Server giant HP turns to Foxconn for help with scale-out servers

Hewlett-Packard(s hpq), which claims server market share leadership, is partnering with contract manufacturer Foxconn to manufacture web-scale servers.
The move shows how much the cloud computing shift has changed the server market over the last few years. These days, cloud providers are calling the shots when it comes to server design and pricing — which is why white-box makers like Quanta and Wistron have been gaining market share.
This growing influence of cloud providers on the hardware market will be a hot topic at Structure in June, where HP executive vice president Bill Veghte, Amazon(s amzn) CTO Werner Vogels and Rackspace(s rax) president Taylor Rhodes will all speak, as will Facebook VP of Infrastructure Jay Parikh. Facebook(s fb) helped nurture this trend with its Open Compute project aimed to bring open-source design goodness to the data center hardware world.
Taipei-based Foxconn is best known for manufacturing iPads and iPhones under contract to Apple(s aapl), but is now apparently focusing on the server market. HP has also been pushing its high-end, energy-efficient Project Moonshot servers as platforms for enterprise workloads and cloud, but clearly sees how much traction low-end white box makers like Quanta and Wistron are making.
The HP-Foxconn partnership shows just how fluid things are in the server market as cloud vendors from Amazon to Rackspace exert more influence over how the servers running their massive clouds are designed and manufactured. They want their servers their way, not necessarily the way HP or Dell or IBM wants to manufacture them. Oh, and they want them cheap and as energy-efficient as possible. IBM(s ibm), under pressure, is selling its X86 server business to Lenovo and is now pushing its open POWER chip design to cloud makers, with some help from Google(s goog)
When software giant Microsoft joined the Open Compute Foundation in January, in an effort to push its server specs, you knew something was up. Microsoft wants to exert its considerable buying power — it has to fill those Azure data centers with something. As Bill Laing, corporate VP of server and cloud for Microsoft said at the time:

“We now run more than a million servers across our data center footprint and learned how to optimize for those workloads with a focus on saving costs.”

Wells Fargo analyst Maynard Um was cautiously optimistic on how HP’s new partnership to provide “cloud-optimized servers” will pan out. In a research note he said the FoxConn alliance …

” …  makes sense as there has been a trend by large hyperscale companies to purchase low-end, low-cost, fast servers from ODM’s directly. With this new product, HP will be able to address a specialized SKU in the server market that had been going directly to ODMs.”

This story was updated at 6:36 a.m. PST with analyst comment and other details on the deal.