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Channel has to deliver server growth for HPE

The need to grow the server business via the channel has been identified by HPE as one of its growth priorities for the next fiscal year

HPE is planning to increase its server sales via the channel and reverse the current weakness it perceives in that part of its business as it details plans for its next fiscal year.

The firm marked its first year of operations with revenues of $50.1bn. The fourth quarter however saw a drop of 7% to $12.8bn, with the firm talking up its transition to make the most out of IoT and the hybrid cloud.

But it was comments made to analysts about servers that included channel heavy references as the firm looked to grow that hardware segment.

In the call HPE CEO Meg Whitman made it clear that there was work to be done in the volume server business, and that would involve the channel.

"ISS rack is where the most ongoing pressure is. Hyper converged is actually growing and is higher margin than our core ISS product as is synergy, as is high-performance compute, as is mission critical systems, and of course, as is TS. So the main area that we’ve got to work on is shoring up that ISS rack, and that’s all volume-based and it’s all through the channel," she said.

"So Disties, VARs, that things like our newly redone value-added reseller program and our ability to do quote the cash fast and our ability to fulfill faster than our competitors. So I would say that if we can shore up ISS rack then I’m confident in the growth rates of these other businesses that we’re now gaining real traction in. So there’s weakness in ISS rack. I think, we are not executing as well as we could and we aim to fix that," she added.

The importance of increasing the volume server business is one of the main planks of the growth strategy that Whitman outlined to analysts.

"As I look at 2017, I think we can grow revenue and operating margins at the same time going forward. And let me tell you why I think that," she added "First is, we need to shore up core ISS rack with improvements in the channel, improvements in quote to cash, and focus – more focused on the distributors and VARs for the volume-related ISS rack business."

Whitman said that it had benefited from some customers making a switch after Lenovo acquired the IBM x86 server business and "We haven't seen them pop back yet".

"I don’t ever count Lenovo out, okay. So they may be just about ready to get up off the math here, but we’ll see in the next 6 to 18 months," she added.

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