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SWOT:HewlettPackardEnterprise(ArubaNetworks),WiredandWirelessLANAccessInfrastructure,Worldwide

11December2015|ID:G00278171|Analyst(s):ChristianCanales,TimZimmerman

Summary

TheacquisitionofArubaNetworkshasstrengthenedHewlettPackardEnterprise'smarketposition,butstrategicplannersneedtounderstandthatthehighlevelofopportunitieswillrequireproperexecution.Competitorscanrefinetheirgo-to-marketstrategiesbasedonthisSWOTanalysis.

Analysis

SWOTAnalysis

Thisstrength,weakness,opportunityandthreat(SWOT)analysisevaluatestheHewlettPackardEnterprise(ArubaNetwork)strategyfordeveloping,marketinganddeliveringwiredandwirelesslocal-areanetwork(LAN)accessinfrastructuresolutions.ThismarketconsistsofvendorsthatsupplywiredandwirelessLAN(WLAN)hardwareandsoftwarecomponentsthatprovidedeviceconnectivitytotheenterpriseinfrastructureaccesslayer.Thesecomponentsinclude:

• Hardware—wirelessaccesspoints(APs)andwiredswitches.• Softwarenetworkapplications—includingnetworkmanagement,guestaccess,onboarding,authentication,

authorizationandaccounting(AAA)security,policyenforcement,intrusiondetectionsystem(IDS)/wirelessIDS(WIDS),locationservices,networkperformancemonitoring(NPM),andapplicationprofilingandanalytics.

ThewritingofthisresearchcomesatatimeofmajorchangeswithinthelargerHewlettPackardorganization.Effectivesincethestartofitsfiscalyear,1November2015,Hewlett-PackardCompany(HP)hasseparatedintotwoindependentpubliclytradedcompanies"HPInc."and"HewlettPackardEnterprise."HewlettPackardEnterprisewillcomprisenetworking,servers,storage,cloudcomputing,unifiedcommunicationsandenterpriseservicesandsoftware,whereasHPInc.willmanagethePCandprinterbusiness.

Inthenetworkingmarketplace,HewlettPackard'sacquisitionofArubaNetworks(Aruba)(completedinMay2015)offersastrongaccesslayersolutionportfolio,butexecutionisparamount—giventhesizeoftheacquisition.Arubahadapproximately1,800employeesand,accordingtoourestimatesin2014,thecompanygenerated$650millioninproductrevenuefromsalesofLANaccesslayerproducts,predominantlyWLAN.ThecombinationoftheNo.2WLANvendorwiththeNo.2Ethernetswitchvendor(intermsofrevenueshare,andaccordingtoGartner'spublishedmarketsharereports,fortheenterprisenetworkequipmentmarket)establishesHPE(Aruba)wellintheglobalaccesslayermarketagainstthemarketleaderCiscoSystems(Cisco).


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StrategicplannerscanuseouranalysistostrengthenHPE(Aruba)'spositioningintheaccesslayermarketasthecompanycapitalizesonmarketopportunities.StrategicplannersfromcompetitorscanuseouranalysistobetterunderstandHPE(Aruba)'sweaknessesandthreats,torefinetheirgo-to-marketapproaches.

NomenclatureUsedinThisSWOT

SinceHewlettPackardandArubaNetworkswereverydifferentcompaniespriortotheacquisition,inthisresearchwehaveusedthefollowingnomenclature:

• "HP"forlegacyHewlettPackard(HP)NetworkingWLANproducts• "Aruba"forlegacyArubaNetworks• "HPE"forreferencestothenewentity(HewlettPackardEnterprise,whichincludesArubaNetworks)

Figure1providesagraphicalproportionaterepresentationofthestrengths,weaknesses,opportunitiesandthreatsofHPEwiredandwirelessaccessinfrastructurebusiness,basedonGartner'sSWOTratingmodel.ThiscomparativerepresentationoftheSWOTanalysisforHPEaddsrelativeweightingstoeachoftheSWOTelementsaspartofproducingthegraphicalresults.ThesizeofeachboxreflectstherelativesignificanceofHPE'sSWOT.

Figure1.GraphicalRepresentationofSWOT:HewlettPackardEnterprise,WiredandWirelessLANAccessInfrastructure,Worldwide

LAN=local-areanetwork;SWOT=strength,weakness,opportunityandthreat

Source:Gartner(December2015)


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Figure2liststhecontributingfactors,providingalistofHPE'skeystrengths,weaknesses,opportunitiesandthreatsinthemarket.Figure2summarizestheindividualSWOTfindings.Figure2.SWOT:HewlettPackardEnterprise,WiredandWirelessLANAccessInfrastructure,Worldwide

H3C=H3CTechnologies;HPE=HewlettPackardEnterprise;LAN=local-areanetwork;R&D=researchanddevelopment;SDN=software-definednetwork;SMB=smallormidsizebusiness;SWOT=strength,weakness,opportunityandthreat;WLAN=wirelessLAN


Strengths

StrongAccessLayerSolutionThroughArubaAcquisition

HPbegantoenhanceitsportfolioofWLANofferingsviatheacquisitionofColubrisNetworks(Colubris)(4Q08)and,later,throughtheacquisitionof3Com(2Q10).Colubriswaspredominantlyasmallormidsizebusiness(SMB)solutionwithastrongsecurityfocus,and3Comwasawell-establishedvendorinChinathroughitsH3CTechnologies(H3C)subsidiary.WhiletheseacquisitionshelpedHPtobecomeatop-fiveWLANvendor(inrevenueranking,accordingtoGartner'spublishedmarketsharereports),HPhasstruggledthroughouttheyearstokeeppacewiththemarket,losingrevenueshareduring2013and2014,withchannelpartnersgrowingmorefrustrated.Theissueswerealackofmarketfocusand


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differentiation,aswellasabroad,disjointedportfolio,basedonacquisitionsthatwerenotrationalizedtomeetHP'stargetmarketsorofferaclearcontinuumofproductsacrossHP'scustomertargets.TheacquisitionofArubaNetworkswasaboldmovebyHPE,inordertostrengthenaWLANofferingthathadlostitscompetitiveedge.Thiswaspredominantlyduetoalackofacost-effectivecontrollerlessofferingaswellasitsgapsinitsnetworkapplicationservicesportfolio(forexample,deviceonboardingandguestaccess).ArubahadbeentheNo.2playersince2007(intermsofrevenueshare,accordingtoourenterpriseWLANmarketsharestatistics).Thisisbecauseofitsbroadoffering—drivenbyinnovation,increasinglysoftware-drivenandbasedonastrongunifiedaccessenforcementpolicy—appealingtonearlyallnetworkdesigntypesandpricepoints.Aruba'sexecutivemanagementteamwasnotableforitsremarkablejobofrecognizingwhichsegmentsweregrowingandthenmovingthecompanytomaximizeitsrevenuepotential.

Strong,unifiedwired/wirelessintegrationandinnovativenetworkapplicationsareincreasinglyrequiredbyenterprises;ArubaprovidesastrongsolutionwithitsClearPassaccessmanagementproductsuiteandAirWavenetworkmanagement.Theseincludemultivendorsupport,whichblendswellwithHPEswitchesaswellasenterprisesthathavedeployedothervendors'accesscomponents—includingCisco.

StrongNetworkManagementandGuestAccessSolution

ArubahasblendeditsAvendaSystemsandAmigopodacquisitionsintotheClearPasssuite,oneoftheleadingguestaccess,policyenforcementandonboardingsolutionsinthemarket.HPEisnowinpossessionofarobustsolutionthatcanimplementgranularaccessprivilegesbasedonusers'roles,devicetype,devicehealthandlocation.Thisallowstheapplicationtocontroltheaccesspolicyofendusersconnectingtoawiredorwirelessnetworkbasedontheirlogincredentials.ThekeyenablerfortheClearPasssuiteofapplicationshasbeentheabilitytoprovideenterpriseswithfunctionalityacrossdifferentpricepointstoaddressabroadmixofmarketsandcustomertypes.Forexample,inthesmallandmediumenterprisemarket,organizationsmayneedguestaccess,inadditiontothephysicalwiredand/orwirelessconnectivity.ClearPassGuestoffersthiscapability,whereasmostcompetitorshavethisfunctionalitybundledintosinglemonolithicsecurity,policyenforcement,configurationmanagement,intrusiondetection,RemoteAuthenticationDial-InUserService(RADIUS)serverapplication.

Aruba'sClearPasssuiteofapplicationswasincludedinGartner's2014"MagicQuadrantforNetworkAccessControl,"inthe"Leaders"quadrant(togetherwithCiscoandForeScoutTechnologies).ARADIUS-basedsolution,ClearPass'strengthsincludeintegrationwiththird-partysecuritysolutions(securityinformationandeventmanagement[SIEM],enterprisemobilitymanagement[EMM]andnext-generationfirewalls),astrongbringyourowndevice(BYOD)EMMstrategythroughitsintegrationwithAirWatch,MobileIronandseveralotherEMMsolutions,aswellasgranularguestnetworkapplicationfunctionality.WhileClearPasssaleshavehistoricallybeenprimarilydrivenbywirelessrollouts(andrarelyseeninwiredLANenvironments),HPE'sacquisitionwillbroadentheopportunity.

HPEhasnotyetmergedAruba'sAirWaveanditsIntelligentManagementCenter(IMC)networkmanagementapplication,butstepswillbetakentodoso.GartnerexpectsanysurvivingfunctionalityofthemonolithicandoftencumbersomeIMC,aswellasaseparateIMCSmartConnectapplication,tobewovenintotheAirWaveaccesslayerplatform.TheIMCbrandandcapabilitiesneededfordatacenter(DC)managementmayalsobespunoffintoaDC-centricsolution,withtheabilityforAirWaveandanewIMCtoprovideanenterprisesolutionwherethespecificapplicationcanfocusontheenterpriseneedsofeachnetworksegment.

LargeNetworkingPortfolio

HPEhasabroadnetworkingportfoliothatincludesswitches,WLANandrouters,unmatchedinbreadthandfunctionalityintheaccesslayermarket(exceptingCisco),butatamorecompetitivepricepoint.Inanincreasinglycommoditizedmarketofaccesslayerhardware,HPEhasbeenabletocapitalizebasedonitslower-pricedaccesslayerswitches(incomparisonwithCisco).

Followingonfromthe2009launchofProCurveOpenNetworkEcosystem(ONE)Alliance,HPEcombinedthisallianceprogramwiththeprogramsfrom3Com/H3CandTippingPointinearly2010tocreateanewprogramcalledHPAllianceOnePartnerProgram.ThisprogramaimsforpartnershipswithvendorproductsdevelopedtoworkwithHP


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Networking.VendorsthatarepartofthisprogramincludeAeroScout,AirTightNetworks,Avaya,F5Networks,Fortinet,IntelSecurityGroup,MicrosoftLyncandRiverbedTechnology.Inaddition,HPEswitchescanbebundledasanoptionwithotherofferingsfromitsalliancepartners.ThisenablesHPEtoofferanend-to-endportfoliotocompetewithCiscoforthoseenterprisesthatpreferasimple"one-stop-shop,"whilemaintaininga"best-of-breed"approachtoinfrastructuredesign.

LifetimeWarranty

AveryimportantsellingpointforHPEcontinuestobetheprovidingofalifetimewarrantyonmanyofitsproducts,withnextbusinessdayadvancedshipmentinmostcountries.HPEhasbeenapioneerhere,andeventhoughothernetworkingvendorsofferasimilarwarrantyonpartoftheirproductlines,today,HPEcontinuestobealeader,coveringallcriticalcomponents,suchaspowersuppliesandfans.In3Q13,HPElauncheditsLifetimeWarranty2.0program,whichofferscustomersfree24/7technicalsupportforthreeyearsonanyHPFlexCampus,FlexBranchorsmallbusinessproduct.Thisprogramappliestoawideselectionofswitches—including5500HI,5500EI,5120EI,3800,3600EI,3500/3500yl,2915,2910al,2620,2615,2530,2520and2510switchseriesforaccesslayerandbranchnetworks.ForWLAN,freesupportappliestotheMSMControllerSeries,830/870UnifiedWired-WLANApplianceseriesandtheMSM-802.11nAccessPointseries.

GlobalSalesCoverageandSupport

HPEhasabroadnetworkofdistributionchannelsandisabletoreachoutandaddressnetworkmarketdemandonawiderscalethanitscompetitors(withtheexceptionofCisco).Ithastheabilitytoofferacompetitivelypricedaccesslayerofferingwithequivalentfunctionalityacrossallgeographies,soHPEiswellpositionedtoseizemarketsharefromCisco(althoughproperfocusedexecutionwillberequired).Additionally,thishasopenedupcross-sellingopportunitiesaswellasaccesstonewcustomerswithinthevariousmarketsHPEbusinessaddresses,particularlylargeenterpriseaccounts,wherethenewaccesslayersolutioncanbedeployedglobally.

FootprintandAbilitytoPenetratetheSMBMarket

ArubaInstanthasenjoyedstrongcustomeradoptionthroughtheintegrationofmeshnetworkingwithintheaccesspoints.ThiseliminatestheneedtodeployaWLANhardwarecontroller,appealingtotheprice-consciousmarketofSMBs.HPEhasachievedgoodpenetrationamongSMBsintheswitchmarketandtheArubaacquisitionhasbroadenedthisopportunitytoWLAN.HPEneedstocontinuetoinvestinArubaCentral,itscloudmanagementoffering,sothatitcanprovideequivalentfunctionalitytotheClearPasssuiteofapplicationsandAirWave.Failuretocreatethisparitywillleavethegrowingcloudmanagednetworkandinfrastructure-as-a-service(IaaS)marketswideopentoCisco'sMerakisolution,aswellasofferingsthatcontinuetobelaunchedbyothercompetitors.HPE'swiredswitcheshaveastrongfootprintintheSMBmarket,particularlyinEMEAandAsia/Pacific,whichneedstobeaggressivelyleveraged.WeexpectHPEtomakepartsofitsswitchingportfoliocloud-manageablewithinthenextninemonths.ThisisanareawhereHPEcanenjoyabetterexperiencethanCisco.WithAruba,thesamehardwarecanbemigratedfromcloudtoon-premisesmanagement,butwithMerakithisisnotpossible.

Weaknesses

BroadWLANPortfolioNeedsSimplifying

FollowingtheacquisitionofAruba,weexpectHPEtobeginrationalizingcertainproductlinesinthenearfuture,tosimplifyselectionforcustomers.Thisisanecessarymeasure,particularlyforWLAN,toeliminateproductfunctionalityoverlapinitsbroadportfolio,andisthereasonwhythishasbeenflaggedasaweakness.Arubaswitchesandlegacy"HP"APsrepresentproductredundancies—andthusarenotthelong-termstrategicplatformsforHPE.Whileeventualdiscontinuationoftheseproductlineshasthepotentialfordisruptiontoexistingcustomers,webelievethereisagreaterbenefittoberealizedbytherationalizationofHPE'sWLANportfolio.


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Productoverlapwillpotentiallyconfusecustomers,particularlywhenlittleproductdifferentiationexists.Inresponsetothe"unifiedwired/wireless"productannouncementsmadebyCiscoearlyin2013withitsCatalyst3850Seriesswitches,HPintroducedits830UnifiedWired-WLANSwitchSeriesthatsameyear,butcompetingcontrollerlesssolutionssuchasArubaInstanthaveenjoyedhighercustomeradoption.TheHPunifiedwired-WLANmoduleforthe10500and7500seriesswitchisexpensivetodeploysinceitrequiresachassisswitch.Moreover,accessswitcheshavevastlymovedawayfromchassisdesignstofixedconfiguration.CustomeradoptionofCisco'sWirelessServicesModule2(WiSM2)hasbeenlimited,ashasHP's10500/7500unifiedwired-WLANmodule.Inlate2014,HPreleaseditsM220802.11nAPseries,whichusesaclusteringtechnologythatenablesSMBstodeployandmanageupto16APsasasingleentity.TheM220overlapswithArubaInstant,buthaslessfunctionality,justifyinganeventualneedtoretirethisproduct.HPEhasacloud-managedWLANproduct,basedonamanagementinterfacecalledCloudNetworkManager(CNM)andthe350,355and365cloud-managedAPs,whichoverlapsinfunctionalitywithArubaCentral.

AccessLayerSolutionNeedsBetter"Stickiness"

TheissueofproductfunctionalityoverlapwithinHPE'saccesslayerportfoliocreatesaholeinthe"stickiness"betweenitsWLANandswitchofferings.Wehavegivenalowweightingtothisweakness,sincesolutionssuchasAirWaveandClearPassofferdifferentiation,butwebelievethereisroomforimprovementtodelivermoreadvancedwired/wirelessintegrationcapabilities.TheabilitytobuildonthisstickinesswillprovideHPEwiththemeanstogainacompetitiveadvantageagainstCisco.Accesslayerswitchesrepresentamaturemarketthathasnotperceivedmuchinnovationinthepastfewyears.Networkapplicationscanprovidethe"glue"requiredinordertoestablishapremiumforfunctionality,aswellaseliminateanaccesslayerpricewar.

LacksaStrongNetworkingBrandWithinLargeEnterprises

Whiletheaccesslayerhasbecomeacommoditizedspace,manyvendorshavehistoricallystruggledintheirabilitytodisplaceCiscobasedonpricing.Oneofthereasonsisthatmanynetworkadministrators,intheirvendorselection,continuetoviewtheentirenetwork(access,aggregationandcorelayers)asoneentity.ThishugelybenefitsCisco,becauseoftheperceivedsafetyofa"onestopshop"fromastrongglobalbrandalongwiththerecognizablevalueofCiscotrainingandcertifications.HPEneedstoadoptastrongerapproachtowardleveragingitsbrandintheenterprisemarket,tobeabletoachievesuccesswhencompetingagainstthebrand"pull"thatCiscoenjoys.TheHPEcompanyspinoffshouldhelpinthisaspect,eventhoughshort-termmarketinginvestmentswilllikelybelimitedduetotheplannedcostcutting.

ArubaCentralHasSomeFunctionalityGaps

HPE'srecentadditionofClearPassguestaccessfunctionalityhascontributedtomakingArubaCentralamorecompletecloudWLANsolution.Forconnectivityredundancy,intheeventoflosingtheWANconnectiontothecloud,ArubaInstantAPscanreverttocluster(on-premises)mode.However,Cisco'sMerakicontinuestoboastseveralstrengthsinfunctionality,includingindustry-leadingdeviceprofiling,aswellassubscription-basedcloudapplicationsthatincludebasictrafficshaping,WANoptimizationandcontentfiltering.ThismeansthatArubaCentralislackinginsomefunctionalityincomparisonwithCiscoMeraki.

Cloud-managedWLANsarebecomingarequiredelementamongenterprisebuyers,andthesubscriptionmodelofsoftware-as-a-serviceblendswellwiththeincreasingavailabilityofmanagedWLANservices.Enterprisesarelookingforvendorstoprovideanequivalentfunctionalitysolutionthatcanbedeployedon-premisesaswellasinapublicorprivatecloud,butoftenexamineasingleimplementationcapabilityforasingleusecase.

Opportunities

MultivendorDeploymentsDuetoCommoditizationofAccessLayerSwitches


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Whilewehadclassifiedthisasathreatin"SWOT:Cisco,WiredandWirelessLANAccessInfrastructure,Worldwide,"weseecommoditizationasanopportunityforHPE.IncreasedcommoditizationofaccesslayerswitchesprobesCisco'sabilitytochargehigherpricepremiums,andinreturn,favorscheaperproductsthatoffersimilarlevelsoffunctionality.WhilefearofinteroperabilitybetweenCiscoandothervendors'equipmentoftencompelscustomerstoavoidlookingatothervendorsforreplacements,multivendornetworkswillcontinuetogrowasaresultofincreasedcommoditization.Accesslayerswitchesrepresentamaturemarketthathasnotseenmuchinnovationinthepastfewyears.TechnologiessuchasPoweroverEthernetPlus(PoE+),virtualstackinginfixedconfigurationswitches,andimprovedpowerconsumptionnolongerofferdifferentiation.Therefore,lowerpricepointsincreasinglyplayanimportantrole.Refreshprojecttimingalsoaffectstheprocurementprocess,whichwhencoupledwithincreasedcommoditization,stimulatesadoptionofmultivendornetworks.Thisisbecausethepurchasingdecisionfortheaccesslayercomponents(wiredandwireless)isoftenmadeatdifferenttimesandsometimesbydifferentpartsoftheenterprise.

IncreasingDemandofNetworkApplicationServices

Physicaltechnologies,suchas802.11nand802.11acWave1,havebecomecommoditizedattheaccesslayer,andthiscommoditizationhasincreasedtheusefullifeofequipment.Thismakessellingoverlaynetworkservices(suchascontext-awareandlocation-basedservices,security,andBYODsupport)acrosstheentirenetworkforwiredandwirelessconnectivitymoreimportant.Deploymentofnetworkapplicationservices,suchasnetworkmanagement,securityauthenticationandauthorization,andpolicyenforcement,willcontinuetobedrivenbyenterprisesseekingefficient,secureandpredictablebehaviorfromtheirnetwork.Gartnerisalreadyhearingclientsaskforthenextstepintheaccesslayermarket—SLAsforwiredandwirelesscommunications.

HPEiswellpositionedintheaccesslayermarkettotakeadvantageofthegrowingbuyerdemandforperformancearoundclientbandwidthrequirementsalongwithend-to-endmonitoringofthenetwork,aswellasproactiveanddynamicchangestothenetworktomaintainSLAs.TheabilitytoenforcetheseSLAsacrossdata,voiceandvideomeansmonitoringtoolsmustprovidefeedbackonbandwidthandlatencyacrosstheend-to-endnetwork.

ProductssuchasClearPassandAirWaveofferdifferentiationandareeasiertouseoverlegacyHPequivalents.TheArubaacquisitionmakesHPEaleadingproviderinapartofthemarketthatisgrowingfast,andwheredemandwillcontinuetobestrong.Thereisalsoaneedinthemarketformanagedservices;however,withoutmonitoringtoolsandtheabilitytoproactivelyaddressissues,managedserviceproviders'partnerswillbeunabletomeetthemarketrequirements.

LocationAssetsviaMeridianAcquisition

WehaveclassifiedHPE'spositionintheWLANlocationservicesspaceasanopportunitybecauseimplementationoflocation-basedWLANsolutions—whilenicheinthecarpetedenterprisespace—isgrowinginverticalssuchasretailandhealthcare,itwillbedrivenfurtherastheuptakeofInternetofThings(IoT)continues.Today,WLANlocationingisfillingagapwhereGPS-basedorcellularsolutionsdon'tfunctionaswell,whichisindoorsandincomplexurbanenvironments.Itallowsenterprisestoanalyzemovementanddeliverhigherlevelsofbusinessvaluebyusingthisdataforcontext.GPSsatelliteandmobilenetworksignaltriangulationofferlessubiquityandprecision,renderingtheirusesuboptimalwhencomparedwithWLANlocationservicestoenrichmobileappsandotherworkflows.Wi-Fisignalscantriangulatethepositionofawirelessdeviceindoorsratheraccurately.InasimilarveintotheacquisitionsofThinkSmartTechnologiesbyCiscoandofYFindTechnologiesbyRuckusWireless,ArubaacquiredMeridianAppsin2013,aimedatintegratingMeridian'sWLANlocationingsolutionforsmartphonesandtablets.Meridian'ssoftwaretargetspublic-facingverticals,suchascasinos,malls,stores,transporthubs,conventioncentersandmuseums,tohelpcustomersnavigatelargeindoorfacilitieswithcustommobileapplicationsthatprovidedirectionsandpointsofinterest.Fortheenterprise,informationcanbegatheredaboutusers'travelpatternsandpreferences,aswellasassetlocations,whichcanbeusedtodelivercontext-awarenessadvertising,forinstance.

Cloud-ManagedWLANs

ThecombinationofHPE'spresenceamongSMBsintheEthernetswitchmarketwithAruba'sacquisitionhaswidenedtheopportunityforcloud-managedWLANs,whicharegainingmarkettraction.Weestimatethatcloud-managedWLANsare


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growingthreetimesfasterthantraditionalofferings.CloudisappropriatefororganizationswithlimitedITstaffandbudgetaryconstraintsasitpresentsanoptionforrapidactivationofremotebranches,particularlyforSMBs.Cloudcanoffermoreflexibledeploymentandmanagementoptions,especiallyinmultisiteormultitenantdeployments.ServiceprovidershaveembracedtheideaofbeingabletocustomizewirelesshotspotsandrelatedservicesviaasingleWeb-basedinterfaceformultiplesites—withouthavingtobuilddatacenters,deployon-siteWLANcontrollersandsoforth.CloudWLANsareflexibleinscalability,anelementofparticularimportancetomanagedservicesproviders.Venueownerswhodeliverpublicwirelessaccesswelcometheideaofnoadditionalcapitalexpenditure(capex)beyondtheinstallationoftheAPs,freeingupinvestmentforothervalue-addedapplicationslikeanalyticsandlocation-basedservices.

GeographicalExpansion

HPE'sacquisitionofArubapresentsanopportunityforgeographicalexpansion,fromthebenefitofamorerobustwired/wirelessLANaccesslayeroffering.Accordingtoourestimates,switchrevenuefromNorthAmericaforHPE'skeycompetitorscontinuestoconstitutethebulkoftheglobalnumber(morethan45%forDellandmorethan50%forCiscoandJuniperNetworks).Incomparison,NorthAmericarepresents20%to25%ofHPE'sworldwideswitchrevenue.Historically,thebulkofAruba'srevenueoriginatedfromNorthAmerica,presentinganopportunityforHPEtogrowitsbusinessinthisregion.Similarly,givenAsia/PacificandEMEAhaveeachrepresentedmorethan30%ofHPE'sglobalswitchrevenue,historically,thisopensupanopportunityforanincreasedWLANfootprintintheseregions.

PublicVenue/ServiceProviderWLANOpportunity

ThisisanareawhereAruba,historically,lackedtraction,andwhenthismarketwasgrowingstrongly,Arubamissedoutonrevenuegrowth.WehaveclassifiedthisasanopportunitybecauseHPEhastherightproductstobecomealeadingplayerinthismarket,especiallywiththemovetomoresoftware-orientedproductsandtheMeridianacquisition.Inordertosucceed,HPEneedstosimplifyAruba'spricingstructurethathas,todate,beenheavilybasedonsoftwarelicenses,makingitssolutiontooexpensiveincomparisonwithRuckusWirelessandHuaweiTechnologies.Aruba'sHybridControlarchitecturewasacomprehensivemove,butultimatelythelackofstrongpartnershipswithcommunicationsserviceproviders(CSPs)meanttractionwasmissing.HybridControltargetsserviceproviderstoofferprivateWi-FiformanagedservicesandpublicWi-Fiforcellularoffload.ThisarchitectureispartlybasedonusingtheArubacontrollerlessInstantaccesspointstooffloadtrafficlocally,whilecentralizingmoreimportanttraffic—suchasbilling—tothe7200SeriesMobilityControllers,deployedinthecore.Arubaclaimsthatthisarchitecturecanscaletomorethan100,000accesspoints.

SoftwareDefinedNetworkImplementationinWired/WirelessLANAccessInfrastructure

ArubahascompletedinteroperabilitytestingwithpartnersAlcatel-LucentEnterprise,AristaNetworks,BrocadeandJuniperNetworks,aimedatimplementingsoftware-definednetwork(SDN)supportacrosswiredandwirelessproducts.ThesetestsincludedtheintegrationofArubaedgeproductswithothervendors'SDNaggregation/coreswitches,orwithothervendors'networkmanagementsolutionsembeddedwithSDNsupport.Incampusenvironments,SDNpresentsanopportunitytosimplifynetworkdesigns,increaseend-to-endapplicationperformanceandvisibility,andeliminatemanualintervention.SDNsupportpermitsnetworkadministratorstocraftwiredandwirelesstrafficforwardingpoliciestooptimizenetworkpaths,maximizeavailablebandwidth,lowerlatencyandeliminatespanningtrees.DynamicSDNtopologiesimplyphysicalandlogicalLevel2/Level3topologiesarelessrelevant.UnifiedmanagementmakesiteasierforITtosupportacommonpolicyframeworkacrosstheentirenetwork.

WhileSDNimplementationattheedgeofthenetworkremainsveryembryonic,asorganizationsbegintoembracethearchitecturaladvantagesthatSDNcanoffer,thiswindowofopportunitywillbecomemoretangible.ThebreadthoftheHPEAllianceOnePartnerProgramcontinuestoprovideopportunitiesforfurthertestingandproductdevelopment.

InnovativeCommercialSolutions

Weclassifythisasanopportunitybecauseintheswitchmarket,somevendorshavestartedtoexplorewaysofofferingmoreflexibleandinnovativecommercialsolutions,whichaddsdifferentiationasanalternativetoCisco.Launchedin


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4Q12,HP'sFlexNetworkUtilityAdvantageProgramisanEthernetswitchrentalmodelbasedonequipmentusage,whichfororganizationscanoffertheadvantageofaligningnetworkingcostswithactualconsumption.Enterprisesarebilledonamonthlybasis,commencingoncetheyreceivetheequipment,withHPEretainingownership.HPE'sofferingispredominantlytargetedatdeliverythroughpartnershipswithCSPs.Customerscanuseports(activate/deactivate)basedonspecifictermsandagreementswiththeirCSP.Forthetargetedlargeenterprisesandgovernmentorganizations,thekeywillbesavingsoncapitalexpenditure,aswellasgreaterflexibilityinaligningnetworkcapacitywithchangingbusinessneeds.

SaleofMajorityStakeinH3C

In2Q15,HPEannouncedthataTsinghuaHoldingssubsidiary,Unisplendour,agreedtoacquire51%stakeinanewbusinesscalled"H3C,"comprisingH3CTechnologiesandHP'sChina-basedserver,storageandtechnologyservicebusinesses.Thedealisexpectedtobefinalizedinthenextthreemonths.MajorityownershipbyaChineseentitywillhelpHPEsoftenthenationalistinfluencethatcannegativelyaffectnon-Chinesevendors.Wearealreadywitnessingforeignvendorsbeingsidelinedincriticalnationalinfrastructureprocurements,includinggovernment,healthcare,education,manufacturing,transportationandutilityindustries.Formoreinformation,see"GeopoliticalIssuesPushHPtoForgoControlofDataCenterNetworkingPortfolio."

Threats

NeedtoRationalizeProductSupportWarranty

HPE'sacquisitionofArubacreatesacollisionbetweenHPE'slifetimewarrantyandAruba'shigher-pricedmaintenanceoffering.Historically,Arubahassupportedafeature-licensedsalesmodelforitsAPs,whichcan"undermine"itsaggressivehardwarepricesagainstcompetitorsthathaveasimplerpricingmodelstructure.Aruba'spricingmodelinregardtonetworkmanagementincludespayingforanAPmanagementlicenseforthecontroller,aswellasalicenseforAirWave.Value-addedsecurityfunctionality(suchaspolicyenforcementfirewallandwirelessintrusionprotection)isalsochargedthroughmodulelicensesbasedonthenumberofsupportedAPs.

HPEhasyettorevealspecificdetailstoGartneraboutthepossibilityofimplementingawarrantypolicyacrosstheformerArubaportfolio—tomirrorthelifetimewarrantyavailableacrossmostofHPEaccesslayerswitches.WeexpectHPEtobeginimplementingarationalizedwarrantypolicyforArubaoverthenextthreetosixmonths,butremaincautiousabouttheextentofthischange,aswerecognizethatHPEwillsacrificeamajorrevenuestreambydoingthis.Failuretomaintainthisimportantsellingfeaturewillleadtothedangerofbuyerspullingthepiecesapart(wiredandwirelesscomponents)andseekingthelowestprice,potentiallyshiftingtoadifferentvendorthatcanprovidepartofthesolution.

Cisco'sAdvantage—SellingtoEnterprisesThatWanttoBuyTheirAccessLayerSolutionFromaSingleVendor

WehavegivenalowweightingtothisthreataswehaverecognizedthestrengthofHPE'send-to-endnetworkportfolio.ThecaveathereisthatbuyingfromthesamevendorwilleventuallyfavorCiscomorethananyothercompany,simplyduetoCisco'sstronglocalpresence,controlofdistributionchannelsandloyalcustomerbase.Thereisalsoanerroneousperceptionthatbuyingfromthesamevendordeliversbetterintegratedwiredandwirelessnetworkmanagement.Thisisnottrue,asthetechnicalcapabilitiesofaccesslayertoolstodayallowenterprisestomanagethenetworkcomponentsofmultiplevendors.InGartner'slatestMagicQuadrantsurveyregardingenterprises'accesslayersolution,75%ofenterprisesreportedthattheypreferredbuyingtheirentireaccesslayersolutionfromasinglevendor.Nevertheless,multivendorrolloutsarediminishingthisadvantageforCisco.Thesamesurveyalsoindicatedthatlessthan50%ofthoseorganizationswereabletobuyfromthesamevendor,eitherbecausetheirpreferredswitchingvendorlackedtheWLANfunctionalityneeded,orbecausetheirpreferredWLANvendordidnotofferaccesslayerswitchingoronethatsuitedtheirneeds.

HPEOwnershipHampersAruba'sAggressiveApproachtoInnovation


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ItisimportantthatHPE'sownershipdoesnothinderAruba'saggressiveapproachtoproductinnovationanditsabilitytoseeknewmarketopportunities.WerecognizethatArubahashistoricallyproducedmanyindustry"firsts,"andforthisreason,wehavegivenalowweightingtothisthreat.Weperceiveapotentialpitfallbasedontheoutcomesofrecentmarketconsolidation(HPE-Aruba,AlliedTelesis-Extricom,Fortinet-MeruNetworks)thathasresultedinWLANvendorsbecomingsubsumedintopredominantlywiredvendors.ThisconsolidationhasledtocontroloftheWLANmarkethavinglargelyshiftedtotwovendors,CiscoandHPE.BothwillarguablycontinuetoprotecttheirrespectiveEthernetswitchbusinessesagainstcannibalizationbyWLAN,oneofthereasonswhytheconceptofthe"all-wirelessoffice,"whileatrendin"greenfield"deployments,hasnotacceleratedasaggressivelyasonewouldhaveassumedafewyearsago.

CompetitionFromCiscointheSMBandCloud-SolutionMarket

Cisco'sacquisitionofMerakihasbeensuccessfulsofar,eventhoughthesplitbetweenAironetandCiscoMerakiproductscontinuetocreatemarketconfusion.Meraki'srevenuegrewfromapproximately$15millionperquarterin2012(asperourmarketshareestimates),to$75millionto$100millionperquarterby2015.ThisestimateincludesrecurringrevenuefromcloudsubscriptionsandswitchesinadditiontonewWLANopportunities.CiscoMerakiresonateswellwithSMBmobilityneeds,eventhoughsomeofthecurrentgrowthcomesfromreplacementsofHybridRemoteEdgeAccessPoint(H-REAP),OfficeExtendandotherweakattemptsataddressingthehometeleworkingandSMBenvironmentsbyCisco.

ArubaInstanthasbeenwellreceivedintheSMBspace,butrecently(inSeptember2015),CiscolaunchedanAPthatofferssimilarfunctionality,aWave2802.11acAP,thatdeliversatotalaggregatedual-radiodatarateofupto1Gbps(theoretically).TargetedatSMBs,withtheCiscoAironet1830Series,anAPcanactasacontrollerinagroupof25APs.CiscoMerakialsoeliminatestheneedtodeployacontroller,butinsteadrequiresthepurchaseofacloud-managementsoftwarelicense.TheCiscoAironet1830APSerieslaunchbroadenstheSMB-relevantproductsofferedacrossproductlines.

ReducedControlofR&DandPlantAssetsinChina

Wehavegivenalowweightingtothisthreat,sincetheH3CacquisitionbyUnisplendourwillaffectthedatacenterswitchbusinessmoreheavilythancampusswitchingandWLAN.However,webelieveitisnecessarytonotethatthe51%ownershipsaleofH3CmeansthatinChina,HPEwillhavelessinfluenceovertheday-to-dayoperationsandR&DofH3C.HPEcouldhistoricallycountonstrongR&DandplantassetsinChina,butwillnolongerbethemajoritystakeholder,potentiallymissingoutontheabilitytodriveproductdevelopmentforthecompany.ThemovetoexertownershipovertheChinesevendorisbelievedbyGartnertohavebeenpartlyfocusedonloweringproductdevelopmentcosts.

RecommendationsforPartnersand/orCompetitors

• Competitorsneedtocontinuedevelopingmultivendorsupportforcampus/accesslayernetworkmanagement,guestaccessandpolicyenforcementtoolsinordertoremainrelevantinbuyerconversations.Strongproductintegrationprovidesamigrationpathforexistinginstalledcomponentsandmeanstodisplacecompetitors.

• Cloud-managednetworksprovidesanopportunityforemergingtechnologyproviderstoaccostandsurpassestablishedonesbyleveragingnewmodelstobetteralignwithSMBrequirements.Thekeywillbetoshiftfromlowestpricetototalcostofownership(TCO)andprovidehigh-qualitysupport.

• WLANresellersandimplementersshouldnotpromoteprojectsbasedonlegacyHPWLANproducts,andinstead,movetowardtheArubaproductfamily.InstalledWLANscontinuetosufferduetoalackofunderstandingoftheend-userexperienceneededtooptimizebusinessapplicationproductivity.ItisimportantthatWLANresellersandimplementerscontinuetolookbeyondvendorinstallationpracticesandprioritizeend-users'desiredperformancelevel.

• PartnersneedtoconfirmhowHPEplanstoleveragecross-sellingHPEandArubawired/wirelessopportunitieswithexistingaccounts.ItisimportanttoclearlyarticulatedifferentiationbetweenHPEandAruba'sproductsandserviceswiththoseofleadingcompetitors.

ImplicationforCompanyBeingProfiled


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Historically,thelackofcontinuitybetweenHPE'saccesslayerswitchesandtheWLANoffering(derivedfromtheColubrisacquisition)resultedinHPEfallingbehindthemarketintermsoffunctionalityandvisionrequiredforitstargetmarkets.TheArubaacquisitionwasneededtokeepHPEcompetitiveintheaccesslayermarket.Asaresult,HPEneedstoensureappropriateinvestmentsaremadetokeepArubacompetitive,byunderstandingthesegmentationoftheaccesslayerandthenetworkserviceapplicationsthatwillcontinuetodifferentiateaswellasunifythecombinedAruba/HPEsolution.Thenewentitywillneedtorationalizeitsproducts,servicesandtoolstosuccessfullyexecutetheintegrationofArubawithinitsend-to-endaccesslayervision.ThemanagementteamneedstocontinuetorecognizethattheaccesslayerrevenueopportunityisinClearPass(guestaccess,policy,onboarding),AirWave(networkmanagement),Meridian(locationservices)RFProtect(wirelessintrusionprotection)andmultivendorsupport,alongwithotherapplicationsthatextendacrosstheentireproductline,allowingthemtogainmarketsharefromfragmentedorsmallercompetitors.

Evenwiththebestproductline,channeltrainingisoneofthehighestpriorities.TheHPEchannelwillallowtheArubaproductlinetoreachgeographicallocationsthatAruba,asaseparatecompany,wouldnothavehadaccessto—butareeasilyaccessiblebyCisco.Thiswillhelpchannelstoswitchfromabox-pushingmentalitytodeliveringentiresolutions,composedofhardware,softwareandservices.TheempowermentofthechannelwillpotentiallyallowthenewHPEtogainmarketshareinthesegeographies.

Inordertoexpanditstargetavailablemarket,architecturallyHPEneedstoinvestinabettercloud-basedsolutiontospecificallyaddressthepartofthemarket(typicallySMBs)thatcontinuestomovetothecloud.TheArubaCentralsolutiondoesnothavethefunctionalityofAruba'sexistingon-premisessolutionsandthiscontinuestoleavethispartofthemarketavailableforcompetitivesolutions.

CompanyOverview

Table1.HewlettPackardEnterprise(Aruba):KeyFacts

Company HewlettPackardEnterprise(Aruba)

Headquarters 3,000HanoverStreet,PaloAlto,California,94304-1112U.S.A.

PresidentandCEO MegWhitman

CompanyDivisions • EnterpriseGroup(servers,storage,networking,consultingandsupport)

• EnterpriseServices• SoftwareandFinancialServices

ExecutiveVicePresidentandGeneralManagerofEnterpriseGroup

AntonioNeri

TotalNumberofEmployees 252,000

Website www.hp.com

www.hp.com/hpnext


DominicOrrispresidentatAruba.Inhisrole,Mr.OrroverseesthecombinedHPENetworkingandArubaNetworksbusinessesacrossdatacenter,enterpriseandSMBdivisions.

Methodology

ThevendoranalyzedinthisSWOTwasselectedbecause,followingitsacquisitionofArubaNetworksinMay2015,HewlettPackardEnterpriseisthelargestglobalproviderofenterprisewiredandwirelessLANaccessinfrastructure—afterCisco.GartnerleveragedavarietyofmaterialstodevelopthisSWOTanalysis,including:


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• Analystexpertise• GartnerdataonenterpriseWLANequipmentandcampusEthernetswitches• ExistingGartnerresearchontheWLAN,switchingandnetworkingmarket,includingend-usersurveysandcase

studies• Secondarysources,suchasmediaandfinancialreports• Ongoingdialoguewiththevendor

TheGartnerVendorSWOTanalysisisdesignedfortheuseofprovidersaswellasindividualsinstrategicplanning,marketingandcompetitiveanalysisrolesasasupplementtotheirplanningprocesses.Itsprimaryvalueisasanindependentanalysisoftheprovider'scompetitivesituation.

TheSWOTanalysisprovidesauniqueindependentviewofthestrengths,weaknesses,opportunitiesandthreatsforaspecificpartofaprovider'sbusinessinaspecificmarketandgeography.

AcronymKeyandGlossaryTerms

AAA authentication,authorizationandaccounting

AP accesspoint

Aruba legacyArubaNetworks

BYOD bringyourowndevice

capex capitalexpenditure

CEO chiefexecutiveofficer

CNM CloudNetworkManager(HP)

CSP communicationsserviceprovider

DC datacenter

EMEA Europe,theMiddleEastandAfrica

EMM enterprisemobilitymanagement

Gbps gigabitspersecond

GPS GlobalPositioningSystem

H3C H3CTechnologies

HP legacyHewlettPackard

HPE HewlettPackardEnterprise,forreferencestothenewentity(HewlettPackardEnterprise,whichincludesArubaNetworks)

H-REAPHybridRemoteEdgeAccessPoint(Cisco)

IaaS infrastructure-as-a-service

IDS intrusiondetectionsystem

IMC IntelligentManagementCenter(HP)

IoT InternetofThings

LAN local-areanetwork

NPM networkperformancemonitoring

ONE OpenNetworkEcosystem(HP)

PoE+ PoweroverEthernetPlus

R&D researchanddevelopment

RADIUSRemoteAuthenticationDial-InUserService


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SDN software-definednetwork

SIEM securityinformationandeventmanagement

SLA service-levelagreement

SMB smallormidsizebusiness

SWOT strength,weakness,opportunityandthreat

TCO totalcostofownership

WIDS wirelessintrusiondetectionsystem

Wi-Fi WirelessFidelity

WIPS wirelessintrusionprotectionsystem

WLAN wirelessLAN

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