisition closes. Ultimately, this would consolidate the combinations of hardware and software available to customers in a market requiring increasingly workload-tailored infrastructure.

Pressure on competitors

TBR believes HPE’s planned acquisition of SimpliVity will further pressure the hyperconverged platforms market around innovation and market share growth, spurring an uptick in industry alliance activity and sparking consolidation of the vendor landscape. Vendors including Dell Technologies, Nutanix and HyperGrid will seek to refine differentiation by quickly building out capabilities in areas such as application containerization and hybrid cloud automation and orchestration that mesh with the promise of the emerging architecture — simplicity, flexibility and cost effectiveness.

As customers purchase with a focus on addressing broader workload requirements, we anticipate the market will coalesce around a smaller number of vendors that can provide not only point hyperconverged appliances but also broader solutions configurations with sophisticated integration and support expertise.

(C) TBR