>> Commentator: Live from Las Vegas.
It's theCUBE.
Covering InterConnect 2017.
Brought to you by IBM.
>> Hello everyone.
Welcome to theCUBE special broadcast here
at the Mandalay Bay in Las Vegas
for IBM InterConnect 2017.
This is IBM's big Cloud show.
I'm John Furrier.
My co-host, David Vellante for the next three days
will be wall-to-wall coverage of IBM's Cloud Watson.
All the goodness from IBM.
The keynote server finishing up now
but this morning was the kickoff of
what seems to be IBM's Cloud strategy
here with Dave Vellante.
Dave, you're listed in the keynote,
we are hearing the presentation.
We had the General Manager/Vice President of Data
from Twitter on there, Chris Moody, talkin' about everything
from the Trump presidential election
being the avid tweeter that he is
and got a lot of laughs on that.
To the SVP of Cloud talking about DevOps
and this is really IBM is investing 10 million dollars plus
into more developer stuff in the field.
This is IBM just continuing to pound the ball
down the field on cloud.
Your take?
>> Well IBM's fundamental business premise is that
cognitive, which includes analytics, John
plus cloud plus specific industry solutions
are the best way to solve business problems
and IBM's trying to differentiate from
the other cloud guys who David Kenny was on stage today
saying, you know, they started with a retail business
or the other guys started with search,
we started with business problems,
we started with data.
And that's fundamental to what IBM is doing.
The other point, I think is--
the other premise that IBM is putting forth
is that the AI debate is over.
The Artificial Intelligence, you know, wave of
excitement in the 70s and 80s and then, you know,
nothing is now back in full swing.
An AI on the Cloud is a key differentiator from IBM.
In typical IBM fashion for the last several Big Shows,
IBM brought out not an IBMer but a customer
or and or a partner.
And today it brought out Chris Moody from Twitter
talking about their relationship with IBM
but more specifically the fact that Twitter's 11 years old.
Some of the things you're doing with Twitter
obviously connected into March Madness
and then Arvind Krishna who has taken over
for Robert LeBlanc as the head of the Cloud group,
talked about IBM, AI, IBM's Cloud, blocked chain,
trusted transactions, IoT, DevOPs, all the buzz words
merged into IBM's Cloud Strategy.
And of course, we reported several years ago
at this event about Bluemix as the underpinning
of IBM's developer strategy.
And as well it showcased several partners.
Indiegogo was a crowdfunding site and others.
Some of those guys are going to be in theCUBE.
So.
You know as they say, this AI debate is over.
It's real and IBM's intent is to the platform for business.
>> Dave, the thing I want to get your thoughts on
is IBM's on a 19 consecutive quarters of
revenue problems with the business on general
but they've been on a steady course
and they kind of haven't wavered.
So it's as if they know they got to shrink to grow approach
but we just came off the heels of Google Next
which is their Cloud Show.
How the Amazon is on re-invent as the large public cloud
but the number one question on the table
that's going to power IoT, that's going to power AI,
is the collision between cloud computing and IoT,
cloud computing in big data I should say is colliding
with IoT at the center which is going to fuel AI
and so, it brings up the question of enterprise readiness.
Okay?
So this is the number one conversation in the hallways here
at Las Vegas and every single Cloud Show
in the enterprise is,
can I move to the cloud?
Obviously it's a hybrid world, multi-cloud world.
IBM's cloud play.
They had a Cloud.
They're in the top four as we put them in there.
Has to be enterprise ready but yet it as to spawn
the development side.
So again, your take on enterprise readiness and then
really fueling the IoT because IoT
is a real conversation at an architectural level
that is shifting the--
tipping the scales if you will for where the action will be.
>> Well John, you and I have talked in theCUBE for years now.
Going on probably five years that IBM had to shrink to grow.
They've got the shrink part down.
They've divested some of its business like the x86 business
and the microelectronics business.
They have not solved the grow problem.
Let's just say 19 straight quarters of declining revenue.
But here's the question.
Is IBM stronger today than it was a year ago?
And I would argue yes and why is that?
One is its focus.
Its got a much clearer focus on its strategy
around cognitive, around data and marrying that to Cloud.
I think the other is as an 80 billion dollar company
even though it's shrinking,
its free cash flow is still 11.6 billion.
So it's throwing off a lot of cash.
Now of course,
IBM made those numbers, made its earnings numbers
by with through expense control, its got lower tax right.
Some of the new ones of the financial engineering.
Its got some good IP revenue.
But nonetheless, I would still argue that IBM
is stronger this year than it was a year ago.
Having said that, IBM's service as business
is still 60% of the company.
The software business is still only about 30% into it
but 10% is hardware.
So IBM--
people say IBM has exited the hardware business.
It hasn't exited completely the hardware business
but it's only focusing on those high value areas
like mainframe and they're trying to sort of retool power.
Its got a new leader with Bob Picciano
but it's still 60% of the company's business is still
services and it's shifting to a (mumbles) model.
An (mumbles) model.
And that is sometimes painful financially.
But again John, I would argue that it is stronger.
It is better positioned.
And now its got some growth potential in place
with AI and with, as you say, IoT.
We're going to have Harriet Green on.
We're going to have Deon Newman on.
Focusing on the IoT opportunity.
The weather company acquisition as a foundation for IoT.
So the key for IBM is that it's strategic imperatives
are now over 40% of its business.
IBM promised that it would be
a 40 billion dollar business by 2018
and it's on track to do that.
I think the question John is,
is that business as profitable as its old business?
And can it begin growing to offset the decline
in things like storage,
which has been seeing double digit declines
and its traditional hardware business.
>> So Dave, this is to my take on IBM.
IBM has been retooling for multiple years.
At least a five year journey that they have to do
because let's just go down the enterprise cloud
readiness matrix that I'm putting together
and let's just go through the components
and then think about what was old IBM and what's new.
Global infrastructure.
Compute networking, storage and content delivery,
databases, developer tools, security and identity,
management tools, analytics, artificial intelligence,
Internet of Things, mobile services,
enterprise applications, support, hybrid integration,
migration, governance and security.
Not necessarily in that order.
That is IBM, right?
So this is a company that has essentially (mumbles) together
core competencies across the company
and to me, this is the story
that no one's talking about at IBM is that
it's really hard to take those components
and decouple them in a fashion that's cloud enabled.
This is where, I think, you're going to start to see the bloom
on the rose come out of IBM
and this is what I'm looking at because
IBM had a little bit here, they had a little bit here,
then a little stove pipe over here.
Now bringing that together
and make it scalable, it's elastic infrastructure.
It's going to be really the key to success.
>> Well, I think, if again if you breakdown those businesses
into growth businesses,
the analytics business is almost 20 billion.
The cloud business is about 14 billion.
Now what IBM does is that they talk about
as a service runway of you know, 78 billion
so they give you a little dimensions on
you know, their financials but
that cloud business is growing at 35% a year.
The as a service component, let's call it true cloud,
is growing over 60% a year.
Mobile growing, 35%.
Security, 14%.
Social, surprisingly is down actually year on year.
You would thought that would be a growth theory for them
but nonetheless, this strategic initiatives,
this goal of being 40 billion by 2018
is fundamental to IBM's future.
>> Yeah and the thing too about the enterprise rate is
in the numbers, it speaks to them where the action is.
So right now the hottest conversations in IT are SLA's.
I need SLA's.
I have a database strategy that has to be multi-database.
So (mumbles) too.
Database is a service.
This is going to be very very important.
They're going to have to come in and support multiple databases
and identity and role-based stuff has to happen
because now apps, if you go DevOps
and you go Watson Data Analytics,
you're going to have native data within the stack.
So to me, I think, one of the things
that IBM can bring to the table
is around the enterprise knowledge.
The SLA's are actually more important than price
and we heard that at Google Next
where Google tried it out on their technologies
and so, look at all the technology,
buy us 'cause we're Google.
Not really.
It's not so much the price.
It's the SLA and where Google is lacking
as an example is their SLA's.
Amazon has really been suring up the SLA's
on the enterprise side but IBM's been here.
This is their business.
So to me, I think that's going to be something
I'm going to look for.
As well as the customer testimonials,
looking at who's got the hybrid
and where the developer actually is.
'Cause I think IoT is the tell sign in the cloud game
and I think a lot of people are talking about
infrastructures of service
but the actual B-platform as a service
and the developer action.
And to me, that's where I'm looking.
>> Well comparing and contrasting,
you know, those two companies.
Google and Amazon with IBM,
I think completely different animals.
As you say, you know, Google kind of geeky
doesn't really have the enterprise readiness yet
although they're trying to talk that game.
Diane Green hiring a lot of new people.
AWS arguebly has, you know, a bigger lead
on the enterprise readiness.
Not necessarily relative to IBM
but relative to where they were five years ago.
But AWS doesn't have the software business that IBM has yet.
We'll see.
Okay so that's IBM's ace in the hole
is the software business.
Now having said that, David Kenny got on stage today.
So he came out and he's doing his best
Jeremy Burton impression.
Came out in sort of a James Bond, you know, motif
and guys with sunglasses and he announced
the IBM Cloud Object Storage Flex.
And he said, yes we have a marketing department
and they came up with that name.
You know, this to me is their clever safe objects tour
to compete with S3, you know several years late.
After Amazon has announced S3.
So they're still showing up some of that core infrastructure
but IBM's--
the (mumbles) of IBM strategy is the ability to
layer cognitive and their SAS Portfolio on top of Cloud
and superglue those things together.
Along, of course, with its analytics packages.
That's where IBM gets the margin.
Not in volume infrastructure as a service.
>> I want to get your take on squinting through
the marketing messages of IBM
and get down to the meat and the bone which is
where is the hybrid cloud?
Because if you look at what's going on in the cloud,
we hear the new terms, lift and shift.
Which to me is rip and replace.
That's one strategy that Google has to take is
if you run (mumbles) and Google,
you're kind of cloud native.
But IBM is dealing a lot at pre-existing
enterprise legacy stuff.
Data center and whatnot so
the lift and shift is an interesting strategy
so the question is, for you is,
what does it take for them to be successful?
With the data platform, with Watson, with IoT,
as enterprise extend from the data center with hybrid.
>> Well I think that, you know, again
IBM's (mumbles) is the data and the cognitive platform.
And what IBM is messaging to your question
is that you own your data.
We are not going to basically take your data
and form our models and then resell your IP.
That's what IBM's telling people.
Now why don't we dig into that a little bit?
'Cause I don't understand sort of how you
separate the data from the models
but David Kenny on stage today was explicit.
That the other guys, he didn't mention Google and Amazon,
but that's who he was talkin' about,
are essentially going to be taking your data into their cloud
and then informing their models
and then essentially training those models
and seeping your IP out to your competitors.
Now he didn't say that as explicitly as I just did
but that's something as a customer
that you have to be really careful of.
Yes, it's your data.
But if data trains the models,
who owns the model?
You own the data but who owns the model?
And how do you protect your IP
and keep it out of the hands of the competitors?
And IBM is messaging that they are going to help you
with the compliance and the governance and the (mumbles)
of your organization to protect your IP.
That's a big differentiator if in fact
there's meat in the bone there.
>> Well you mentioned data, that's a key thing.
I think whether doing it really quickly is
getting the hybrid equation nailed
so I think that's going to like just pedal as fast as you can.
Get that going.
But data first enterprise is really speaks
to the IoT opportunity
and also the new application developers.
So to me, I think, for IBM to be successful,
they have to continue to nail this data as value concept.
If they can do that, they're going to drive (mumbles)
and I think that's their differentiation.
You look at, you know, Oracle,
Azure, Microsoft Azure and IBM,
they're all playing their cards to
highlight their differentiation.
So.
Table stakes infrastructures of service,
get some platform as a service, cloud native, open source,
all the goodness involved in all the microservices,
the containers, Cooper Netties,
You're seeing that marker just develop as it's developing.
But for IBM to get out front,
they have to have a data layer,
they have to have a data first strategy
and if they do that well,
that's going to be consistent with
what I think (mumbles).
And so, you know,
to me I'm going to be poking at that.
I'm going to be asking all the guests.
What do you think of the data strategy?
That's going to be powering the AI,
you're seeing artificial intelligence,
and things like autonomous vehicles.
You're seeing sensors, wearables.
Edge of the network is being redefined
so I'm going to ask the quests really kind of
how that plays out in hybrid?
What's your analysis going to be for the guests
this week? >> Well, I think
the other thing too is the degree to--
to me, a key for IBM success and their ability to grow
and dominate in this new world is
the degree to which they can take
their deep industry expertise in health care,
in financial services and certain government sectors
and utilities, et cetera.
Which comes from their business process, you know,
the BPO organization and they're consulting
and the PWC acquisition years ago.
The extent to which they can take that codifier,
put it in the software, marry it
with their data analytics and cognitive platforms
and then grow that at scale.
That would be a huge differentiator for IBM
and give them a really massive advantage
from a business model standpoint
but as I said, 60% of the IBM's business
remains services so we got a ways to go.
>> Alright.
We're going to be drilling into it again.
There's a collision between cloud
and big data markets coming together
that's forming the IoT.
You can see machine learning.
You can see artificial intelligence.
And I'm really a forcing function in cloud acceleration
with data analytics being the key thing.
This is theCUBE.
We'll be getting the data for you for the next three days.
I'm John Furrier.
With Dave Vellante.
We'll be back with more coverage.
Kicking off day one of IBM InterConnect 2017
after the short break.