Editor’s note: HPE’s $275 million purchase of Silicon Graphics International is part of its drive to disrupt the high-performance computing market, says Technology Business Research analyst Krista Macomber.

HAMPTON, N.H. – Acquiring SGI will improve HPE’s ability to maximize share in the strategic, quickly evolving analytics and HPC markets.

Customer organizations are increasingly turning to real-time data analytics for newfound business advantages, such as more agile responsiveness to nuances in market demand. As a result, data analytics is quickly extending outside traditional, IT-centric use cases such as processing scientific research queries, extending the relevance of high-performance computing (HPC) across verticals and driving robust demand, visibility and stickiness of HPC implementations in customer organizations.

HPE’s announcement on Aug. 11, 2016, of its intent to acquire niche HPC hardware, software and services provider Silicon Graphics International (SGI) Corp. for $275 million is the most recent — and also a particularly influential — addition to a series of initiatives by traditional HPC vendors to evolve to capture burgeoning opportunities.

  • VIDEO: High performance computing explained in 3 minutes: https://www.youtube.com/watch?v=A_i5kOlj_UU

HPE has long and successfully participated in the HPC space, most notably through its Intel Integrity-based Superdome, NonStop and UX offerings that compete against the likes of IBM OpenPOWER and Oracle SPARC in being optimized to serve the demanding performance requirements of data-centric workloads. However, emerging analytics requirements have caused underlying HPC infrastructure requirements to evolve, driving market disruption.

Analytics and HPC customers require enhanced efficiencies (for example around power consumption) and scalability of underlying infrastructure. Even more notably, TBR believes HPC customers are increasingly purchasing from a more holistic solutions perspective as they seek to address line-of-business requirements, as opposed to focusing more narrowly on performance improvements. In this environment, TBR believes HPE faces new headwinds.

HPE has sustained innovation in core Integrity-based HPC platforms while also investing in new alternatives such as its higher-density Apollo hyperscale servers. However, ongoing developments to performance and efficiency from Intel have not only limited opportunities for HPE’s Integrity-based offerings but also created opportunities for strengthened competition from vendors such as Dell.

More traditional competitors, including Fujitsu and IBM, are investing in alternative forms of innovation to avoid mindshare and install base attrition. For example, IBM has made its platform more accessible to a wider range of customers and third-party innovators through its OpenPOWER Foundation.

SGI provides HPE with more concentrated expertise in identifying and providing solutions that meet customer requirements in verticals such as financial services, government and life sciences, which have among the most demanding HPC requirements, historically. In addition to gaining access to these customers, TBR believes HPE will concentrate its HPC efforts around the SGI employee base and portfolio, applying this cachet to secure HPC-oriented deals across HPE’s broader customer base.

From a portfolio perspective, TBR expects rationalization to occur across the HPE and SGI server offerings. Most prominently, SGI potentially offers HPE a new means to migrate its portfolio and install base off of Intel’s Itanium processors — which continue to shrink in demand due to industry commoditization — in the mid to long term.

In the short term, SGI provides competencies around scalable, high-performance storage that will be valuable to HPE as Dell nears its proposed acquisition of EMC. Additionally, SGI’s systems and data management and visualization software, and consulting and support services will better position HPE to compete against vendors such as IBM, Fujitsu and others as an analytics and HPC solution provider, as opposed to a systems provider.

In particular, SGI brings unique IP in bundling HPC-dedicated infrastructure for SAP HANA to HPE. This approach will help HPE secure its traction in customers’ analytics workloads and expand this footprint in underpenetrated environments.