>> Live from San Francisco, it's theCUBE.
Covering IBM Think 2019.
Brought to you by IBM.
>> Hello everyone, welcome back to theCUBE's live coverage
here at San Francisco.
The Moscone North allow you here
as part of our exclusive coverage
theCUBE for IBM Think 2019,
their annual conference of customers and employees
coming together to set the agenda
for the next year for IBM and its ecosystem.
I'm John Furrier.
Stu Miniman, Dave Vellante, and Lisa Martin
co-hosting all week.
Four days of wall to wall coverage.
Day two of our coverage,
really day one of the show kickoff we're here.
Ending out that day and just have the CEO's Keynote,
and we're going to do a review and analysis, Dave and Stu.
We had a lot of interviews coming up to this.
The theme is pretty clear, it's AI cloud, (laughs)
and everything else going underneath that
classic development, application developers,
developers in general making applications, that's classic.
But AI's the big story,
and like always cloud and the promise of where that's going,
which is hybrid and multi-cloud.
Dave, you said on the Keynote,
any surprises from Ginni Rometty?
>> I wouldn't say there were any surprises.
First of all I like Ginni.
I think she's a great presenter,
I'd like to hang out with her like we were kids.
I would of wanted to hang out with her.
She's the type of person I think I would feel comfortable
talking sports or business.
She looked good, she had a really nice sharp white suit on,
she's self deprecating,
she was drinking Starbucks,
they're obviously a client of IBM's.
I thought the best moment was when
Jim Whitehurst came on stage.
He said it's great to be here.
She was like yea, I'll give you 34 billion reasons
why it's great to be here kind of thing.
So that was pretty funny.
She made the comment
we've been dating Red Hat for 20 years
before we decided to get married.
She was trying to make a case.
Normally in Ginni's presentation, she makes a really solid,
puts forth a solid premise
and then sort of backs it up with her guests.
Today I thought her premise,
which was, we're entering chapter two,
it's all about scaling and abetting AI everywhere,
it's about hybrid, it's about bring mission critical apps,
move those forward.
And then she had a number of other lessons learned.
I thought she laid it out
but I think it sort of missed the backend.
I don't think they punctuated the tail end of Ginni's talk.
The guests were great,
and they had guys on from Kaiser Permanente, AT&T.
And they were, I thought, very solid.
But I don't think they made the case
as strong as the premise that she put forward,
and we can talk more about that.
>> And Stu I've seen Red Hat on stage,
We've been commenting,
we've been analyzing the acquisition of Red Hat.
Big number, $34 billion.
Critical point, you guys talked about
in your opening on day one,
the leverage they need to get out of that.
This is the Alamo for them with the cloud in my opinion.
IBM's a lot to bring to the bear in the cloud.
AI anywhere telegraphs that they want to have their stuff
with containers and multiple clouds.
They want to be positioned as a multi-cloud company,
but still have their cloud providing the power
for the work loads that make sense for IBM.
This is their last day.
This is like the Alamo for them.
They need to make cloud work right now,
Watson move from a product to a brand holistically.
Openstack, does it tie it together Stu?
You're thoughts on OpenStack
and how this fits in to their narrative.
>> So I think you mean OpenShift, right John?
From Red Hat's standpoint, absolutely.
What they're doing.
They are involved in OpenStack
but OpenStack, they are small potatoes.
>> They're one of the few that are saying
we're not OpenStack.
>> Red Hat, I mean OpenShift, my bad.
Long Day.
>> Absolutely and it's complicated in the multi-cloud world.
Lots of different pieces.
We've had a number of conversations with the IBM people
that have worked with, side by side,
Red Hat in the open source communities.
IBM, no stranger to open source.
As we talked about it in our open on yesterday,
it's the developers is really where IBM needs to go,
and where Red Hat has a bevy of them.
And John, what you said about multi-cloud, absolutely.
If IBM thinks that buying Red Hat
will make them the global player in cloud,
I think that's wrong
and I don't think that's what they're doing.
When I wrote a blog post when it came and I said,
Is this move going to radically change the cloud landscape?
No!
Can this acquisition radically change IBM and change
the trajectory of where they fit into multi-cloud?
Absolutely.
So now there's cultural differences.
We had Stefanie Chiras on who's a long time IBM'er
who now runs the biggest business inside of Red Hat.
And she talked about the passion of open source.
This is not lip service.
I have many friends that have worked for Red Hat.
I've worked with them, partnered with them,
and covered them for most of those 20 years.
And absolutely, you've got over 10,000 people
that are passionate, involved in communities,
and when you talk about the developer world
you talk about the cloud-native world.
This is what really Red Hat has been waiting for.
>> You know what is interesting John,
and I'm wondering if you can comment on this,
is hearing IBM, Ginni talking about chapter two,
she talked about digital reinvention.
Here's yet another company using the reinvent terminology.
I think that's sort of poignant.
She talked about 40% of the world
is going to be private,
60% is going to be public cloud.
That's the first time I've heard those stats.
She said it's flipped if you're a regulated industry.
But what are you're thoughts on people essentially using
Amazon's narrative on reinvention?
>> Everyone's using Amazon's narrative.
Here's the bottom line,
Amazon is winning by large margins.
I think the numbers are way skewed
in the favor of the people trying to catch up.
I think that's more of a game of vocation
by the analyst firms.
Amazon is absolutely blowing away the competition
when it comes to public cloud.
The only game at the table right now
for the Oracles, IBMs,
and Microsofts, and Google
is to slow down the adoption of Amazon.
And you see the cloud adoption with Amazon.
Whether it's in the government sector,
which I think is more acute and more illustrative,
the JEDI contract, a $10 billion contract.
That is a "sole source deal,"
but it was bid as a multi source deal,
means anyone can bid on it.
Well guess what,
that is going to be awarded probably to Amazon
as a sole winner because IBM doesn't have the certification,
nor does Microsoft, nor does Oracle, nobody's got it.
Amazon's winning that.
And that begs the argument, can you use one cloud?
And the answer is, yes you can,
if the app work load works best for it.
And procurement does not decide output for the cloud.
For example: If it's the JEDI contract
it's a military application.
So like a video game would you want to play a video game
and be lagging?
Would you want our military to be lagging?
Certainly the DoD says no, so one cloud makes sense.
If you're running Office 365, you want to use Azure.
So Microsoft has taken that
and their earnings have been phenomenal,
by specializing around their work loads
that makes sense for Azure and they're catching up.
IBM has an opportunity to do the same for their work loads,
the business work loads.
So AI anywhere is interesting to me.
So I think this is a good bet if they can pull it off,
that's the strategy.
And the world will go multi-cloud
where certain clouds will be sole for the app,
sole sourced for the work loads
that make sense for those work loads.
So this is where the market's going, right?
So this whole notion of there will be multi-cloud,
it's going to be multi-cloud and winner take most.
And the game right now is to stop Amazon.
That is clearly the case and you see it in the bids,
you see it in the customer base,
and IBM is catching up as fast as they can.
They got the people and the technology, the question is,
how much do they catch up and level up to Amazon?
>> Well Stu, despite Ginni invoking the reinvent terminology,
her Keynote is starkly different
than what you would expect from an Amazon Keynote.
She mentioned in a couple of the announcements
Watson anywhere, which by the way it's about time,
it's about time that Watson ran on other people's clouds,
it should have been a while ago.
And then Hyper Protect is the world's most secure cloud
but we don't really have any details on that.
And then IBM business automation with Watson.
And that was really it.
I think it was by design not to give a big product pitch.
Very non-Steve Jobs like, very non-Andy Jassy like
which is all product, product, product.
I mean kind of surprising,
in a big show with all these customers,
you'd think they'd be pitching
but I think their intent
was to really be more content oriented.
>> Well, so Dave, it goes back at the core.
What is IBM's biggest business?
IBM's biggest business is sole services.
So I've done a number of interviews this week already,
talking about how IBM is helping
with digital transformation.
How they're helping people move
to more agile development for environments.
The multi-cloud world, how do they,
IBM has a long history with CSPs and MSPs.
So they have large constituencies
and sure they have products.
Great stuff talking about how do they have
the best infrastructure to run your AI workloads,
and the strength that they have in super-computing,
and HPC and how they can leverage that
because IBM knows a thing or two about scale.
Dave, one of the questions I have for you is,
We've seen the big services organizations
go through radical downsizing,
HP spun-off their business,
Dell got rid of the Perot business,
IBM still is service at it's core,
is IBM built for the multi-cloud, cloud-native, AI world?
Or do they still need to go through some massive changes?
>> Well multi-cloud is complicated.
IBM does complicate it.
Services deal with complexity.
But I still can't help but feel like--
>> Well I think I want to comment on that.
I think the services,
If the manual services and professional services drop down,
IBM has a great opportunity to
move them to cloud based services.
Meaning I can write software.
This is where I think they have an advantage.
They could really nail the business applications
which will become services,
whether it's domain expertise, in a vertical.
And I think this is their cloud opportunity.
IBM can capture that.
They can take an entirely new category of applications,
business applications and services.
Automate them with machine learning,
automate them with cloud scale, they're cloud scale.
While making them portable on multiple clouds.
So the notion of services will be the professional services,
classic, grandfather's services
to cloud based services at scale.
>> Yeah well I think you're right.
Look at it, that's one of IBM's biggest strengths.
Ginni did that acquisition, by the way, the PWC acquisition.
It's 100,000 people.
It instantly brought IBM into
that deep vertical industry expertise.
They're not going to give that up anytime soon.
And there's so many opportunities to codify those services
through software and make them repeatable services.
As a service business is one of the fastest growing parts
of IBM's revenue streams.
So I don't see that going away at all.
I do think there was a missed opportunity
and maybe they can't talk about it
for some regulatory reason or maybe they're just paranoid.
But you had Whitehurst on the stage,
you just spent $34 billion,
I would have liked to heard more about the rational.
Even though we heard it before.
They did a, Jim and Ginni, did a tour,
they were on all the big TV shows, they were on Kramer.
But I would've liked to heard sort of six months on
what that rational is and how they're going to help
transform in this new chapter.
And what that role that Red Hat was going to play,
I thought that was a missed opportunity.
>> Well I'll speculate on that.
I think one of the things they probably don't have
their answer yet.
IBM's very good on messaging, they're pretty tight.
But I think Arvind Krishna talked to us
this morning on our first interview.
He brought up the containerization and Kubernetes Trend.
I think that's where Red Hat fits in.
Now once they'll give them cloud-native developers
in Enterprise Fortune 1000.
They also got the the cloud-native ecosystem behind that
to see and see et cetera,
but containers does for legacy,
containerization and Kubernetes really preserves legacy.
It allows developers to essentially keep the old
while bringing in the new
and managing the life cycles of those applications,
not a rip and replace.
This is an opportunity for IBM,
and if I think the messaging folks and product guys
are probably going to figure out
okay how do we take the Red Hat and OpenShift
and be cloud-native and take all the goodness
that comes in with cloud-native, the new developers,
the dev-ops, infrastructure this code,
make under the covers infrastructure programmable
and as Rob Thomas pointed out,
have a horizontal data layer
that enables new kinds of business services.
So to me containerization is kind of nerdy Kubernetes,
but this is really a new linchpin
to what could be a sea change for IBM in terms of revenue.
Keeping the legacy customers happy
because then the pressure to move to Amazon goes away
because I can say, whoa wait.
If the question, is why adopt?
If customers have an answer for that,
that gives IBM time, this is what they want.
Otherwise the cloud-native world
is going to move very, very fast,
we've seen the velocity of the momentum.
And I think that's a key move.
>> Well I think your point about
slowing down the Amazon momentum is a good one.
And I want to talk about five things that Ginny said,
the lessons learned.
She said one: "You could approach the world from outside in
"and focus on customer experience.
"Or you could do inside out and identify new ways to work
"and new work flows, a kind of drive in change."
The third lesson learned was: "You need a business platform
"fueled by data with embedded AI."
The fourth is: "You need an AI platform."
And then the fifth is, Rob Thomas says:
"You can't have AI without I A,
"you need an information architecture."
Which by the way I believe it to be true.
So those are business oriented discussions.
It's not something that you'd necessarily hear from Amazon,
They're kind of chewy,
there's a services component to all that.
The big question I have is, will Watson be that AI platform?
>> Yeah, I mean something I look at is,
why do I choose a platform and a partner?
So we understand Amazon,
they want to be the leader in everything.
They have a lot more services than anyone.
But if I want data services,
first cloud that comes to mind to me is Google.
Google has a real strength there.
Where does IBM have a leadership compared to Google?
Business productivity, IBM has a lot of strengths there
but Microsoft also has a place.
So customers, if they're going to live multi-cloud,
they're going to, in many ways, go back to best of breed.
And therefore, where will IBM differentiate themselves
from some of those big companies.
>> Well we have visibility now, it's clear now.
If you look at the industry, the fog is lifting,
you're starting to see some clear lines of sight
in a few major trends.
And it's pretty clear on where the industry is going
for the next 10 years.
Application developers are at the top of the stack,
they are going to build apps.
The infrastructure's cloud,
cloud something, multi-cloud, cloud-native,
infrastructure's code and data and AI.
You see that in Amazon reinvent SageMaker.
You are seeing all the major innovations happening around.
Apps using data powered by CloudScale, that's it.
Everything else to me is glue
or some sort of fabric component
or a piece of that distributed architecture
and it's cloud, AI, and applications.
>> As Dave has often said,
it's the innovation sandwich of today.
>> Yeah well so,
I guess the other piece I want to mention is,
because of, there's been some high-profile failures
with Watson, but Watson was trying to do some things
that were, not voice response to Alexa,
it's rather solve cancer and world problems.
And so I think IBM has actually earned
the right to be in the discussion.
I think that the Red Hat acquisition
gives IBM instant credibility in this game.
Especially as a multi-cloud game.
>> They got the right.
They got zillions of customers,
they have a lot of business model,
innovations that their customers are innovating on.
And if they keep the cloud innovative,
they got to match the specs of the cloud,
they got to be there with cloud.
If they don't make the cloud work
then they're going to be subservient to the other clouds.
They have to make it in the top three.
This is clear.
The AI thing I think will work.
They got a lot of experience in data.
I think Watson kind of finding it's home
as a brand is natural fit.
Got a portfolio of data.
I think IBM will do very well on the data front.
It's the cloud game that they got to really sure up.
They got to make sure that the IBM cloud
can serve their customers.
>> The good news there is they're in the game.
We saw HPE try to get into it,
HP try to get it to cloud, it failed.
Cisco for a while was trying to get in.
We saw EMC making numerous attempts.
VMware made numerous attempts.
IBM spent $2 billion on software, they've got a cloud,
they've transformed what was essentially
a bare metal hosting platform into a cloud.
They jammed all there as a service products in there,
their SAS portfolio.
So they're at least in the game.
And again, I've said often,
I think they're very Oracle like.
It's not the biggest cloud,
it's not going to scale to the Amazon levels.
But they've got a cloud and it's a key part of the strategy.
>> Innovation sandwich: Applications, cloud,
with data in the middle, and AI.
That's the formula, Dave, we said on theCUBE here.
Alright day two coverage for theCUBE
of four days we're here.
In the lobby of Moscone North,
part of the new refurbished Moscone Center in San Francisco.
Howard Street's closed,
it feels like Salesforce Dreamforce event.
Big event in San Francisco.
I'm John Furrier, Stu Miniman and Dave Vellante.
We're here for four days,
day two of four days of coverage for IBM Think.
Back tomorrow, thanks for watching.
(upbeat music)