SimpliVity provides a solution that combines storage, computing, and networking in a single server. The reasonably-priced deal is promising for both firms as it bolsters HPE's offerings to the middle market and will combine SimpliVity's software with HPE's ProLiant server line.
Westborough, Mass.-based SimpliVity was founded in 2009 by CEO Doron Kempel to provide a range of enterprise computing, networking, and storage capabilities.
The company created what it calls the OmniStack Data Virtualization Platform and related OmniStack Accelerator Card which serve to create " hyperconverged" services via an appliance that combines computing, storage, network switching and other data services.
Historically, these services have been separated and managed in functional silos, and SimpliVity's value-add has been to combine them into a single x86 form factor for simplified enterprise-grade data center IT management
The company has developed a number of functional partnership categories:
- Solution Providers
- Cloud Service Providers
- Technology Alliance Partners
- System Integrators
Below is a brief video that provides an explanation:
Source: SimpliVity YouTube
SimpliVity raised at least $276 million in several rounds from top-tier venture capital investors such as Accel Partners, CRV, DFJ Growth, Kleiner Perkins Caufield & Byers and others.
Competitors to the company's approach included publicly held and privately held companies such as:
HPE intends to pay $650 million in all cash deal for the privately held company. According to a Business Insider report, SimpliVity was valued at $1 billion in its most recent financing round of $175 million in 2015.
As a comparable, fast-growing direct competitor Nutanix is currently valued at $4 billion by the public markets on $524 million in annual sales, for a price/sales multiple of 7.6x. SimpliVity's revenue numbers aren't publicly available, but assuming it has a similar growth rate as Nutanix, the company's top-line revenues would approximate $85 million per year.
In a company statement, HPE said it "expects the acquisition to be accretive to earnings in the first full fiscal year following close."
Rationale and Commentary
HPE aims to add SimpliVity's hyperconverged infrastructure solution to its portfolio of offerings in order to provide customers with:
Built-in enterprise data protection and resiliency that simplifies backup and enables customers to more quickly restore operations.
Enterprise storage utilization and virtual machine (VM) efficiency that helps customers control cost and performance.
Always-on compression and de-duplication that guarantees 90 percent capacity savings across storage and backup.
Policy-based VM-centric management that simplifies operations and enables data mobility, making development teams and end-users more productive.
A review of the company's customer testimonial list suggests that SimpliVity's customer base is primarily middle market firms who are looking for simpler solutions as they move their legacy, on-premise systems to the cloud.
HPE is looking to capitalize on this trend by adding SimpliVity's hardware solution to its previously software-only, Hybrid IT system. In addition, HPE said it will offer the SimpliVity OmniStack software on its ProLiant DL380 servers and will further expand on this offering in 2H 2017.
SimpliVity will keep its existing product roadmap, but HPE says it's customers "can expect to see their hyper converged experience continue to improve with new innovations like 'workspace' controls, which provide business leaders and developers with simple self-service portals to compose virtualizing containerized resources, and accelerate application development and deployment."
So, HPE is acquiring SimpliVity to fill gaps in its offerings, especially for middle market and smaller clients that value simplicity and self-service capabilities in fewer hardware devices preconfigured to their less-demanding needs compared to large enterprises.
As more middle-market firms consider the move into cloud-based systems and transition away from legacy, on-premises systems, HPE is now in a better position to provide them with a fully converged system for their storage, networking and computing needs.
I consider this acquisition a promising deal for HPE as it expands its offerings for the middle market.
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