>> Narrator: Live, from Las Vegas,
it's The Cube, covering IBM Think 2018.
Brought to you by IBM.
>> Hello, everyone and welcome back
to our day two of coverage here in Las Vegas,
where IBM Think 2018's The Cube's three days
of wall-to-wall coverage day two.
Yesterday, we had kick-off, kind of partner day.
Today's really the kick-off of the event.
CEO of IBM up on stage for the keynote.
I'm John Furrier with Dave Vellante.
Dave, we're doing seven years or so plus
all these six shows coming down to one for IBM Think.
It's a packed house; you can't
even get through the hallways.
Looks like they need to go to Sands Convention Center.
>> Dave: (laughs) or Moscone.
>> Or Moscone, or somewhere bigger, they need a bigger boat,
but the keynote kicked off, Ginni Rometty was up there.
Interesting, putting smart to work,
quantam, blockchain, AI data and she
kind of laid out the cloud strategy,
you know, using data in public cloud and private.
It's clear where they're going with the cloud.
Your analysis of the keynote, what's your thoughts?
>> Well, first of all, John, as viewers know,
I mean, I'm a big fan if Ginni Rometty.
I think she's been overly criticized,
but I think she's a great presenter.
When I compare Ginni's presentation skills
with some of the other CEOs in
the industry, I think she's far superior.
She connects with the audience,
she looks great, she's really cogent,
she's well prepared, so, I really like her
as a presenter and as an executive,
and, you know, another women in tech, you know we love that.
Yes, you're right, putting smarter to work was her theme.
She's talkin' about 30 to 40,000 people at the event.
There's too many people to count I guess.
You can't really figure that out,
and, so, it's big, it's packed.
She also did a theater in the round which was different.
I noticed last year ServiceNow did that.
I really like that style, so that
was kind of an interesting thing.
Ginni talked about three exponential growth areas.
So, I'll lay 'em out and then, we can talk about it.
She said they come every 25 years.
The first was Moore's law, and we all know what that is,
and the second was Metcalfe's law, the value of
the network increases exponentially if
the nodes in network increase, and then,
the third, which is upon us now, is data plus AI.
Her supposition was that is going to usher
in a next era of incremental growth,
because you're going to out-learn the competition,
and she used this term of incumbent disruptors,
and I heard that and went okay, hold on,
(Dave laughs)
'cause I don't see it that way.
>> Yeah.
>> I don't see the incumbents as the disruptors.
So, that was my first reaction,
and then, she brought up three customers,
Verizon, and I'm like, "Verizon?
"A big telco is a disruptor, come on!
"They're gettin' a disruptor by over the top.",
but the CEO came on, Lowell McAdam,
talkin' about 5G, so we'll talk about that,
and then, Maersk, IBM has a joint venture with Maersk,
so, Michael White came up, he's the CEO of that.
Now, Maersk is using blockchain,
and Maersk we all know is the container company
and they're attacking inefficiencies with blockchain,
so I thought that was actually a really good example,
and then, Royal Bank of Canada, RBC, came up.
You know, banking, to me, is an industry
that has not been disrupted yet,
and, so, I, again, was initially negative
toward this idea of incumbent disruptors,
'cause I don't think the incumbents are disruptors,
and we'll talk about why I think that,
but I thought IBM did a pretty good job
of showing how incumbents can actually take AI
and blockchain and, at least,
defend against the disruptors.
>> I mean, it's clear to me that she's obviously
playing to the crowd with the digital debt transformation.
I mean, we talk about these traditional companies,
they need to transform, and she brings up Moore's law
and Metcalfe's law kind of to take a view of the past,
but to look forward, she's kind of saying,
"Lookit, Moore's law make things smaller, faster,
"cheaper, doubling every six months."
That's just on the, I mean, this applies to IoT,
quantum makes everything else.
Metcalfe's law I think is very relevant,
'cause if you look at blockchains
about decentralized internet, you're talkin' about
decentralized applications, that's where
blockchain will play the major enablement there,
that's about network effects, so you
bring network effects in with Metcalfe's law,
Moore's law on the equipments on the hardware side,
I like that, so, that worked for me.
The disruptors, I think it's more
of overplaying her hand on that,
because I just haven't seen any evidence
of any incumbents truly disrupting themselves.
So, maybe you can talk with Microsoft,
IBM's trying to transform, but at the end of the day,
they got to look back and learn from the internet era.
If you don't jump on these next waves,
you could be driftwood, right?
So, you got to surf the new waves,
and I think that's what I heard her say
is IBM is putting data at the center
of the value proposition using AI as a front end for that,
make it smarter, and then, using blockchain
as an infrastructure and protocol level
opportunity to take the IBM software and
data plane and wrap 'em together.
So, if you look at it, you got data at the center,
blockchain on one side, and AI on
the other, it's the innovation sandwich.
That, for me, works for me, now, let's unpack that.
How real is it, and that's going to be what we're
going to talk about, and I think that's a good strategy.
All the elements are in play.
>> Well, I think the other piece of that sandwich,
maybe it's the dressing on top, is the cloud,
'cause you have to have scale and network effects
in order to achieve that innovation.
I just want to mention, she talked about three other things
that you are going to do as a customer.
You're going to, one, leverage digital platforms,
you're going to, two, embed learning in, virtually,
every process that you do, and,
three, you're going to empower humans.
So, she put forth this idea of augmented intelligence,
and, as I predicted yesterday, she,
unlike Larry Olsen, she doesn't come right out
and slam her competition, she does it in a classy way.
She said, quote, "IBM is not
"in conflict with your business."
In other words, we're not taking your data
and then, remonetizing it at the back end.
That's a big deal, IBM makes a lot of noise about that.
So, it's really augmenting humans, not in conflict
with your business, and bringing advanced security
to things like blockchain, >> Yeah.
>> and cloud, and AI.
>> I like her term security to the core, I like that,
but that kind of gives the impression that's core
to all things, but if you look at the megatrends
that are impacting the incumbents
and the people trying to do digital transformation,
as well as the new startups, Dave, that are trying
to get a new position in the landscape is clear.
You got blockchain, you got decentralized apps,
you got AI, but the data's critical,
and she mentioned some cool things I like with the cloud
which was she's saying, "Lookit, we'll make
"the data a really big thing for you.
"If you want it in public cloud,
"you can have it in private cloud."
So, she's looking at cloud as much more
of a hybrid approach on private, kind of hinting
at the GDPR problem that we know's out there.
So, if you want to move your data
around, that's a critical asset.
Also, if you look at what's going on in the news today,
these days, is Facebook is getting slammed
because how they were hacked with the election,
and other weaponization of data,
this is a big deal for companies,
and I think if IBM can play that card
to leverage the data and have the confidence
of the companies that they serve
to say, "Lookit, data's got to be owned by you,
"but has to be managed in a way that's dynamic,
"whether it's a GDPR or some other regulatory issue.",
and, believe me, blockchain's going to have some.
So, you know, they could come out
and get in the front of this new wave,
and I think that's a good play.
So, it wasn't just a recycled cloud show,
it wasn't just AI Watson, I like how she put it together.
>> So, just touching on a thing, you mentioned Facebook.
So she talked about Moore's law ushering in
this era of back office productivity.
She didn't mention Wintel; I think it's still,
probably, too painful for IBM to think about that.
Metcalfe's law, she said ushered
in, sort of, the Facebook era.
I think that's fair, the network effect of Facebook,
and then, she said, "Hopefully, you know,
"they'll call this Watson's law."
I don't know if that's going to happen,
but that notion of, >> Wishful thinking.
>> hey, hey, you got to be power of positive thinking,
but that notion of exponential learning.
I want to talk about cloud for a minute.
You and I had some interesting
debates yesterday in our open about cloud.
Oracle announced its earnings yesterday, cloud growth 30%.
I see Oracle and IBM as very similar
in their cloud strategies; both companies would vehemently
disagree with that, >> Yeah.
>> but I think they are very similar in that sense.
The street didn't like it, because Oracle cloud
only grew at 30%, stock's down, okay, great,
but, to me, IBM and Oracle are similar
in that they're basically cloudifying their business.
They're allowing their clients
to onboard customers to the cloud,
putting their applications portfolios,
their SAS products, their middleware into the cloud,
IBM putting mainframe class stuff in the cloud,
they're putting power into the cloud,
storage into the cloud, pretty much everything
into the cloud if you want it.
Now, that's not easy to do >> Yeah.
>> if you've got, you know, legacy businesses,
obviously, AWS has a blank sheet of paper, that was
kind of your point yesterday, >> Yeah, yeah.
>> but I like the differentiation that I see
from the companies like IBM and Oracle, and there really
aren't many others like that. >> Yeah.
I mean, my point yesterday was
the definition of cloud has been totally mangled, right?
Like, it's different, if you're Amazon,
they have a slew of services, they have more services
than anyone else on the planet,
and they have more people using those services,
so, by that standard, Amazon is
clearly kicking everyone's butt,
but that's just their perspective.
If you look at IBM, their services
are applications, same with Oracle.
So, if you look at what IBM's doing
is they're taking the same approach.
Services and applications are going to
be IBM's view of the cloud, but IBM's
taking a multicloud approach, and I think
that's different, and, when you put the data
as the central component of the architecture,
you're basically saying, "I'm going to look
"at the cloud as more of a commodity layer.
"I'll let the customers decide which cloud to use.",
and that's a better strategy, now, it's hard
to do multicloud, so maybe they're buying some time,
but I think that's a good, solid strategy
to take if they're not going to be trying
to push their own cloud as 100%,
because not all customers will sole source cloud
unless there's functionality that that cloud does.
For instance, Amazon is winning the public sector
business like it's nobody's business,
because they have the only cloud that has the ability
to do classified and non-classified cloud.
Nobody else has it, so, from a log speck standpoint,
they're winning everything and
from the DOD, CIA, and government.
What IBM has to do is go into customer requirement
saying, "We're the only company that can provide this."
That's a unique opportunity for IBM.
I think that's a winning approach
rather than going on a frontal
arms race of services with Amazon,
and that's what all the big guys are doing.
Microsoft, Oracle, IBM are not taking on Amazon directly,
because they're going to have to match feature for feature,
and then, Amazon wins that game every time.
>> So, I want to go back to something Sam Palmisano
said when he was CEO of IBM in 2012 on his way out.
HP was the hot company, Hurd was running the company,
and he was asked, "Do you worry about HP?"
He said, "I don't worry about HP,
"'cause they don't invest in R&D.
"I worry about Oracle, 'cause they invest in R&D.",
and, again, what I like about Oracle
and IBM, they both invest in R&D, IBM even,
you know, core stuff around blockchain,
certainly quantum computing and the like.
So, I think that is a very positive
dynamic for both of those companies.
>> Well, I mean, IBM's R&D is a secret weapon,
I think, for them; they don't overplay that much.
They do talk about it, but we look at what blockchain
potentially could be, and I think, you know,
IBM's certainly doing the messaging on blockchain.
It still has a bunch of ads on T.V.,
and they're trying to make that a kind of a global brand,
but blockchain speaks to a new infrastructure, right?
It's not just distributed computing,
it's decentralized computing, and we were saying
on the Cube and we've been reporting
there is a new wave of software developers
coming on the market that are going to be writing
decentralized applications for token economics.
The notion of tokens isn't about ICOs and those scams,
although there's a lot of those going on.
The notion of token economics fit
with a mobile cloud decentralized architecture
whether it's IoT, or end users, or applications,
token economics is going to change
the impact in efficiencies up and down the stat.
So, to me, the developer community
that's rushing into the market
on the decentralized applications
will be a major opportunity, but you got to nail
the blockchain and that tech is just a moving train
from a protocol standpoint to an infrastructure.
So, to me, I like what IBM's doing with blockchain.
I think that's going to be an opportunity
to move the ball down the field.
>> So, the exponential innovation formula, in my view
of the next ten years, is going to, and you nailed it,
going to combine data with artificial intelligence,
or machine intelligence, and cloud economics,
and there is a set of digital services emerging.
>> Well, cloud and token economics, both, it's two.
>> But, so, yes, but, so, and that's part of it,
but there's a set of digital services emerging
in this fabric, and they're not bespoke services,
they're part of this integrated fabric.
The extent to which people leverage those services,
those digital services, to create new business models
is going to determine success or failure.
Data, at the core, is critical.
>> Yeah, yeah. >> I think you're
right on on that, but what I like is
that IBM is trying to solve some hard problems with AI.
>> I mean, lookit, I was tweeting yesterday all day
on some highlights from my Puerto Rico trip
on the cryptocurrency events we've been covering,
and one thing that we reported was
the killer app for blockchain and cryptocurrency
and decentralized apps is money.
Money is the killer app, and we see
that with the hype cycle with the ICOs,
but, if you look at what IBM's doing
with the supply chain side of their business,
perfect storm for supply chain innovation.
Blockchain is about money, marketplaces,
and nailing inefficient incumbents.
So, if the incumbents want to be disruptive,
they're going to have to disrupt themselves
by removing inefficiencies out of the system.
>> Well, and the Maersk example was a good one
where there's inefficiencies, you know,
20% of the cost of moving containers is admin stuff.
Sometimes the admin costs exceed the shipping costs.
So, that was a good example, but, again,
I see blockchain as one component
in this fabric, in this puzzle.
>> Day two, Cube here, kicking off wall-to-wall coverage.
Three days of live broadcast talking to the thought leaders.
Extracting the signal from the noise, the Cube,
the number one leader in live tech coverage.
Go to cube.net to check out all the footage
and siliconangle.com to check out all of our articles.
We're reporting and the team reporting all week,
and that analysis of Ginni's keynote, well done, Dave.
More coverage after this short break.
(techno beat)
>> Narrator: Robert Herjavec.