Despite HP's Storage Refresh, CEO Mark Hurd Says Business Has 'Issues'

Storage remains Hewlett-Packard's Achilles' heel and now its struggling business has the ire of Mark Hurd, the company's new president and CEO. The good news is HP this week has updated its portfolio with the largest refresh of storage products in the company's history.

Speaking in his inaugural earnings call Tuesday evening, Hurd said turning around the company's struggling storage business is a key priority.

"We have issues in storage," Hurd said candidly. "We have not made enough progress in building out our specialist sales force, and we are not closing enough deals in the field. We have a lot of work in storage to do to get this business back."

For its second fiscal quarter of 2005 ended April 30, HP reported storage revenues of $825 million, a decline of 6 percent over the same period last year.

"We certainly have to improve our profitability in the storage business as we move forward," Hurd said, adding that the launch of nine new products and service packages should put the company on a path to achieve those objectives."HP needed to be more competitive with EMC and NetApp, and this puts them back in the game," said Tim Joyce, CEO of Roundstone Systems, an Alameda, Calif.-based HP partner. "They realized they were out of step and decided to come back with a bang."

Among the new products launched was a key update of its midrange Enterprise Virtual Array (EVA) line that includes three models, as well as products in segments of the storage market where HP has been absent. That includes the release of a new high-end NAS platform that the company says is less expensive than those from EMC and Network Appliance, the company's first virtual tape library, a popular means of backing up systems on low-cost disk that emulates tape. Also introduced was a new mid-range tape library.

But will those and other wares be enough to put HP back on the storage map?

"It's not really a product issue; I think it's execution," said Nancy Hurley, a senior analyst at Enterprise Strategy Group (ESG). "The key is getting the server folks as a whole to talk about storage." IBM and Sun are struggling in the same way, Hurley added.

Nonetheless, HP's new storage portfolio will give partners substantially better wares to compete against EMC and others."These are a lot of powerful solutions that will help partners to offer a full portfolio," Hurley said. "In the past, if you were an HP partner, you did really well in the SMB and maybe in the midtier. But having the end-to-end products to bring to the table so that nobody else could get their foot in the door wasn't necessarily there. Now it is."

The new products were launched at HP's StorageWorks conference in Las Vegas this week.

"We are changing the competitive landscape," said Bob Schultz, HP's senior vice president and general manager of network storage solutions, in the opening keynote address. Key to HP's refresh is a major upgrade to its flagship EVA line with three new configurable models that are much more competitive with EMC's Clariion CX Series arrays than HP's previous EVA 3000 and 5000 offerings.

"The presence of three models should increase the selling appeal to VARs as there is no longer a quantum change in capacity/performance as existed between the EVA3000 and the EVA5000," wrote Merrill Lynch analyst Shebly Seyrafi, in a report released last week. That's significant, he noted, because half of HP's EVA sales are sold through the channel in the United States.

The high end of the new EVA platform, the EVA8000, supports higher disk capacity, totaling 72 GB, support for up to 240 disk drives per controller pair and connectivity to up to 256 hosts. The entry-level EVA4000 supports up to 16.8 TB per system, up to 56 drives and 256 hosts as well. In the middle, HP's EVA6000 accommodates up to 33.6 TB per system and up to 112 drives."Did the EVA upgrade leapfrog the Clariion? No. But are they more than sufficiently competitive with that product now? Absolutely," ESG's Hurley explained. Key to the new EVA line is the new CommandView device manager, replication software that manages local and remote sites in a single interface, according to Schultz.

"It automates and integrates management tasks, which means fewer administrators, that manage more storage, more simply," Schultz said. "It enables you to quickly provision online storage, whether it's expanding LUNs, or adding physical disk online and instantly replicate data." Each support Fibre Channel connectivity and include HP FATA drives. Pricing for the EVA4000 is $124,000 for a 3.5-TB configuration, $221,000 for a 6.7-TB version of the EVA6000, and the high-end EVA8000 costs $409,000 for 14 TB. All are now available.

HP's decision to move up the food chain in the NAS world was aided by an OEM relationship with Beaverton, Ore.-based PolyServe, a supplier of clustered file-serving software for high-performance implementations.

"PolyServe probably has the best clustered file technology out there," ESG's Hurley said.

Each cluster can support 16 TB of file space, or 512 Linux file systems totaling up to 8.2 petabytes, said Kyle Fitze, director of marketing for HP's SAN division."It really changes the economics of NFS and large network-attached storage solutions," Fitze said. However, Merrill Lynch's Seyrafi questioned whether HP's new solution will have an impact on Network Appliance, noting that NetApp supports up to 64 TB on a single filer. HP's solution is more competitive with HP's lower-end FAS200, according to the report.

"While the added functionality and scalability provides some risk to Network Appliance, scalability below that of NetApp and the use of Linux as the operating system (rather than NetApp's robust DataOntap 7G) likely limits HP's penetration in the NAS segment," he wrote. Available later this month, HP's EFS Clustered Gateway, which starts at $30,000, and the cluster starts at roughly $75,000.

Another area HP hopes to have a major impact in is with its new StorageWorks Enterprise File Services WAN Accelerator. Based on technology licensed by San Francisco-based Riverbed Technology, the appliance, which runs on industry-standard HP ProLiant servers, is designed to speed the connection of data at branch offices by up to 100 percent, HP said. Accelerating WAN performance at branch offices is a growing trend--EMC and Cisco earlier this year partnered to deliver a similar appliance based on wide area file services (WAFS) technology that Cisco acquired last year.

Alan Saldich, Riverbed's vice president of product marketing, argued that his company's solution offers more features than Cisco's.

"The product Cisco sells is a file engine," Saldich said. "It is a file cache, a single-purpose product. Our product optimizes everything on TCP." Nine out of 10 customers use it for more than just file caching, he added.Demand for WAN accelerators at remote offices has picked up with the growing availability of the technology, said Larry Gross, director of enterprise storage at Technology Integration Group, a solution provider that sells IBM, HP and EMC storage.

"With the need for replication to support remote offices and the hassle and cost of getting additional pipes, which may not even be available in some rural areas, makes this product very valuable," Gross said.

Available later this month, the software starts at $11,100, although a high-availability implementation starts at $42,500.

Another approach to backup recovery included in HP's new offering is the 6000 Virtual Library System (VLS). Based on technology licensed by Sepaton, the VLS platform is a disk-based solution that emulates multiple tape libraries, allowing customers to back up and recover multiple hosts and SANs simultaneously. Available in June, pricing starts at $29,000. The system currently scales to 10 TB.

HP also added a high-end tape library -- the company is OEMing StorageTek's SL500. Branded by HP as the Modular Library E-Series, it supports up to 16 LTO format Ultrium tape drives and 440 slots (future releases will scale higher) with native throughput of 4.6 TB per hour. Available now, an EML with 103 slots and up to four drives (20.6 TB) is priced at $37,000.HP also unveiled a solution that can recover Microsoft Exchange e-mail servers in minutes rather than hours. The Fast Recovery Solution will be available in late June. Starting prices for connectivity to HP's EVA systems starts at $4,150, and to the company's high-end XP platform, pricing starts at $6,150.

Finally, HP unveiled seven Information Lifecycle Management (ILM) services that leverage specific technical- and vertical-industry expertise. Although the services will be offered through HP, the company said it will bring in partners on certain engagements as needed.