Hyperconvergence in high demand

Hewlett Packard Enterprise's $650 million acquisition of SimpliVity last week highlights the growing popularity of consolidated computing systems that CIOs are adopting as an alternative to public cloud services.

SimpliVity is a market leader in hyperconverged systems, which bundle computing, storage and networking are bundled onto the same server. Such systems, once considered a niche market in a rapidly shrinking sector for on-premises technology, are rapidly gaining traction.

Cloud benefits, without the cloud

"Companies want the cloud experience – faster speed, better economics and ease of use - without sacrificing control and security," wrote Anthony Neri, HPE executive vice president and general manager of the Enterprise Group, in a blog post. "Hyperconverged infrastructure can do that."

HPE's acquisition -- which should help it compete with Cisco Systems, Dell, VMware, EMC and Nutanix --suggests that on-premises computing systems remain a crucial option for CIOs in an age where many enterprises are consuming public cloud services.

Hyperconverged systems are being increasingly adopted by IT departments that want to build private clouds or that simply wish to gain more efficiencies from their existing virtualization technology. IDC says the market for hyperconverged systems topped $2.6 billion in 2016 and could reach 6.4 billion by 2020.

SimpliVity makes virtualization software that offers several compute, data storage and network management features, including high availability, virtual machine recovery, compression, deduplication, remote backup and restore, and disaster recovery. One of the appeals of combining such capabilities in the same system is that it enables companies to build infrastructure that dynamically pools and reconfigures assets across multiple servers without requiring additional expertise in managing storage systems, according to a Forrester Research report published last August.

[ Related: All hyper-converged solutions are not created equal ]

“If you wish to develop cloud-like services atop your infrastructure, hyperconverged services represent a very promising platform,” wrote Forrester analysts Richard Fichera and Naveen Chhabra in the report.

SimpliVity was worth as much as $1 billion after a March 2015 funding round led by Waypoint Capital. By 2016, it was viewed by CIOs as a "prime candidate" for a core enterprise IT platform for virtualized environments, according to Gartner research published in October.

Hyperconverged systems boost performance, save money

Red Bull Racing purchased SimpliVity technology to refresh its virtualization infrastructure, gaining improvements in application performance, data processing, virtualized workstations, along with a reduced total cost of ownership. The hyperconverged platfrom reduced real-time data processing for applications, including ERP, SQL Server and proprietary applications by as much as 60 percent, Red Bull Racing CIO Matt Cadieux said in a statement.

Niche players such as Atlantis Computing are also finding success. Arizona Tile purchased the company’s hyperconvergence technology to support an upgrade to its ERP and tax software as it moved to a new colocation facility.

Rather than investing more money in storage and software, connectivity devices and more compute power to support additional virtual desktop users, the company purchased two 12 terabyte appliances from Atlantis, Chris Murray, director of information technology, said in a statement.

“We were able to fit the two appliances in four units within the existing rack, greatly reducing our footprint at the colocation site, saving money and increasing our compute power to run all our primary workloads,” Murray said

CIOs are tapping into their IT budgets for the technology, according to Morgan Stanley. The financial services firm said in its 2016 CIO survey 60 percent of CIOs indicated they planned to purchase hyperconverged systems within the next year, up three-fold from the 2015 survey.

HPE, which expects to close the SimpliVity deal by the end of next month, says it will offer the company's software for its ProLiant DL380 servers. In late 2017, HPE plans to sell an integrated HPE SimpliVity hyperconverged systems based on its ProLiant servers.

As HPE tucks in SimpliVity, financial and technology analysts have turned their attention to Nutanix, which is worth roughly $4 billion after going public in September. Analysts have opined that Cisco could counter HPE's move by acquiring Nutanix, which Gartner says has captured more than 50 percent of hyperconverged systems revenue, with over 3,000 customers worldwide.

"Cisco is left with limited options to address its portfolio gaps and could turn to Nutanix for a solution (partnership or M&A)," wrote Oppenheimer analyst Ittai Kidron.