CRN Exclusive: Aruba Co-Founder Melkote On Taking Cisco 'Head On' With New Core Switch, Asset Tracking, IoT And The 'Margin Rich' Opportunity At The Intelligent Edge

Melkote On The Record

Keerti Melkote the senior vice president, general manager and co-founder of Aruba Networks, the HPE subsidiary driving the intelligent edge Internet of Things revolution, spoke with CRN about the company's new switch that takes on Cisco at the network core, new asset tracking solution and the dramatic architectural differences between Cisco and Aruba.

Melkote said the HPE acquisition of Aruba has helped unleash more innovation in HPE. "The innovation and customer first approach to our culture is what I think is giving HPE more confidence that we can do more of these acquisitions, like Nimble and SimpliVity, and create this new stack that customers are looking for," he says. "And most importantly have the confidence that we can keep the talent – the innovation DNA – that comes from these startups as part of the HPE organization and make HPE a very innovative company moving forward."

Melkote, in fact, has become an "ambassador" of sorts to the newly acquired companies – providing advice on how to continue to drive innovation at an unprecedented clip – while taking advantage of HPE's enterprise channel muscle to grow the business dramatically.

Get all of CRN's coverage of HPE Discover 2017, here.

What kind of opportunity to do you see to take the networking leadership ball from Cisco?

We started out as a wireless LAN company. Now as part of HPE we have the wired and wireless component of the mobile first strategy. And what you'll see us do at Discover is expand the portfolio to include another element of the architecture which is core switching – allowing us to really complete the portfolio. We now can sell across the architecture, and our customers won't have to rely on Cisco for what used to be a core part of their networking strategy. They can go end-to-end with HPE with a mobile first approach.

How will Aruba extend its innovation dynamic into the core of the network?

Innovation is coming edge in. Fundamentally the core of the network has remained a very fragile, hard core that is only about moving packets but the future is edge-in. It's about users and things. The core needs to be a lot more valuable to the changes that are actually happening which means it needs to be driven by new tools that allow it to be automated, to allow it to provide a lot more intelligence. It needs to be a part of an architecture as opposed to a standalone environment. The entire network value proposition has changed. The core is just a point in the network.

The real value is the software that lives on top of all of this and how it integrates the core – the edge – into one single fabric for the customer. That is where you will see innovation coming from Aruba. Users and things are going to rule. The networks will be built underneath and we are going to enable better security, better automation and better analytics as a result of this new architecture.

What is the new asset tracking solution Aruba will introduce at Discover?

We are innovating on the application and software side by bringing new things like asset tracking which historically have not been offered by infrastructure companies. These have been very, very siloed organizations with asset tracking solutions for specific verticals. I feel the market is ripe for innovation with location based services – adding an asset tracking layer for hospitals, for retailers, that allows them to really bring the network to life in terms of business value. Lowering the time to find things means that they need to buy less of the assets they are buying. It also provides better optimization and utilization of those assets.

Applications like asset tracking will continue to change the dialogue and discussion away from moving packets to applications that add business value. For partners that is very important: migrating above the lower levels of the stack to the upper layers of the stack where the business decisions get made.

What is the software difference at the Intelligent Edge versus Cisco and Aruba?

I think the paradigm for the network has changed entirely in the last three years. It used to be about the wired network going to user's desks and delivering services around the idea of the user's desk – connecting computers and telephones and things. It all used to be wired. Now what has happened due to mobility it has all changed to a mobile first conversation. That is the starting point. That disrupts everything. That disrupts the selling motion of the Cisco partner from selling a wired first to basically saying, "You don't need those wires. Now it is wireless first." Wireless is the foundation and you build from there where you are connecting users and things.

What is the architectural difference between the Aruba approach to the business versus the Cisco approach?

Fundamentally Cisco is a core out story - you build out your core and then you add the edges. What we are doing is edge-in. Fundamentally the reason for that is that is where the users and the things are. The software value is not in the core. The core is about moving packets fast. It is hardware. The edge is about understanding the users, adding development services to these users and securing things – IoT.

That is a software story – enabling mobility, location-based services, security architecture, enabling applications like unified communications and Skype for Business to work better. This is all software value add. This is what users want and what organizations are looking for from their IoT.

What does that shift mean to how partners architect solutions for customers?

Partners have to start to think about how do they architect from the outside in, from the edge in, delivering value to the users. There is clear cost savings from the hardware perspective because you actually need less hardware in this kind of new architecture because most users will connect through wireless. You don't need as much wired switching or ports or such. You still need some obviously to connect the access points but the center of gravity has shifted from a core switching base to a mobile first kind of a base and the users and the things are where the value is. And the users and the things are where the value is whether it is Niara for security, whether it is Meridian for location-based services, whether it is ClearPass for doing policy management. Each one of these software suites that we bring to the table is how customers are architecting their networks of the future.

How big is the opportunity for partners teaming with Aruba?

For partners, it is a massive opportunity because software means recurring revenues. You can go get the software platform installed and get a subscription for it from an ongoing perspective.

The other piece is we are not doing a bolt on. We are actually integrating it with the infrastructure not creating bolt on software that doesn't necessarily integrate well with the infrastructure.

I think that is where the differentiation lies. Our infrastructure – our boxes – are instrumented to deliver richness at the software layer rather than acquisitions for the sake of acquisitions. It is very well integrated from an architecture perspective.

What are the architectural differences between Cisco and Aruba translate into solutions at the customer level?

First off customer budgets are going to remain the same. What they are going to spend money on is the value add. Let's say they used to spend 90 percent of their budget on hardware and 10 percent on software. What they are going to do is spend maybe 50 percent on hardware. If you just look hardware for hardware, there is clearly going to be significant reductions in the cost of the hardware simply because they are deploying less hardware in a mobile first architecture. But what they are going to do with the cost savings is the question: they can either take it to the bank or apply it to software and deliver more value to their business.

How do you see customers buying patterns changing with regard to network hardware vs. software?

We see customers taking budget that they saved from hardware and applying it to software intelligence – giving organizations better security tools, better visibility tools, and better proactive management, and big data, and machine-learning tools and better business value, creating tools like location based services. Whether it is finding things in a building or customer and visitor engagement tools, asset tracking – these are all new capabilities that enhance the IT value proposition to the organization.

IT fundamentally and broadly is becoming central to every organization especially with IoT. IoT becomes the heart of everything people are going to do in their businesses. They are taking those budgets and applying it very squarely to business value as opposed to being a cost center.

What is your message to partners at Discover?

My message to them at Discover is get educated on the Intelligent Edge, figure out the customer opportunities around the Intelligent Edge and start to position solutions there. Their value will be to do the systems integration – not just install the boxes, but bring the systems together. The more they have the technologists in their organizations that understand the solutions, and that go and work with customers to enable the solutions and add value the more their businesses are going to thrive.

At the end of the day with cloud, there definitely is (margin) compression partners are experiencing. When you go to Amazon Web Services, partners are not selling boxes anymore the customer is just subscribing to a web service. But the Intelligent Edge is not impacted by the cloud. It is a completely new space. You still end up selling boxes, but I think you are going to end up doing a lot more on top of the boxes by adding value.

How important was the Aruba acquisition to the HPE strategy?

Aruba was the first in the M&A track that came into HPE. And frankly, if Aruba had not succeeded then the follow-on acquisitions would be far more questionable for HPE to go do. The fact that Aruba has come in and infused new energy into the overall value proposition that HPE offers to our customers and the Intelligent Edge and the fact that we have been successful the last two years- we have grown dramatically. We are the fastest growing provider at the edge.

We are taking Cisco head on from a competitive standpoint at the edge. There have not been too many challengers to Cisco in the enterprise. There has been obviously challengers like Juniper in the service provider space but when you look at the enterprise networking space it has been dominated by Cisco for a long time. Now with Aruba HPE is in a position to challenge that.

What is the Aruba culture?

We have a different approach to the market. And the innovation and customer first approach to our culture is what I think is giving HPE more confidence that we can do more of these acquisitions like Nimble and SimpliVity and create this new stack that customers are looking for. And most importantly have the confidence that we can keep the talent – the innovation DNA – that comes from these startups as part of the HPE organization and make HPE a very innovative company moving forward.

I think there is a confidence that HPE and Meg have that we can bring in new organizations and innovate with them towards the future. I think that is the fundamental influence we have had on HPE – -a customer first, innovation first culture and most importantly the confidence that we can do these acquisitions and keep the talent so we can keep it going for a long time.

How has HPE changed under the leadership of HPE CEO Meg Whitman?

When Meg took over HPE five years ago, it was a troubled company. There was a lot that she had to do to break it down. Fundamentally the biggest challenge for HP was its bigness. It was a massive company – 325,000 employees – doing everything from PCs and printers to EDS type services to software applications to infrastructure in the data center. Anything you could think of in IT HP was doing. In a world where things are moving so rapidly it is impossible to focus anymore when you are so broad. So the big strategy was to create focus so the company could be more agile and nimble in the fast moving market. So it could react to the trends and give customers and partners what they wanted and be more competitive in the marketplace.

What Meg has achieved is to break the company down into pieces that allow each part to focus on what it does best. So HP Inc. focuses on PCs and printers for consumers, DXC – which is where Enterprise Services went – is going to focus on delivering outsourced services to our customers.

What is the strategy for HPE in the wake of the spin-offs?

What remains is entirely squarely focused on the enterprise. And enterprise architecture is fundamentally going through a shift. There is mobile first on the edge and there is a cloud first happening in the data center. To meet these trends fundamentally there is a realization that we need to double down on what we do great inside our own architecture – the organic part and then we need to pursue an inorganic path through M&A which brings the new elements of the new architecture of the new stack that customers are inspired to build.

Why did the Aruba acquisition succeed within the HPE framework?

I think (HPE CEO) Meg (Whitman) made a very important call the day of the acquisition when she spoke to our customers and partners. She basically said 'we are going to let this thing run.' Fundamentally what that meant was she was going to keep us independent – relatively. In fact in the networking market this was almost a reverse acquisition. She took the networking portfolio HPE had and put it under Aruba management – under me and (former Aruba CEO) Dom (Orr) at the time. And we were able to take it and keep the Aruba culture and model of customer first, customer last and innovation first DNA. So we were able to keep going. That gave confidence to our customers that this was not an acquisition where Aruba was going to be integrated and be lost in the bigness of HPE. We maintained our focus, our relationships and continued to drive in the market.

Giving us that opportunity to lead as opposed to be integrated was a very important first step. And two years later that still remains; the Aruba brand is vibrant. It is alive and we are growing really well. And that promise that we would leave Aruba alone is actually still relevant.

What is the lesson learned from the successful HPE strategy with Aruba?

I think they have learned that by doing that you win in the market. You get the advantage of a new brand and you reenergize the core HPE as a result of this. Two years later, we are embraced very warmly within HPE and we are seen as a harbinger of change for the organization. The people within HPE are all great. They were just chaffing under market conditions that made them feel like they were under siege. Now they feel like they are winning again. That gives you a new spring in your step when you go out and talk to customers. You can say we are winning and here is why we are winning. Keeping us independent and giving us the autonomy to go operate on our own was a very fundamental step in allowing us to win.

How important are the current acquisitions like SimpliVity, Nimble and Niara?

Very important As we start to migrate to the new stack, we need to bring in these new technologies and we need to most importantly keep the people that built these technologies and the culture that allowed them to build these market leading technologies. That is the realization – how do you keep the DNA that comes in? It is basically to empower them to do what they do best and not get in their way. That is what we have learned as an organization.

Now that I have been a part of HPE for two years, I am an ambassador to these new acquisitions that says [that] it is possible to succeed within HPE' and here is a blueprint to do it. I am talking to the founders of these companies as they come into HPE and say here is how to proceed. There are going to be challenges obviously because you are part of a bigger organization, but here is how you manage it and take advantage of the bigness.

How big an advantage did Aruba gain from HPE's market muscle?

Honestly, a lot of the huge customer wins we have had in the market are because of HPE's presence in the market. They have the footprint that you need to take advantage of and they have the connections at large organizations. It is how do you connect with that and take advantage of that opportunity. Smaller companies don't have that leverage and feet on the street. But HPE does. If you can really hook into that and take advantage of that, you can really win. We are a living example of that.

How important are acquisitions going forward for HPE to be number one in hybrid IT and Intelligent Edge?

It is core to the strategy. We have to do two things well: we have to continue to innovate organically across the board – across the traditional HPE portfolio – which we have always done well. We need to continue to build that out both on the software and the hardware on the data center side. And we need to continue to innovate with acquisitions that we make like Aruba where we keep the innovation DNA and keep it going. And then we have to bring new talent in whether it is through Niara or Rasa or SimpliVity, Nimble and others. This is a whole enchilada. We really need to bring organic and inorganic elements together and make it all work well together as one culture.

How important is focus in the new HPE?

I think by bringing the company down into a manageable bite-sized company – and it is still very big; it is $30 billion company – but relative to a $100 billion company that did everything under the sun in IT, we are now a lot more focused on these two missions. It is very clear now what the strategy and focus is. It allows us to really build a culture to make it all come together.

How big of a role will you have in shaping the culture going forward?

I have a seat at the table. I am with (HPE CEO) Meg (Whitman) and (HPE Executive Vice President) Antonio (Neri). I am not an outsider looking in to HPE. I am influencing HPE's strategy directly. That helps. It makes you feel like you own the outcome and you are not just a participant. That is a very important element of changing the culture – to bring in the new talent and give them the voice to allow you to change direction. That is what motivates me at HPE: I am able to not only able to keep the Aruba culture, go to market machinery and innovation DNA alive, but I am able to actually influence the broader HPE organization to adopt more of our approach and our culture. That openness is very, very important to building up the new company.

I squarely credit Meg and Antonio for ensuring Aruba and the new startups have a seat at the table. That openness and approach is driven from the top down. It is very, very important.

How is the Intelligent Edge strategy is taking hold in the partner community?

Powering the Intelligent Edge is an initiative I own for HPE. At the highest level for HPE there are three initiatives; the first one is hybrid IT which is the movement toward a hybrid private and public cloud infrastructure, the second one is powering the Intelligent Edge and the third one is the services that make it all come together for our customers. Intelligent Edge is really a complete growth story for HPE overall. If you think about what defines the Intelligent Edge is the mobility first approach that Aruba has taken to the networking market that is really resonating in the marketplace with our customers and our partners.

What we are doing is building out that mobility first strategy in its entirety as part of HPE. It includes not only the Aruba wireless assets that we brought to the table, but it now has expanded into enabling overall network architecture including the wired components that are required both at the access level and at the core switching level. It allows us to now take a full solution to the market. That is what customer want and what partners have been looking for.

What is the big data and analytics part of the Aruba strategy?

That is other piece of the mobile first strategy. Acquisitions like Niara that we did recently around security and prior acquisitions like Rasa are allowing us to take the software intelligence on top of the different access points and switches and really turn it into an engine for machine learning. In the past networking software has been in the smart category which means that there were a bunch of different knobs that we gave customers to tweak.

What we are going to do next is learning software where the knobs learn and proactively advise customers on the changes that they need to make to the environment – including securing it - for their users.

I think that is the overall message on the mobility side. That is one part of the puzzle.

How big is the Internet of Things opportunity for partners?

What we are seeing there is a huge influx of devices in the network that connect, for example, in a building context to smart lighting, smart HVAC systems, smart physical security systems with video surveillance. There is a whole bunch of IoT use cases inside a traditional enterprise, but I think even more interestingly outside of the enterprise with factory floors and oil rigs – environments that have not been traditionally connected to the network. They are getting connected to the network. We have a whole strategy on how we bring security to the world of IoT and a big data and analytics model that takes analytics out from the data center and brings it to the edge of the network. That is the second part of the overall strategy. So mobility first and Intelligent Edge are the two huge drivers for the Intelligent Edge conversations.

Are HPE partners moving fast enough to capitalize on the Intelligent Edge opportunity?

We launched the integrated partner program in November and we are seeing a very good uptake of HPE partners coming over and selling networking. The message fundamentally to them is they need to broaden their portfolio from selling into the data center to now selling infrastructure outside of the data center. That is where the Intelligent Edge comes in. The conversation is not just about the cloud and how that is changing the data center, but it is really about enabling the edge where the users and things are to actually plug into the cloud.

There is a much more margin rich and relatively newer area at the Intelligent Edge. So there is a lot more opportunity to add value to those conversations. It is not just about selling boxes. You obviously do that. But the new conversations with partners is about how do you take these products and solutions that HPE brings to market at the edge and turn it into new practices that give them margin and differentiation. That is really where the future lies. There is a ton of interest in mobility, IoT and security. The better they get educated on those trends the more margin and revenue they are going to make.