Any merger or acquisition raises questions, the biggest of which is “What comes next?” HPE’s acquisition of Juniper Networks is no exception.
HPE, while it’s a computer company, has some network gear through its Aruba acquisition. It’s mostly an enterprise vendor; why else would it be Hewlett-Packard Enterprise? Juniper is a pure networking play, and it has substantial service provider market presence. The joint company is still officially HPE, but in the long run, who’s the tail and who’s the dog, in a strategic-future sense? HPEJ, JHPE, or some other name like Mist4All? I think that will be determined in the balance of 2025, either explicitly by the actions of the two, or by default…meaning by accident.
One part of the deal for acquiring Juniper was formation of a board-level committee that was charged with ensuring the deal would add to shareholder value. This group may well decide how HPE plays its Juniper and AI assets, but it won’t be the deciding factor in this question. That role belongs to the enterprise buyers. Fortunately, I get to chat with hundreds of them, and many have expressed their views on how the combined company should position itself, and these relate to which of our three strategy-driven names the company will earn.
We need to set the stage a bit, though.
Enterprises aren’t being created in today’s market, so if HPE wants to sell more to enterprises, it’s going to have to steal market share from someone else, probably market-leading Cisco. The problem is that enterprises say overwhelmingly that network management isn’t enough to make them rethink their vendor commitments, even with AI. HPE has to go beyond that. HPE can benefit simply by exploiting their sales influence in data center server deals to promote Juniper technology, but HPE’s sales account control is a factor only in current HPE accounts, and they need to steal market share from Cisco, not from HPE’s own Aruba offerings, to win.
Let’s open our nomenclature examination with the “JHPE” name. Mist AI is Juniper’s big market advantage, and it’s the AIops tool that has the best overall enterprise name recognition in the over-400 enterprises I’ve chatted with over the last 18 months. When the deal was announced, most analysts said it was about HPE getting access to Juniper’s Mist AI, and it’s true that HPE’s sales force is in a good position to influence the sale of Juniper switches in data center applications. For decades, it’s been the data center server/platform vendor that has the most influence on these deals.
The problem is that less than one-eighth of enterprises said that they believed HPE could justify the Juniper deal simply by having HPE salespeople sell Juniper gear. We can take JHPE off the table.
But not the Mist influence. Nearly all the enterprises who offered comments on the deal want to see HPE expand Mist to include HPE management, becoming an element in a “full-stack observability” strategy, creating our “Mist4All” name. Three dozen told me that their sales team had suggested this would happen, but interestingly, none who also talked with HPE or Juniper executives said they repeated that promise. HPE’s problem is that only 11 of over 250 enterprises said a move to offer integrated AI observability would even make them consider switching from Cisco to the new company. The problem with vendor-specific observability like Mist4All is that you can’t introduce it incrementally; you need to fork-lift. Only one-fifth of enterprises thought HPE could justify the deal by integrating their own operations tools with Mist. Forget Mist4All, too.
Which brings us to HPEJ. I don’t think there’s any question that the biggest driver in how the new venture positions itself is AI. AI is also the most likely near-term driver of incremental data center deployment, both among enterprises and among service providers, something Juniper’s AI-Native positioning aims to exploit and that competitors like Cisco and Extreme are countering. And, of course AI data centers obviously need servers, so HPE has its own interests here. That’s what creates the HPEJ/JHPE tension, but can shareholder value and customer interest be created by simply doubling down on what the companies were doing separately?
Three enterprises who use both HPE and Juniper gear enough to get significant account attention from both say that Juniper’s people push AI hosting more than HPE does. Nobody has told me the opposite is true, and nobody has suggested why HPE might not be pushing AI as much as they might, and should. I wonder if the reason is simply one of sales strategy, and whether IBM might be the lurking giant behind it.
Who’s the most important AI player to enterprises? The answer, if you answer it based on the percentage of enterprises who reference a vendor, is IBM. Yes, enterprises know Nvidia chips are critical to AI, but Nvidia isn’t a strategic influence on enterprise business and application planning, and IBM is. One enterprise AI planner said: “Nvidia offers us examples of AI success. IBM offers us instructions on how to be successful with AI.” While HPE is in a pretty highly populated tie for second in enterprise strategic influence, IBM has almost twice as much influence as HPE. Might HPE think that if they introduce AI strategy, they’re encouraging their prospects to talk to IBM too?
It’s not that IBM sells servers competitive to HPE’s, either. It’s that they’re agnostic on the question of whose hardware should be used, and are just as likely to name HPE competitors as HPE. If HPE were to play a more active role in pushing AI strategy, might IBM be less likely to mention HPE to their accounts? Maybe, and that might well be enough to discourage HPE. Not only that, enterprises tell me that AI projects take one-third longer than traditional IT projects, and HPE needs to show something positive from the merger quickly. Maybe they won’t wait.
Because maybe competitors won’t let them. Nvidia and Broadcom both have network AI strategies, and either one could be a serious problem for the HPEJ position—Broadcom the most serious because of its VMware incumbency, and Broadcom’s new Tomahawk chip takes on Nvidia’s InfiniBand for AI networking. In that face-off, enterprises come down decisively on the side of Ethernet and Broadcom, and this debate over the technology that underpins AI networking could work against the HPEJ model, simply by focusing buyers more on the network.
The final vote is cast by enterprises, and to get a majority of favorable responses from enterprises on HPEJ, enterprises would have to see HPE actually work to drive self-hosted AI to generate new AI data center clusters. That, they believe, could validate both the Juniper Mist AI union with HPE and Juniper’s AI-Native networking, and it would dodge Cisco’s incumbency benefit because AI clusters are green fields. But while enterprises would love to see HPE become a self-hosted AI powerhouse, very few think it will happen, or at least that HPE will be effective in driving it. They believe that HPE needs to move aggressively on AI as a strategic concept, not just as a foundation for better management. They’d like to see server vendors in general get more strategic with AI, and if HPE isn’t going to do that, then enterprises think integrating Mist and server management would help them, but wouldn’t likely help HPE all that much. I agree.
Source:: Network World