Introduction, Background, and Review of the Past Four Years
The Hewlett Packard Enterprise is an American company that has a strong presence in various information technology markets. It was founded in 2015 as a result of splitting the Hewlett-Packard Company into two different companies. The focus of this separation was to provide diverse opportunities for their main products and services. HP Inc. consists of divisions related to personal computers and printing products. The Hewlett Packard Enterprise took the divisions of business-to-business products and services, such as cloud computing, artificial intelligence, data storage, and business-related software and hardware. The company continues to stay one of the top international players in the IT market, especially in cloud applications and solutions.
This split has allowed the emerged businesses to find more stable platforms of operation. The technologies the company produces are focused on providing other companies with a deeper understanding of market trends and ways to exploit the best available practices. In the past four years, the company has acquired several smaller yet promising businesses in the information technology sphere. The acquisition of Cloud Technology Partners, Nimble Storage, and RedPixie allowed HPE to speed up the company’s expansion in cloud computing services and enriched its data storage portfolio (Preimesberger, 2017). Despite these additions, the Hewlett Packard Enterprise stocks continue to decline.
Due to several unresolved obstacles, Hewlett-Packard Enterprise experienced a slight decline in revenue for several years in a row. After the initial split, the Hewlett Packard Enterprise stock raised by 12% in the fiscal year 2016 (Wallis, 2020). However, starting with the fiscal year 2017 up to today, their revenue fell by 5-6% year-to-year, despite the efforts taken to expand the business (Wallis, 2020). This issue could be related to the company’s inability to produce innovative technologies. The secondary problem is the pricing of memory and bandwidth that remains to be the main input cost for IT companies.
Because of said revenue outcomes, the company had to take several steps to reduce its operational costs. In 2017, Hewlett Packard Enterprise had completed a spin-merger with another IT company named Computer Sciences Corporation by separating its Enterprise Services division (Cornell, 2017). The resulting company was named DXC Technology, the main product of which is business-oriented IT services and consulting.
DXC Technology continues to struggle with its presence on the market. After the merge, the company sees steady declines in revenue and was unable to cut its costs to stay competitive. It was forced to reduce the number of offices and employees in India due to rising costs and falling revenue, but the investor interest continues to stay low (Phadnis, 2019). They are facing issues similar to Hewlett Packard Enterprise, but the merger of a potentially unprofitable division helped it to alleviate the problem.
Despite these unsatisfactory results, HPE has been able to produce better revenue outcomes in the past year. During the second quarter of 2019, the company and its Chinese partner New H3C have been able to increase revenue by double-digit percent and achieved 18% market share in the data storage business (Hewlett Packard Enterprise/New H3C delivers double-digit market share and attains number one position in the second quarter of 2019 worldwide server revenue tracker, 2019). The company managed to acquire a strong presence in the China IT market, which is one of the biggest and most desirable markets in the world.
International Business Environment
The Hewlett Packard Enterprise has a strong presence and stays competitive not only in the United States IT market but in Europe and other countries as well. The demand for technologies used in every aspect of modern businesses created one of the most globalized markets on the planet. However, this market is highly competitive and requires constant innovations for a company to stay in it.
As seen from the previous chapter, Hewlett Packard Enterprise has chosen to focus on cloud computing and data storage systems and solutions. There are multiple crucial problems in this strategy related to international personal data storage and handling laws. In recent years, many countries have implemented new rules and regulations which negatively affected the IT market, such as the General Data Protection Regulation in EU law and Data Protection and Privacy laws in Russia. To comply with these laws, business transformation requires additional cost reduction, which Hewlett Packard Enterprise is yet to achieve.
Moreover, recent well-known cyberattacks led to increased pressure on organizations that work with personal data. The required expenditures to adhere to modern data protection standards and security measures led to the increased operational costs for the Hewlett Packard Enterprise. The article by an HPE security analytic Mowbray (2017) concludes that “good IoT security is difficult to achieve in general and now as widespread as it should be” (p. 5). However, Mowbray (2017) argues that future hardware improvements will have “capabilities particularly suited to detecting attacks” and produce “more effective results than traditional network security tools” (p. 14). Until then, the costs of operation continue to decrease the Hewlett Packard Enterprise growth potential and make it less favorable for investors.
It is also worth noting that several acquisitions made by Hewlett Packard Enterprise consist of companies based outside of the United States. An example of such a company is RedPixie, which is a cloud service and software provider from the United Kingdom. By joining HPE, the company gained access to a broad range of capabilities, better service integration, and gained additional customers.
The social factors related to the company’s activities are often seen in a positive light. The Hewlett Packard Enterprise is considered to be a global industry leader for sustainability, showing commitment to the environment, human rights, and digital inclusion throughout the world (Hewlett Packard Enterprise, 2016). Nowadays, they are providing additional support for remote workplace solutions, as well as technologies for health care facilities focused on defeating COVID-19.
The Hewlett Packard Enterprise Opportunities and Threats
The threats that the company faces are defined by the globalization process more than ever. The Hewlett Packard Enterprise faces the following threats:
- Most of its products come as a response to the innovations of other major companies in the IT market. This situation creates a severe lag in up-to-date products and reduces the number of potential customers.
- Irregularity in the new products introduced by the company creates swings in sales numbers, leading to unstable returns of investments.
- The number of suppliers has reduced, which gave the remaining suppliers higher bargaining power, increasing costs of production and service providing (Burke, 2020).
- The major part of the Hewlett Packard Enterprise revenue comes from international sales. The fluctuations in currency exchange rates create additional instability for the company’s profitability.
- Political changes drive the further implementation of constrictive data regulations and laws, which, as seen before, negatively affect the input costs.
- The innovative technologies can reshape the IT market, and changing consumer tastes require constant updates to the company’s products and services.
- In the previous year, the company had to take legal action against counterfeiters who produced over 210,000 hard drives and were selling them under the HPE brand name (Goh, 2019). To prevent such incidents, the company implemented security measures that increased the costs of production. This issue will potentially appear again in the future, as counterfeiting methods will evolve.
- The need for innovations means that a constant flow of highly skilled workers is required. The shortage of skilled staff can harm the company’s profits.
- The company experiences trouble with acquiring additional investors due to unsatisfactory fiscal reports in previous years. HPE already has a debt of $13.82B, and the trend shows a steady growth (HPE | Hewlett Packard Enterprise Co. Financial Statements – WSJ, 2020).
- New competitors continue to join the IT industry, for example, Pure Storage and Nutanix. This can lead to the loss of market share by HPE, or the need to reduce profits to retain customers.
Despite the significant amount of threats that are presented above, there is a promising number of opportunities for the Hewlett Packard Enterprise:
- The emergence of e-commerce businesses provides a large customer base for IT companies, especially since HPE specializes in business-to-business solutions.
- The Internet allows the company to extend its reach via social media, targeted advertisements, and other promotional opportunities.
- Globalization allowed the company to expand the availability of its products and services, and create partnerships with key players in other countries to secure its position on other markets, as seen by the example with New H3C.
- Trade barriers are slowly dissipating, which creates a positive environment for international businesses. While HPE already outsources major parts of the production process to foreign facilities in China and India, the potential to decrease input costs still exists.
- The company’s specialists already predicted that future technological developments would help in reducing the costs of production. Moreover, with new technologies, there will be more opportunities for the expansion of HPE products and services.
- Since the company takes great effort in producing ecologically friendly goods and the demand for such technologies will only increase, HPE has a lead in this potentially profitable field of operation. Further environmental policies can shift the market in favor of Hewlett-Packard Enterprise.
- Lowering interest rates across the globe allows the company to take larger loans to expand cheaper and more efficiently.
- The presence of HPE in the fresh market of the Internet of Things provides an opportunity to take a larger portion of the market share, especially since modern businesses tend to have vast networks of devices.
- Costs of transportation are on the decline and allow the company to boost its profitability and provide growth potential.
In conclusion, Hewlett Packard Enterprise experienced a period of hardship as it struggled to find potential expansion opportunities, but the deal with New H3C shows that the situation is improving. Its current strategy that led to a spike in revenue growth reveals the importance of globalization for IT businesses.HPE is able to take advantage of that fact by increasing its presence on markets outside of the United States.
Burke, S. (2020). ‘Antonio Neri: HPE has set up ‘war rooms’ to battle coronavirus component shortages’. CRN. Web.
Cornell, J. (2017). ‘Hewlett Packard Enterprise completes spin-merger to form DXC Technology’. Forbes. Web.
Goh, B. (2019). ‘China smashes counterfeiting ring that sold hard drives: Xinhua’. Reuters. Web.
Hewlett Packard Enterprise, (2016). ‘HPE recognized as global industry leader for sustainability’. The Corporate Social Responsibility Newswire. Web.
Hewlett Packard Enterprise/New H3C delivers double digit market share and attains number one position in second quarter of 2019 worldwide server revenue tracker. (2019). Web.
HPE | Hewlett Packard Enterprise Co. financial statements – WSJ. (2020). Web.
Mowbray, M. (2017) Detecting security attacks on the enterprise Internet of Things: an overview. Hewlett Packard Labs. Web.
Phadnis, S. (2019) ‘As DXC cuts jobs, India amongst the most hit’. The Times of India. Web.
Preimesberger, C. (2017) ‘HPE completes acquisition of Nimble Storage earlier than planned’. eWeek. Web.
Wallis, A. (2020) ‘Hewlett Packard Enterprise: looking for growth’. Seeking Alpha. Web.