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Who wants to be number one?

Vendors have an obsession with being number one in their market but is it really that important wonders Billy MacInnes

Does it matter if you’re the number one vendor in a market or not? According to an article in IT Pro , the answer, for HPE at least, appears to be “no, not really”. It quotes the company’s vice president of strategy, Mark Linesch, reacting to server market figures from Gartner by saying: “Yeah, Dell’s got a couple of points of share according to Gartner – big deal.”

Given that so many people are focused on making their company number one in whatever market they operate in, that’s a fairly brave statement to make. Some might view it as a concession of defeat to Dell EMC but HPE seems to have adopted a different approach, concentrating on value and customer satisfaction although, to be pedantic, there seems little reason why you can’t do that and be number one.

To be fair, Linesch’s comments are merely echoing views put forward by CEO Antonio Neri in a blogpost back in March on IDC’s figures for the server market when he stated that “we are not going to chase market share just for share’s sake. We are going to drive profitable share”.

Neri added that IDC’s figures for the server market for Q4 2017 painted a clear picture where some vendors were “pursuing share for share’s sake, whereas HPE is focused on providing solutions that deliver high-value differentiation to our customers”.

What he and Linesch neglect to mention is that HPE’s strategy of concentrating on value happily coincides with a strategy that increases the average selling price (ASP) of its servers. Armed with the calculator on my iPhone – an upgrade on the old back of a fag packet or a beer coaster – I did a very rough calculation of ASPs based on server revenue and shipment figures from Gartner for the first quarter of 2018. While HPE slipped to number two in terms of shipments, it had the highest ASP of close to $8,300, 28% higher than Dell EMC’s ASP of $6466.30.

This suggests that, for HPE and its partners, being number two in the server market is not a disaster if it means they can make more money from every server they sell. However, the proviso is the vendor needs to maintain a strong and credible presence in the market if it wishes to continue to keep customers and partners happy.

It’s also worth stressing that Dell EMC came top in terms of overall shipments and revenues, so whatever HPE might imply, its rival’s strategy is paying off as well, especially when you consider that Dell EMC’s ASP grew by 21% compared to HPE’s 15% increase. Despite HPE’s protestations, being number one in the server market has proved to be quite important for Dell EMC.

So are we in “he would say that, wouldn’t he?” territory when it comes to analysing Linesch’s comments? No one can tell for sure but ask yourself this: would he be saying the same thing if HPE was still number one in the server market?

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