As the world's biggest online firms consume an increasing share of the world's servers HP is trying to catch the eye of customers too big to ignore.
HP may be the largest server maker in the world but the money it made from selling boxes into datacentres fell 6.2 percent last year, at a time when Asian low-cost server manufacturers saw revenues rise 50 percent.
The reason? These Asian manufacturers - the likes of Huawei, Supermicro, Quanta Computer and Wistron - are satisfying the vast appetite for computer hardware of the world's biggest online firms - the likes of Google and Amazon in the west and Alibaba Group and Tencent in the east.
To power extensive online operations and growing cloud services, these companies are buying servers thousands at a time and refreshing hardware in as little as eight months.
These internet giants, the so-called 'tier one service providers', typically manage the design of the server and its surrounding infrastructure themselves, stripping out extraneous hardware to keep running costs at a minimum, and building custom software stacks.
These no-frills, built-to-spec boxes are what these Asian ODMs are set up to provide, while being a far cry from the premium servers and software traditionally supplied to enterprise by HP. As such, HP is trying to ensure it can meet the fast growing demands of these big companies, as well as the more traditional server market.
In Europe, demand from these tier one companies for servers is growing by more than 60 percent each year, and is primarily met by ODMs, said Iain Stephen, VP and GM for HP Servers EMEA.
"The problem for us with was we were trying to play with products like this [indicating its latest range of HP ProLiant DL servers], and they're playing with a product they are designing and sourcing from Taiwan, and there's no comparison in price."
To produce servers better suited to the needs of these major service providers HP recently announced it is setting up a joint venture with computer manufacturer Foxconn to make low-cost boxes tailored to these customers' demands.
"It's becoming increasingly important [to serve this market]. It's growing and we want to be part of that and we can't with our standard offerings right now," said Rhys Austin, BladeSystem and infrastructure software manager for HP Servers EMEA.
While margins on boxes sold to tier one providers may differ from those sold to enterprise, there is still an opportunity to sell services to these companies, said Stephen.
"It's not easy to deploy 15,000 servers at a time. So they actually buy a lot of services around integration, asset tagging, cabling testing. It's there where you potentially make money and differentiate yourself because they don't have an endless supply of administrators and physical people to put things in."
There is rapid turnover in hardware at these tier one companies - Stephen talks of 40-foot containers full of 2,500 servers shipped in for immediate use, only to be replaced with a container of new machines eight months later.
In contrast the enterprise-targeted servers announced by HP yesterday - such as the new HP ProLiant DL 360 and 380 and budget DL160 and 180 range - will likely have a far slower pace of adoption by individual, end-user companies.
"In the traditional IT world most businesses used to be on a three year refresh cycle and now most people are on a five year," said Stephen, adding those businesses upgrading to the latest ProLiant range would likely be running machines from three generations back.
"In 2013, the traditional IT market for these sorts of servers stopped," he said, adding it is only just beginning to pick up again as banks refresh their datacentre estates.
But while demand from enterprise for servers stagnated last year, increasing numbers of workers began renting infrastructure on cloud platforms, said Stephen, a trend he believes will continue.
"If you said to most CIOs 'Are they using Amazon?', they would say 'No'. But if you did a proper audit lots of people in the organisation would be using their services, because IT wouldn't deploy anything new or spend any money. The traditional market won't grow again because over time people will move to a different way of doing IT."
HP is also broadening its server offerings with its Moonshot range, tiny server cartridges designed to be densely packed, with hundreds fitting into a 42U rack. Each cartridge is powered by an energy sipping, wimpy core processor targeted at handling specific, computationally light workloads in parallel. Current cartridges are based on Intel Atom CPUs and AMD X2150 APUs, with HP testing 64-bit ARM-based cartridges ahead of release. Stephen said it is the m700 cartridge's ability to serve hosted desktop that is proving popular with customers.
It's important to keep the sales by ODMs in perspective, however. The traditional OEMs are still on top, with HP making $13.2bn selling servers last year, according to IDC, almost five times the combined revenues of the ODMs. Stephen also says that the enterprise-targeted HP ProLiant DL 360 is the most popular two-socket server in the world, and HP's latest generation of ProLiant servers are not just aimed at enterprise, but also the smaller tier two and tier three service providers.