[Music] thecube's coverage of red hat summit 2022 thecube has been covering red hat summit for a number of years of course the last two years were virtual coverage now the red hat summit is one of the industry's most premier events and and typically red hat summits are many thousands of people i think the last one i went to was eight or nine thousand people very heavy developer conference this year red hat has taken a different approach it's a hybrid event it's kind of a vip event at the westin in boston with a lot more executives here than we would normally expect versus developers but a huge virtual audience my name is dave vellante i'm here with my co-host paul gillin paul this is a location that you and i have broadcast from many times and um of course 2019 the summer of 2019 ibm acquired red hat and um we of course we did red hat summit that year but now we're seeing a completely new red hat and a new ibm and you wouldn't know ibm owned red hat for what they've been talking about at this conference we just came out of the keynote where uh in the in the hour-long keynote ibm was not mentioned once and only appeared the logo only appeared once on the screen in fact so this is uh very much red hat being red hat not being a subsidiary at ibm and perhaps that's justified given that ibm's track record with acquisitions is that they gradually envelop the acquired company and and it becomes part of the ibm board yeah they blue wash the whole thing right it's ironic because ibm think is going on right across the street arvin krishna is here but no presence here and i think that's by design i mean it reminds me of when you know emc owned vmware you know the vmware team didn't want to publicize that they had an ecosystem of partners that they wanted to cater to and they wanted to treat everybody equally even though perhaps behind the scenes they were forced to do certain things that they might not have necessarily wanted to because they were owned by another company and i think that you know certainly ibm's done a good job of leaving the brand separate but when they talk about the con the conference calls ibm's earnings calls you certainly get a heavy dose of red hat when red hat was acquired by ibm it was just north of three billion dollars in revenue obviously ibm paid 34 billion dollars for the company actually by today's valuations probably a bargain you know despite the market sell-off in the last several months uh but now we've heard public statements from arvind kushner that that red hat is a 5 billion plus revenue company it's a little unclear what's in there of course when you listen to ibm earnings you know consulting is their big business red hat's growing at 21 but when i remember paul when red hat was acquired stu miniman and i did a session and i said this is not about cloud this is about consulting and modernizing applications and sure there's some cloud in there with openshift but from a financial standpoint ibm was able to take red hat and jam it right into its application modernization initiatives so it's hard to tell how much of that 5 billion is actually you know legacy red hat but i guess it doesn't matter anymore it's working ibm mathematics is notoriously opaque they if the business isn't going well it'll tend to be absorbed into another number in the in the earnings report that that does show some growth so we've heard uh certainly ibm talks a lot about red hat on its earnings calls it's very clear that red hat is the growth engine within ibm i'd say it's a bit of the tail wagging the dog right now where red hat really is dictating where ibm goes with its hypercloud strategy which is the foundation not only of its technology portfolio but of its consulting business and so red hat is really in the driver's seat of of hybrid cloud and that's the future for ibm and you see that very much at this conference where uh red hat is putting out its uh series of announcements today about improvements to his hybrid cloud the new release of route 9 red hat enterprise linux 9 improvements to its hybrid cloud portfolio it very much is going its own way with that and i sense that ibm is going to go along with wherever red hat chooses to go yeah i think you're absolutely right if by the way if you go to siliconangle.com paul just published a piece on red hat reds hats their roll out of their parade which of course is as you pointed out led by enterprise linux but to your point about hybrid cloud it is the linchpin of of certainly ibm strategy but many companies hybrid cloud strategies if you think about it openshift in particular it's it's the modern application development environment for kubernetes you can get kubernetes you can buy eks you can get that for free in a lot of places but you have to do dozens and dozens of things and acquire dozens of services to do what openshift does to get the reliability the recoverability the security and that's really red hat's play and they're the the thing about red hat combining with linux their linux heritage they're doing that everywhere it's going to open shift everywhere red hat everywhere whether it's on-prem in aws azure google out to the edge you heard paul cormier today saying he expects that in the next several years hardware is going to become one of the most important you know factors i agree i think we're going to enter a hardware renaissance you've seen the work that we've done on arm i think 2017 was when red hat and arm announced kind of their initial collaboration could have even been before that today we're hearing a lot about intel and nvidia and so affinity with all of these alternative processes i think they did throw in today in the keynote power and so i think i heard that that was the other ibm branding they sort of tucked that in there but the point is red hat runs everywhere so it's fundamental to building out hybrid cloud and that is fundamental to a lot of company strategies and red hat has been all over kubernetes with openshift it's i mean it's a drum beat here uh the openshift strategy is what really makes hybrid cloud possible because kubernetes is what makes it possible to shift workloads seamlessly from platform to platform you make an interesting point about hardware we have seen kind of a renaissance in hardware these last couple of years as these specific chipsets and uh and even full-scale processors have come to market we're seeing several in the ai area right now where startups are developing full-blown chipsets and and systems uh just for ai processing and nvidia of course that's that's really kind of their stock and trade these days so uh a a company that can run across all of those different platforms a platform like like rel which can run all across those different platforms is going to have a leg up on on anybody else and the implications for application development are considerable when you when you think about we talk about a lot about these alternative processes when flash replaced the spinning disk that had a huge impact on how applications are developed developers now didn't have to wait for that that disc to spin even though it's spinning very fast it's mechanical compared to electrons forget it and and the second big piece here is how memory is actually utilized the x86 you know traditional x86 you know memory everything goes through that core processor intel for years grabbed more and more function and you're seeing now that function become dispersed in fact a lot of people think we're moving from a processor-centric world to a connect centric world meaning connecting all these piece parts alternative processors memory controllers you know storage controllers io network interface cards smartnics and things like that where the communication across those resources is now where a lot of the innovation is going you see you're seeing a lot of that and now of course applications can take advantage of that especially now at the edge which is just a whole new frontier the edge certainly is part of that equation when you look at machine learning at training machine learning models the cpu actually does relatively little work most of it is happening in gpus in these parallel processes that are going on and the cpu is kind of acting as a traffic cop and you see that in the edge as well it's the same model at the edge where more of the intelligence is going to be out in discrete devices spread across the network and the cpu is going to be less of a uh you know less of a engine of intelligence at the same time though we've got cpus with we've got 100 core cpus are on the horizon and there are even 200 and 300 core cpus that we may see in the next uh in the next couple of years so cpus aren't standing still they are evolving to become really kind of super traffic cops for all of these other processors out in the network and on the edge so it's a very exciting time to be in hardware because so much innovation is happening really at the microprocessor level well we saw this you and i lived through the pc era and we saw a whole raft of applications come about as a result of the microprocessor the shift of the microprocessor-based economy we're going to see so we are seeing something similar with mobile and the edge you know just think about some of the numbers if you think about the traditional moore's law doubling a number of transistors every let's call it two years 18 to 24 months pat gelsinger at intel promises that intel is on that pace still but if you look at the apple m1 ultra they increased the transistor density 6x in the last 15 months okay so where is this another data point is the historical moore's law curve is 40 that's moderating to somewhere down you know down in the low 30s if you look at the apple a series i mean that thing is on average increasing performance at 110 a year when you add up into the combinatorial factors of the cpu the neural processing unit the gpu all the accelerators so we are seeing a new era the thing i i i wanted to bring up paul is you mentioned ai much of the ai work that's done today is modeling that's done in the cloud and when we talk about edge we think that the future of ai is ai inferencing in real time at the edge so you may not even be persisting that data but you're going to create a lot of data you're going to be operating on that data in streams and it's going to require a whole new new architectural thinking of hardware very low cost very low power very high performance to drive all that intelligence at the edge and a lot of that data is going to stay at the edge and and that's we're going to talk about some of that today with some of the ev innovations and the vehicle innovations and the intelligence in these vehicles yeah and in talking in its edge strategy which it outlined today and the announcements that are made today red hat very much uh playing to the importance of being able to run red hat enterprise linux at the edge the idea is you do these big machine learning models centrally and then you you take the you take what results from that and you move it out to smaller processors it's the only way we can cope with it with the explosion of data that will be uh that these sensors and other devices will be generating so some of the themes we're hearing in the uh announcements today that you wrote about paul obviously rel9 is huge uh red hat enterprise linux version nine uh new capabilities a lot of edge a lot of security uh new cross portfolio capabilities for the edge security in the software supply chain that's a big conversation especially post solar winds managed ansible when you think about red hat you really i think anyway about three things rel which is such as linux it powers the internet powers everything uh you think of openshift which is application development you think about ansible which is automation so itops so that's one of the announcements ansible on azure and then a lot of hybrid cloud talk and you're gonna hear a lot of talk this week about red hat's cloud services portfolio packaging red hat as services as managed services that's you know a much more popular delivery mechanism with clients because they're trying to make it easy and this is complicated stuff and it gets more complicated the more features they add and the more the more components of the red hat portfolio are are available it's it's gonna be complex to build these hybrid clouds so like many of these so thecube started doing physical events last summer by the way and so this is this is new to a lot of people uh they're here for the first time people are really excited we've definitely noticed a trend people are excited to be back together paul cormier talked about that he talked about the new normal you can define the new normal any way you want so paul cormier gave the uh the the intro keynote bidani interviewed amex stephanie cheris interviewed accenture both those firms are coming out stephanie's coming on with the in accenture as well matt hicks talked about product innovation i loved his reference to ada lovelace that was very cool he talked about uh serena uh ramyanajan a famous mathematician who nobody knew about when he was just a kid these were ignored individuals in the 1800s for years and years and years in the case of ada lovelace for a century even he asked the question what if we had discovered them earlier and acted on them and been able to iterate on them earlier and his point tied that to open source very brilliantly i thought and um keynotes which i appreciate are much shorter much shorter intimate they did a keynote in the round this time uh which i haven't seen before there's maybe a thousand people in there so a much smaller group much more intimate setting not a lot of back and forth but uh but there is there is a feeling of a more personal feel to this event than i've seen it past red hat summits yeah and i think that's a trend that we're going to see more of where the live audience is kind of the on the ground it's going to the vip audience but still catering to the virtual audience you don't want to lose them so that's why the keynotes are a lot tighter okay paul thank you for setting up red hat summit 2022 you're watching the cube's coverage we'll be right back wall-to-wall coverage for two days right after this short break [Music] you

from the cube studios in palo alto in boston bringing you data-driven insights from the cube and etr this is breaking analysis with dave vellante cloud repatriation is a term often used by technology companies the ones that don't operate a public cloud the marketing narrative most typically implies that customers have moved work to the public cloud and for a variety of reasons expense performance security etc are disillusioned with the cloud and as a result are repatriating workloads back to their safe comfy and cost-effective on-premises data center while we have no doubt this does sometimes happen the data suggests that this is a single digit de minimis phenomenon hello and welcome to this week's wikibon cube insights powered by etr some have written about the repatriation myth but in this breaking analysis we'll share hard data that we feel debunks the narrative and is currently being promoted by some we'll also take this opportunity to do our quarterly cloud revenue update and share with you our latest figures for the big four cloud vendors let's start by acknowledging that the definition of cloud is absolutely evolving and in this sense much of the vendor marketing is valid no longer is cloud just a distant set of remote services that lives up there in the cloud the cloud is increasingly becoming a ubiquitous sensing thinking acting set of resources that touches nearly every aspect of our lives the cloud is coming on prem and work is being done to connect clouds to each other and the cloud is extending to the near and far edge there's little question about that today's cloud is not just compute storage connectivity and spare capacity but increasingly it's a variety of services to analyze data and predict slash anticipate changes monitor and interpret streams of information apply machine intelligence to data to optimize business outcomes it's tooling to share data protect data visualize data and bring data to life supporting a whole new set of innovative applications notice there's a theme there data increasingly the cloud is where the high value data lives from a variety of sources and it's where organizations go to mine it because the cloud vendors have the best platforms for data and this is part of why the repatriation narrative is somewhat dubious actually a lot dubious because the volume of data in the cloud is growing at rates much faster than data on prem at least by a couple thousand basis points by our estimates annually so cloud data is where the action is and we'll talk about the edge in a moment but a new era of application development is emerging with containers at the center the concept of write wants run anywhere allows developers to take advantage of systems that run on-prem say a transaction system and tap data from multiple sources in various locations there might be multiple clouds or at the edge or wherever and combine that with immense cheap processing power that we've discussed extensively in previous breaking analysis episodes and you see this new breed of apps emerging that's powered by ai those are hitting the market so this is not a zero-sum game the cloud vendors have given the world an infrastructure gift by spending like crazy on capex more than a hundred billion last year on capex for example for the big four and in our view the players that don't own a cloud should stop being so defensive about it they should thank the hyperscalers and lay out a vision as to how they'll create a new abstraction layer on top of the public cloud and you know that's what they're doing and they'll certainly claim to be actively working on this vision but consider the pace of play between the hyperscalers and their traditional on-prem providers we believe the innovation gap is actually widening meaning the public cloud players are accelerating their innovation lead and will 100 compete for hybrid applications they have the resources the developer affinity they're doing custom silicon and have the expertise there and the tam expansion goals that loom large so while it's not a zero-sum game and hybrid is definitely real we think the cloud vendors continue to gain share most rapidly unless the hybrid crowd can move faster now of course there's the edge and that is a wild card but it seems that again the cloud players are very well positioned to innovate with custom silicon programmable infrastructure capex build-outs at the edge and new thinking around system architectures but let's get back to the core story here and take a look at cloud adoptions you hear many marketing messages that call into question the public cloud at its recent think conference ibm ceo arvind krishna said that only about 25 of workloads had moved into the public cloud and he made the statement that you know this might surprise you implying you might think it should be much higher than that well we're not surprised by that figure especially especially if you narrow it to mission critical work which ibm does in its annual report actually we think that's probably high for mission critical work moving to the cloud we think it's a lot lower than that but regardless we think there are other ways to measure cloud adoption and this chart here from david michelle's book c seeing digital shows the adoption rates for major technological innovations over the past century and the number of years how many years it took to get to 50 percent household adoption electricity took a long time as did telephones had that infrastructure that last mile build out radios and tvs were much faster given the lower infrastructure requirements pcs actually took a long time and the web around nine years from when the mosaic browser was introduced we took a stab at estimating the pace of adoption of public cloud and and within a decade it reached 50 percent adoption in top enterprises and today that figures easily north of 90 so as we said at the top cloud adoption is actually quite strong and that adoption is driving massive growth for the public cloud now we've updated our quarterly cloud figures and want to share them with you here are our latest estimates for the big four cloud players with only alibaba left to report now remember only aws and alibaba report clean or relatively clean i ass figures so we use survey data and financial analysis to estimate the actual numbers for microsoft in google it's a subset of what they report in q121 we estimate that the big 4is and pas revenue approached 27 billion that's q121 that figure represents about 40 growth relative to q1 2020. so our trailing 12-month calculation puts us at 94 billion so we're now on roughly 108 billion dollar run rate as you may recall we've predicted that figure will surpass 115 billion by year end when it's all said and done aws it remains the leader amongst the big four with just over half of the market that's down from around 63 percent for the full year of 2018. unquestionably as we've reported microsoft they're everywhere they're ubiquitous in the market and they continue to perform very well but anecdotally customers and partners in our community continue to report to us that the quality of the aws cloud is noticeably better in terms of reliability and overall security etc but it doesn't seem to change the trajectory of the share movements as microsoft's software dominance makes doing business with azure really easy now as of this recording alibaba has yet to report but we'll update these figures once their earnings are released let's dig into the growth rates associated with these revenue figures and make some specific comments there this chart here shows the growth trajectory for each of the big four google trails the pack in revenue but it's growing faster than the others from of course a smaller base google is being very aggressive on pricing and customer acquisition to that we say good google needs to grow faster in our view and they most certainly can afford to be aggressive as we said combined the big four are growing revenue at 40 on a trailing 12-month basis and that compares with low single-digit growth for on-prem infrastructure and we just don't see this picture changing in the near to midterm like storage growth revenue from the big public cloud players is expected to outpace spending on traditional on on-prem platforms by at least 2 000 basis points for the foreseeable future now interestingly while aws is growing more slowly than the others from a much larger 54 billion run rate we actually saw sequential quarterly growth from aws and q1 which breaks a two-year trend from where aws's q1 growth rate dropped sequentially from q4 interesting now of course at aws we're watching the changing of the guards andy jassy becoming ceo of amazon adam silipsky boomeranging back to aws from a very successful stint at tableau and max peterson taking over for for aws public sector replacing teresa carlson who is now president and heading up go to market at splunk so lots of changes and we think this is actually a real positive for aws as it promotes from within we like that it taps previous amazon dna from tableau salesforce and it promotes the head of aws to run all of amazon a signal to us that amazon will dig its heels in and further resist calls to split aws from the mothership so let's dig in a little bit more to this repatriation mythbuster theme the revenue numbers don't tell the entire story so it's worth drilling down a bit more let's look at the demand side of the equation and pull in some etr survey data now to set this up we want to explain the fundamental method used by etr around its net score metric net score measures spending momentum and measures five factors as shown in this wheel chart that shows the breakdown of spending for the aws cloud it shows the percentage of customers within the platform that are either one adopting the platform new that's the lime green in this wheel chart two increasing spending by more than five percent that's the forest green three flat spending between plus or minus five percent that's the gray and four decreasing spend by six percent or more that's the pink and finally five replacing the platform that's the bright red now dare i say that the bright red is a proxy for or at least an indicator of repatriation sure why not let's say that now net score is derived by subtracting the reds from the greens anything above 40 percent we consider to be elevated aws is at 57 so very high not much sign of leaving the cloud nest there but we know it's nuanced and you can make an argument for corner cases of repatriation but come on the numbers just don't bear out that narrative let's compare aws with some of the other vendors to test this theory theory a bit more this chart lines up net score granularity for aws microsoft and google it compares that to ibm and oracle now other than aws and google these figures include the entire portfolio for each company but humor me and let's make an assumption that cloud defections are lower than the overall portfolio average because cloud has more momentum it's getting more spend spending so just stare at the red bars for a moment the three cloud players show one two and three percent replacement rates respectively but ibm and oracle while still in the single digits which is good show noticeably higher replacement rates and meaningfully lower new adoptions in the lime green as well the spend more category in the forest green is much higher within the cloud companies and the spend less in the pink is notably lower and you can see the sample sizes on the right-hand side of the chart we're talking about many hundreds over 1300 in the case of microsoft and if we look if we put hpe or dell in the charts it would say several hundred responses many hundreds it would look similar to ibm and oracle where you have higher reds a bigger fat middle of gray and lower greens it's just the way it is it shouldn't surprise anyone and it's you know these are respectable but it's just what happens with mature companies so if customers are repatriating there's little evidence here we believe what's really happening is that vendor marketing people are talking to customers who are purposefully spinning up test and dev work in the cloud with the intent of running a workload or portions of that workload on prem and when they move into production they're counting that as repatriation and they're taking liberties with the data to flood the market okay well that's fair game and all's fair in tech marketing but that's not repatriation that's experimentation or sandboxing or testing and deving it's not i'm leaving the cloud because it's too expensive or less secure or doesn't perform for me we're not saying that those things don't happen but it's certainly not visible in the numbers as a meaningful trend that should factor into buying decisions now we perfectly recognize that organizations can't just refactor their entire applications application portfolios into the cloud and migrate and we also recognize that lift and shift without a change in operating model is not the best strategy in real migrations they take a long time six months to two years i used to have these conversations all the time with my colleague stu miniman and i spoke to him recently about these trends and i wanted to see if six months at red hat and ibm had changed his thinking on all this and the answer was a clear no but he did throw a little red hat kool-aid at me saying saying that the way they think about the cloud blueprint is from a developer perspective start by containerizing apps and then the devs don't need to think about where the apps live whether they're in the cloud whether they're on prem where they're at the edge and red hat the story is brings a consistency of operations for developers and operators and admins and the security team etc or any plat on any platform but i don't have to lock in to a platform and bring that everywhere with me i can work with anyone's platform so that's a very strong story there and it's how arvin krishna plans to win what he calls the architectural battle for hybrid cloud okay so let's take a take a look at how the big cloud vendors stack up with the not so big cloud platforms and all those in between this chart shows one of our favorite views plotting net score or spending velocity on the vertical axis and market share or pervasiveness in the data set on the horizontal axis the red shaded area is what we call the hybrid zone and the dotted red lines that's where the elite live anything above 40 percent net score on the on on the vertical axis we consider elevated anything to the right of 20 on the horizontal axis implies a strong market presence and by those kpis it's really a two horse race between aws and microsoft now as we suggested google still has a lot of work to do and if they're out buying market share that's a start now you see alibaba shown in the upper left hand corner high spending momentum but from a small sample size as etr's china respondent level is obviously much lower than it is in the u.s and europe and the rest of apac now that shaded res red zone is interesting and gives credence to the other big non-cloud owning vendor narrative that is out there that is the world is hybrid and it's true over the past several quarters we've seen this hybrid zone performing well prominent examples include vmware cloud on aws vmware cloud which would include vcf vmware cloud foundation dell's cloud which is heavily based on vmware and red hat open shift which perhaps is the most interesting given its ubiquity as we were talking about before and you can see it's very highly elevated on the net score axis right there with all the public cloud guys red hat is essentially the switzerland of cloud which in our view puts it in a very strong position and then there's a pack of companies hovering around the 20 vertical axis level that are hybrid that by the way you see openstack there that's from a large telco presence in the data set but any rate you see hpe oracle and ibm ibm's position in the cloud just tells you how important red hat is to ibm and without that acquisition you know ibm would be far less interesting in this picture oracle is oracle and actually has one of the strongest hybrid stories in the industry within its own little or not so little world of the red stack hpe is also interesting and we'll see how the big green lake ii as a service pricing push will impact its momentum in the cloud category remember the definition of cloud here is whatever the customer says it is so if a cio says we're buying cloud from hpe or ibm or cisco or dell or whomever we take her or his word for it and that's how it works cloud is in the eye of the buyer so you have the cloud expanding into the domain of on-premises and the on-prem guys finally getting their proverbial acts together with hybrid that they've been talking about since 2009 but it looks like it's finally becoming real and look it's true you're not going to migrate everything into the cloud but the cloud folks are in a very strong position they are on the growth flywheel as we've shown they each have adjacent businesses that are data based disruptive and dominant whether it's in retail or search or a huge software estate they are winning the data wars as well that seems to be pretty clear to us and they have a leg up in ai and i want to look at that can we all agree that ai is important i think we can machine intelligence is being infused into every application and today much of the ai work is being done in the cloud as modeling but in the future we see ai moving to the edge in real time and real-time inferencing is a dominant workload but today again 90 of it is building models and analyzing data a lot of that work happens in the cloud so who has the momentum in ai let's take a look here's that same xy graph with the net score against market share and look who has the dominant mind share and position and spending momentum microsoft aws and google you can see in the table insert in the lower right hand side they're the only three in the data set of 1 500 responses that have more than 100 n aws and microsoft have around 200 or even more in the case of microsoft and their net scores are all elevated above the 60 percent level remember that 40 percent that red line indicates the elevation mark the high elevation mark so the hyperscalers have both the market presence and the spend momentum so we think the rich get richer now they're not alone there are several companies above the 40 line databricks is bringing ai and data science to the world of data lakes with its managed services and it's executing very well salesforce is infusing infusing ai into its platform via einstein you got sap on there anaconda is kind of the gold standard that platform for data science and you can see c3 dot ai is tom siebel's company going after enterprise ai and data robot which like c3 ai is a small sample in the data set but they're highly elevated and they're simplifying machine learning now there's ibm watson it's actually doing okay i mean sure we'd like to see it higher given that ginny rometty essentially bet ibm's future on watson but it has a decent presence in the market and a respectable net score and ibm owns a cloud so okay at least it's a player not the dominance that many had hoped for when watson beat ken jennings in jeopardy back 10 years ago but it's okay and then is oracle they're now getting into the act like it always does they want they watched they waited they invested they spent money on r d and then boom they dove into the market and made a lot of noise and acted like they invented the concept oracle is infusing ai into its database with autonomous database and autonomous data warehouse and look that's what oracle does it takes best of breed industry concepts and technologies to make its products better you got to give oracle credit it invests in real tech and it runs the most mission critical apps in the world you can hate them if you want but they smoke everybody in that game all right let's take a look at another view of the cloud players and see how they stack up and where the big spenders live in the all-important fortune 500 this chart shows net score over time within the fortune 500 aws is particularly interesting because its net score overall is in the high 50s but in this large big spender category aws net score jumps noticeably to nearly 70 percent so there's a strong indication that aws the largest player also has momentum not just with small companies and startups but where it really counts from a revenue perspective in the largest companies so we think that's a very positive sign for aws all right let's wrap the realities of cloud repatriation are clear corner cases exist but it's not a trend to take to the bank although many public cloud users may think about repatriation most will not act on it those that do are the exception not the rule and the etr data shows that test and dev in the clouds is part of the cloud operating model even if the app will ultimately live on prem that's not repatriation that's just smart development practice and not every workload is will or should live in the cloud hybrid is real we agree and the big cloud players know it and they're positioning to bring their stacks on prem and to the edge and despite the risk of a lock-in and higher potential monthly bills and concerns over control the hyperscalers are well com positioned to compete in hybrid to win hybrid the legacy vendors must embrace the cloud and build on top of those giants and add value where the clouds aren't going to or can't or won't they got to find places where they can move faster than the hyperscalers and so far they haven't shown a clear propensity to do that hey that's how we see it what do you think okay well remember these episodes are all available as podcasts wherever you listen you do a search breaking analysis podcast and please subscribe to the series check out etr's website at dot plus we also publish a full report every week on wikibon.com and siliconangle.com a lot of ways to get in touch you can email me at david.velante at siliconangle.com or dm me at dvalante on twitter comment on our linkedin post i always appreciate that this is dave vellante for the cube insights powered by etr have a great week everybody stay safe be well and we'll see you next time you

>>From the cube studios in Palo Alto in Boston. It's the cube covering IBM thing brought to you by IBM. >>Welcome back. I'm Stu Miniman and we're here with the cubes coverage of IBM. Thank you. 2020. The global experience reaching all of the participants of the event where they are. I'm happy to welcome back one of our cube alumni, Mike Farris, who is the vice president of corporate development and strategy at red hat. Mike, it's great to see you. Likewise too. Happy to be here. All right, so what Mike, uh, you know, lots of things to talk about a few weeks back. Uh, of course the management changes happened. Uh, we're fresh off of a red hat summit. Uh, I, I had a pleasure really talking to a lot of your peers, uh, your new boss, uh, and uh, you know, many of the customers. Uh, but for our, I think audience, right? Bring us up to speed. Uh, you know, back in 2019, it, uh, the, the largest software acquisition ever, uh, completed with IBM buying red hat and there've been some management changes, uh, some people, uh, switching roles. >>And, and you've got a new title, so, uh, bring her audience speed. Sure. Absolutely. So it's, it's been an exciting several, several months as we've gone through this. Of course. Um, we knew things were going to happen, things were announced clearly with Jenny's retirement quite a while ago. Um, but certainly, you know, the Arvin announcement and then as well as having both Jim Whitehurst become president. Okay. Oh, Cormier becoming CEO of red hat. You know, it's been an exciting several months trying to try to go through this and understand, you know, what would change and frankly, what would not change. Um, I'll say from red hats perspective, having been with red hat for coming up, you're on 20 years, uh, not a lot is really changed. We're still focused on our mission of being the owner leading enterprise open source software company, uh, focusing on both taking our, our platforms, both red hat enterprise Linux and now OpenShift a Ford in the market, partnering around middleware components, hardening around our management, uh, as well as our storage elements. >>So, you know, our mission hasn't changed and that's kind of one of the key aspects of this. I'll say that certainly, you know, with Arvind now as CEO of IBM and Jim Whitehurst is president of IBM along with Oh for me or being, you know, CEO of red hat and we've got a really strong leadership group in place at IBM that understands what red hat is, what we mean to the customer and just as importantly what we mean to the open source community. Uh, and, and that type of action and, and, and drive is certainly something that, that we think, you know, that leadership in place will help to ensure that the value we've delivered to customers, frankly from day one back when we launched red hat enterprise Linux or red hat advanced server, frankly, uh, it's something that, that we'll be able to continue to do and drive in the community and with the customers as we move forward. >>Yeah. Mike, it's interesting when we look out, uh, on the, the ecosystems and happening out there, we understand for customers sometimes it might be challenging to say, Hey, I listened to 10 different vendors and they all say the same words. I've got multi hybrid cloud, digital modernization, things like that. Well, with our hat as a, as an analyst firm, we kind of say, okay, everybody does things a little bit different. Do you know if you look at the big cloud players, they are all playing different games. When we looked at the IBM strategy pre acquisition of red hat and red hat, they line up pretty well, you know, red hat. Yeah, very much. At summit it was open hybrid cloud. Uh, when I look at IBM, maybe a little bit more talk of multicloud than hybrid. Well, but hybrid is long bend a piece of it. >>So yeah. Okay. Give us a little bit of the inside, you know, with your strategy hat on it. How much had it been okay. Strong alignment, obviously IBM and red hat decades. Um, but you know, there are some places where, uh, you need to make sure that people understand that, you know, red sat still please markers with all the clouds. And of course IBM has services that span many places, but they also have, you know, products and services that are, uh, it was particular to IBM thing. Absolutely. And I think, you know, it's important to note, and this is well established that, you know, one of the core, uh, justifications and reasons for the acquisition was really around red hats. A physician, not just an open source, but in the hybrid cloud. Um, we've been talking about that for sure many years in fact, before most of the vendor's name has predicted up. >>Um, uh, but just as importantly, I think if you look back at Marvin Krishna's announcements on frankly the day that he was named CEO, uh, you know, he starts talking about things like IBM's focus being hybrid. Yeah. AI. And how did those things come together and who were the participants in that value being delivered? Certainly from red hat's perspective is, as we've said, we've been talking about hybrid and delivering on hybrid for many years now. Now that's being, being pushed as part of the IBM overall message. Um, and so certainly being able to leverage that value and extend it throughout the ecosystem that IBM brings throughout the software that IBM has and their services. You know, certainly we think we've got a, a good opportunity to really take that message broader in the market. Um, you know, with again, with, with both Paul and Jim, president and CEO of red hat working together and we'll be able to take that and leverage that capability throughout all of IBM generally. >>Yeah. I'm glad you brought up the AI piece because one of the things that really struck me, thumb it often we're talking about plot worms and we're talking about infrastructure. And while that is my background, we understand that the reason infrastructure exists is because my Apple, that application and one of the most important piece of applications or data. So, you know, red hat of course has a strong history with hi guys, uh, to applications and data. You, you've got an operating system as you know, one of the core pieces of what you're doing. And when I think about IBM and its strengths, well the first thing I probably think of is services. But the second thing I think of was all of the businesses productivity, uh, the databases, you know, all these applications that IBM has. I read it over the years, uh, wondering if we can just click down one notch and you talk about, uh, you know, hybrid cloud and AI and everything. >>How are IBM and red hat helping customers build all of those new applications go through those transformations, uh, to really be modern enterprises? Yeah, so certainly if you look at red hat's history where we focused very much on building the platforms and again, whether that was red hat, enterprise, Linux open shift or J boss, you know, our focus has been how can we make a standardized platform, it will work across the industry regardless of use case or industry verdict. IBM, you know, has both platforms as well as a lot of investment in capabilities in the higher level value services as well as the specializations. And use of these applications and platforms for specific vertical industries. And a lot of what they've been able to bring to the table with your investments in Watson and AI as well as a lot of their data services has certainly start to come to fruition. >>And when we start taking these two in combination and applying, for example, a focus on developers, developer tools, being able to bring a value to not just uh, the operations folks, but also the developer side and really put a lot of the AI capabilities cross that we're starting to see, you know, accelerated value, accelerated use. And then if you layer that on top of a hybrid approach, you know, we've got a very strong message that crosses everything from, you know, existing applications to net new applications before developing from their DevOps cycle all the way through their operation cycle at the bottom end where they're, they're actually trying to do boy cross multiple platforms, multiple infrastructures, and keep everything consistently managed, secured and operated. And that's, that's really the overall message that we're seeing as we talk about this together with IBM. All right. So, Mike, you touched on some of the products that that red hat, uh, offers in the portfolio. >>Uh, it was, it was a real focus at summit, not really to talk about the announcements, you know, a week before a summit two came out. Yeah. Uh, OpenShift bar dog four wasn't a big w blob. Uh, you know, give us the update on really the red hat portfolio and you know, where are those points? You know, IBM is helping red hat scale. Yeah. So certainly you've touched on some of the big ones, right? Well, OpenShift itself with the four dot. Four release brings a lot of new capabilities, uh, that are being brought forward to those customers. I have a better management, better capabilities and what they can do from monitoring service, et cetera. Um, but certainly also things like what we're doing with OpenShift virtualization, which was another announcement. There were, we're actually doing, you know, bringing a game, changing capability to the market, uh, and enabling customers that have both existing, uh, virtual virtualized environments and also new or, or migrated or transformed a container, native environments and running those on the same platform. >>With the same management infrastructure, we see that as huge to be able to simplify the management capabilities, understand cost and be able to control those environments in a much more consistent way. Uh, secondly, uh, you know, one of the big things that's been happening is really around advanced container management. What we're calling an ACM. Uh, this is, this is a good example of how red hat and IBM have worked together, uh, to bring existing IBM capabilities and what they had called a multi cluster management or MCM and bring those not just into red hat yes. Part of our platforms, but also have red hat take the step of open sourcing that and making it part of the industry standard through open source community. So being able to take that type of value that IBM had matured, take it through red hat into the open source community, but simultaneously deliver it to our customers. >>Yeah. Open shift and make it part of the platform. It's something we really see as, as a huge value add. Mmm. We're also doing a lot more with hyperscalers, especially in the space of OpenShift managed services. Uh, you saw some of those last week and I would encourage everyone to go out and, and look at the Paul Cormier and Scott Guthrie announcements that we did. There was a keynote, a video that you can go review. Uh, but, but certainly, uh, certainly the focus on how do we work with these hyperscalers inclusive of IBM, uh, to make open shift and much more fluid deployment option, have it more, more service oriented, a both on premise and off premise so the customers can actually, uh, work together better in it. Yeah. A red hat I think has always done a really good job of highlighting those partnerships. It's way easy on the outside to talk about the competitive nature of the industry. >>And I remember a few years ago, a red hat made, you know, a strong partnership with AWS. You mentioned, you know, Scott Guthrie from Microsoft. Well, okay. Not Satya Nadella. Okay. Love it last year, but Microsoft long partner. Oh, okay. Of course, with IBM back to the earliest days, uh, and with red hat or, uh, you know, in the much more recent days, uh, there was those partnerships. So critically important. ACM definitely an area, uh, we want to watch it. It was really question we had had, if you look at last year, Microsoft announced Azure, uh, there are lots of solutions announced as to how am I going to manage in this multicloud world. Um, because it's not, my piece is everywhere. It's now I need to manage a lot of things that are out of my control from different vendors and hopefully we learned a lot of the lessons from the multi-vendor era that will be fixed in the multi cloud era. >>Oh, absolutely. And you know, arc was part of our discussion with Scott Guthrie last week or Paul's discussion and you'll see a demo of that. But I would also expect that you'll see more things coming from us markers as well. Right. You know, this is about building a platform, a hybrid platform that works in a multicloud world and being able to describe that in a very consistent way. Manage it. You were at entitled it in a very consistent way of across all the vendors, inclusive of both self and managed services, only one option. And so we're very focused on doing that. Um, IBM, certainly AXA assisting in that, helping grow it. But overall this focus is really about red has perspective about making that hybrid, right? the leading hybrid platform, the leading Coobernetti's. Okay. uh, in the industry. And that's, that's really where starting from with OpenShift. >>All right. So, so Mike, we started out the discussion talking about some of the changes and you know, where red hat stays, red hat and where the company is working together. Obviously the leadership changes. Oh, we're a big piece. Uh, congratulations you, you got, you know, a new role. I've seen quite a few people, uh, with some new titles. Uh, you know, w which is always nice to see. Uh, the, the people that have been working for a long time. The other area where seems from the outside there coordinated effort is around the covert response. So, you know, I've seen the, the public letters from, from Arvin Krishna of course. red hat and Paul Cormier's letter. Well, he is there. Uh, IBM was one of the first companies that we had heard from, uh, that said, Hey, you know, we're not going to RSA conference this year. >>We're moving digital, uh, with the events. So no real focus on them boys. And then of course boarding customers. Yeah. How does that covert response happen? And am I right from the outside that it looks like there, there is a bit of United right attack, this global pandemic response. It is a, you know, I think there's two levels to this. Certainly between red hat and IBM were well coordinated. Um, within, within red hat we have, uh, we have teams that are specifically dedicated to making sure, yeah, our associates and more importantly, uh, our customers and the overall communities are well-served through this. As you said earlier in the interview, uh, certainly we hold back on any significant product announcements at summit, including with some of our partners merely because we wanted to maintain this focus on how can we help everyone through this very unfortunate experience. >>Um, and so, you know, as obviously a lot of us, all of us are sitting at home now globally. Uh, the focus is very much how do we stay connected or we keep the business flowing as much as possible through this and, and, and keep people safe and secure in their environments and make sure that we serve both the customers and the associates. Yes. Awesome away. So there's a lot of sensitivity and we want to make sure that, you know, the industry and the overall world knows, uh, that we're very focused on keeping people healthy and moving forward as we, as we work through this together as a world. Yeah. Well, Mike Ferris, thank you so much for the update. It's been been a pleasure catching up. Great. Thanks dude. Appreciate it. All right. Stay tuned for lots more coverage from IBM. Think 20, 20. The global digital experience. Okay. To a minimum. And thank you. We're watching. Thank you.

>>Live from Miami, Florida. It's the cube covering IBM's data and AI forum brought to you by IBM. >>We're back in Miami. Welcome everybody. You watching the cube, the leader in live tech coverage. We're here at the IBM data and AI forum. Wow. What a day. 1700 customers. A lot of hands on labs sessions. What used to be the IBM analytics university is sort of morphed into this event. Now you see the buzz is going on. At least the Galean is here. She's the vice president of global sales for IBM data and AI. Welcome to the cube. Thank you for coming on. So this event is buzzing the double from last year almost. And uh, congratulations. >>Well, thank you very much. We have con, uh, lots of countries represented here. We have customers from small to large, every industry represented. And a, it's a, I can see a marked difference in the conversations in just a year around our, how customers want to figure out how to embark on this journey to AI. >>So yeah. So why are they come here? What's the, what's the primary motivation? >>Well, I think one IBM is recognized as the leader in AI and we just came out in the IDC survey as the three time w you know, leader, a recognized leader in AI. And when they come here they know they're going to hear from other clients who have embarked on similar journeys. They know they're going to have access to experts, hands on labs, and we bring our entire IBM team that's focused on data and AI to this event. So it's intimate, it's high skilled, it's high energy and they are learning a ton while they're. >>Yeah, a lot of content and you're educating but you're also trying to inspire people. I mean a raise. I was the hub this morning, he wrote this book, but he's this extreme, extreme, extreme like ultra marathoner. Uh, which I thought was a great talk this morning. And then you did a, I thought a good job of sort of connecting, you know, his talk of anything's possible to now bringing AI into the equation. What are you hearing from customers in terms of what they want to make possible and, and what's that conversation like in the field? >>Well, it's interesting because there is a huge recognition that every client that I talked to you, and they all want to understand this, that they have to be transforming their businesses on this journey to AI. So they all recognize that they need to start. Now. What I find when I talk to clients is that they're all coming in at different entry points. There's a maturity curve. So some are figuring out, you know, how do I move away from just Excel spreadsheets? I'm still running my business on Excel, right? And these are no banks in major that are operating on Excel spreadsheets and they're looking at niche competitors, you know, digital banks that are entering the scene. And if they don't change the way they operate, they're not going to survive. So a lot of companies are coming in knowing that they're low on the maturity curve and they better do something to move up that curve pretty fast. >>Some are in almost the second turn of the crank where they've invested in a lot of the AI technologies, they've built data science platforms, and now they're figuring out how do they get that next rev of productivity improvement? How do they come up with that next business idea that's going to give them that competitive advantage? So what I find is every client is embarking on this journey, which is a big difference where I think we were even a year, 18 months ago, where they were sort of just, okay, this is interesting. Now there I better do something. >>Okay, so you're a resource, you know, as the head of global sales for this group. So when you talk to customers that are immature, if I hear you right, they're saying, help us get started because we're going to fall behind. Uh, we're inefficient right now. We're drowning in spreadsheets, data. Our data quality is not where it needs to be. Help. Where do we start? What do you tell them? >>Well, one, we have a formula that we've proven works with clients. Um, we bring them into our garages where we will do design thinking, architectural workshops, and we figure out a use case because what we try not to do with our clients is boil the ocean. We want them to sh to have something that they can prove success around very quickly, create that minimal viable product, bring it back to the business so that the business can see, Oh, I understand. And then evolve that use case. So we will bring technical specialists, we will bring folks that are our own data scientists to these garage environments and we will work with them on building out this first use case. >>Explain the garage a little bit more. Is that those, those are sort of centers of excellence around the world or how do I tap them as a customer? Is it, is it a freebie? Is it for pay? Isn't it like the data science elite team? How does it all work? >>Well, it is. There are a number of physical locations and it's open to all clients. We have created these with co-leadership from across the entire IBM company. So our services organization, our cloud cognitive organization, all play a role in these garages. So we have a formal structure where a team can engage through a request process into the garages. We will help them define the use case they want to bring into the garage. We will bring them in for a period of time and provide the resources and capabilities and skills and that's not charged to the client. So we're trying to get them started now that they'll take that back to their company and then they will look at follow on opportunities and those may, you know, work out to be different services opportunities as they move forward. But we're on that get started phase. >>Yeah. Yeah. I mean you're a fraud for profit company, so it's great to have a loss leader, but the line outside the door at the garage must be huge for people that want to get in. Hi. How are you managing the dominion? >>Yes, well we're increasing obviously our capacity around the garages. Um, and we're still making customers aware of the garages. So there's still, because it's a commitment on their side, like they just can't come in and kick the tires. We ask them to bring their line of business along with their technical teams into the garages because that's where you get the best product coming out of it. When you know you've got something that's going to solve a business problem, but you have to have buy in from both sides. >>I want to ask you about the AI ladder. You know, Rob Thomas has been using this construct for awhile. It didn't just come out of thin air. I'm sure there was a lot of customer input and a lot of debate about what should be on the ladder. We went, when I first heard of the day AI ladder, it was, there was data in IAA analytics, ML and AI, sort of the building, the technical or technology building blocks. It's now become verbs, which I love, which is collect, organize, analyze and infuse, which is all about operationalizing and scaling. How is that resonating with customers and how do they fit into that methodology or framework? >>Well, I'll tell you, I use that framework with every single client and I described that there is a set of steps and you know, obviously to the ladder that every customer has to embark upon. And it starts with some very basic principles and as soon as you start with the very basic principles, every client is like, of course like it seems so obvious that first and foremost you have to date as the foundation, right? AI is not created out of, you know, someone in a back room. The foundation to AI is, is information and data. Yet every customer, every customer struggles with that data is coming from multiple systems, multiple sources that they can't get to the data fast enough. They're shipping data around an organization. It's not managed. And yet that they know that in five years, the data they think they need today is going to be completely different. >>It could be 12 months, but certainly in the future. So how do you build out that architecture that allows them to build that now, but have the agility to grow as the requirements change? You start with that basic discussion and they're like, well of course. So that's collect and then you bring it up and you talk about how do you govern that data? How do you know where that data originated? Who is the owner? How do you know what that data means? What system did it come from? What's the, you know, who has access to it? How do you create that set of govern data? And we'll of course every client recognizes they have that set of issues. So I could continue working my way up the ladder and every client realizes that, okay, I re I'm, here's where I am today. What you just painted for me is absolutely what I need to focus on and address. Now help me get from a to B. >>So I'm really interested in this discussion because it sounds like you're a very disciplined sales leaders and you said you use the ladder with virtually every client and I presume your sales teams use the ladder. So you train your salespeople how to converse the ladder. And then the other observation I'd love your thoughts on this is every step of the ladder has these questions. So you're asking customers questions and I'm sure it catalyzes conversation, the, the answers to which you have solutions presumably from any of them. But I wonder if you could talk about that. >>Well, let me tell about the ladder and how we're using it with our Salesforce because it was a unifying approach, not just within our own team, our data and AI team, but outside of data and AI. Because not only did we explain it to clients this way, but to the rest of IBM, our business partners, our whole ecosystem. So unifying in that we started every single conversation with our sales team on enabling them on how do they talk to their clients, our materials, our use cases, our references, our marketing campaigns. We tied everything to this unified approach and it's made a huge difference in how we communicate our value to clients and explain this journey to AI in in comprehensive steps that everyone could understand and relate to. >>Love it. How is the portfolio evolving to map into that framework? And what can we expect going forward? What can you share with us at least? >>Well, the other amazing feat I'll call it that we produced around this is I'll talk to a client and I'll describe these capabilities and then I will say to a customer, you don't have to do every one of these things that I've just described, but you can implement what you need when you need it. Because we have built all of this into a unified platform called cloud pack for data and it's a modern data platform. It's built on an open infrastructure built on red hat OpenShift so that you can run it on your own premises as a private cloud or on public clouds, whether that be IBM or Amazon or Zohre. It allows you to have a framework, a platform built on this open modern infrastructure with access to all these capabilities I've just described as services and you decide completely open what services you need to deploy when you grow the platform as you need it. And, Oh, by the way, if you don't have the red hat OpenShift environment set up, we'll package that in a system and I will roll in the system to you and allow you to have access to the capabilities in ours. >>How's the red hat conversation going? I would imagine a lot of the traditional IBM customers are stoked. He just picked up red hat, you know, a very innovative company, open source mindset. Um, at the same time I would imagine a lot of red hat customers saying, is IBM really gonna? Let them keep their culture. How's that conversation going in the field? >>Well, I will tell you we've been a hundred percent consistent in terms of everything that you've heard Jenny and Arvin Krishna talk about in the fact that we are going to maintain their culture, keep them as that separate entity inside of IBM. It's absolutely perpetrated throughout the entire IBM company. Um, we have a lot to learn from, from them as I'm sure they have to learn from us, but it truly is operating and I see it in the clients that I'm working with as a real win-win. >>If you had to take one thing away from this event that you want customers to, to remember, what would it be? >>Start now. Um, because if you don't begin on this journey to AI, you will find yourselves, you know, fighting against new competitors, uh, increasing costs, you know, you have to improve productivity. Every client is embarking on this journey to AI start now. >>And when you were talking about, uh, the maturity model and, and one of those levels was folks that had started already and they wanted to get to the next level, when you go into those clients, do you discern a different sort of attitude? We've started, we're down the path. Did they have more of a spring in their step? Are they like chomping at the bit to really go faster and extend their lead relative to the competition competition? What's the dynamic like in those accounts? >>That's a great question because I was with a client this afternoon, um, a large manufacturer of, uh, of goods and they are at this turning point where they did kind of phase one, they implemented cloud pack for data and they did it to just join some of their disparate systems. Now, I mean, I, I barely got a word in because he was so excited cause he's, now what I'm going to do is I'm going to figure out where my factories should go based on where my products are selling. So he's now looking at how he can change his whole distribution process as a result of getting access to this data and analytics that he never had before. Um, and I was like, okay, well just tell me how I can help you. And he was like, no way ahead. >>So this was the big kickoff day. I know yesterday there was sort of deep learning hands on stuff, the big keynotes. Today we're only here for one day. What are we going to miss? What's, what's happening tomorrow? >>Well, it's a bit of a repeat of today. So we'll have another keynote tomorrow from Beth Smith who runs our Watson, uh, business for IBM. We'll have more hands on labs. We have a lot of customer presentations where they're sharing their best practices. Um, lots of fun. >>Where do you want to see this event go? And what kind of, what's next in an IBM event land? >>Well, the feedback from last year this year says we have to do this again next year. It's, it's, it will be bigger because I think this year approves that it's already doubled and we'll probably see a similar dynamic. Um, so I fully expect us to be here. Well, maybe not here. We're sort of outgrowing this hotel. Um, but doing this event again next year, >>AI machine learning automation, uh, I'll throw in cloud. These are the hottest topics going. Elise, thanks very much for coming to the cube was great to have you. >>It's great. It's great meeting with you. >>It. Thank you for watching everybody. That's a wrap from Miami. Go to siliconangle.com check out all the news of the cube.net is where you'll find all these videos and follow the, uh, the Twitter handles at the cube at the cube three 65. I'm Dave Volante. We're out. We'll see you next time.

>>live from Miami, Florida It's the Q covering. IBM is data in a I forum brought to you by IBM. >>Welcome back to the port of Miami, everybody. We're here at the Intercontinental Hotel. You're watching the Cube? The leader and I live tech covered set. Daubert is here. He's the vice president of data and I and a I and the chief data officer of cloud and cognitive software. And I'd be upset too. Good to see you again. >>Good. See, Dave, thanks for having me >>here. The data in a I form hashtag data. I I It's amazing here. 1700 people. Everybody's gonna hands on appetite for learning. Yeah. What do you see out in the marketplace? You know what's new since we last talked. >>Well, so I think if you look at some of the things that are really need in the marketplace, it's really been around filling the skill shortage. And how do you operationalize and and industrialize? You're a I. And so there's been a real need for things ways to get more productivity out of your data. Scientists not necessarily replace them. But how do you get more productivity? And we just released a few months ago, something called Auto A I, which really is, is probably the only tool out there that automates the end end pipeline automates 80% of the work on the Indian pipeline, but isn't a black box. It actually kicks out code. So your data scientists can then take it, optimize it further and understand it, and really feel more comfortable about it. >>He's got a eye for a eyes. That's >>exactly what is a eye for an eye. >>So how's that work? So you're applying machine intelligence Two data to make? Aye. Aye, more productive pick algorithms. Best fit. >>Yeah, So it does. Basically, you feed it your data and it identifies the features that are important. It does feature engineering for you. It does model selection for you. It does hyper parameter tuning and optimization, and it does deployment and also met monitors for bias. >>So what's the date of scientists do? >>Data scientist takes the code out the back end. And really, there's some tweaks that you know, the model, maybe the auto. Aye, aye. Maybe not. Get it perfect, Um, and really customize it for the business and the needs of the business. that the that the auto A I so they not understand >>the data scientist, then can can he or she can apply it in a way that is unique to their business that essentially becomes their I p. It's not like generic. Aye, aye for everybody. It's it's customized by And that's where data science to complain that I have the time to do this. Wrangling data >>exactly. And it was built in a combination from IBM Research since a great assets at IBM Research plus some cattle masters at work here at IBM that really designed and optimize the algorithm selection and things like that. And then at the keynote today, uh, wonderment Thompson was up there talking, and this is probably one of the most impactful use cases of auto. Aye, aye to date. And it was also, you know, my former team, the data science elite team, was engaged, but wonderment Thompson had this problem where they had, like, 17,000 features in their data sets, and what they wanted to do was they wanted to be able to have a custom solution for their customers. And so every time they get a customer that have to have a data scientist that would sit down and figure out what the right features and how the engineer for this customer. It was an intractable problem for them. You know, the person from wonderment Thompson have prevented presented today said he's been trying to solve this problem for eight years. Auto Way I, plus the data science elite team solve the form in two months, and after that two months, it went right into production. So in this case, oughta way. I isn't doing the whole pipeline. It's helping them identify the features and engineering the features that are important and giving them a head start on the model. >>What's the, uh, what's the acquisition bottle for all the way as a It's a license software product. Is it assassin part >>of Cloudpack for data, and it's available on IBM Cloud. So it's on IBM Cloud. You can use it paper use so you get a license as part of watching studio on IBM Cloud. If you invest in Cloudpack for data, it could be a perpetual license or committed term license, which essentially assassin, >>it's essentially a feature at dawn of Cloudpack for data. >>It's part of Cloudpack per day and you're >>saying it can be usage based. So that's key. >>Consumption based hot pack for data is all consumption based, >>so people want to use a eye for competitive advantage. I said by my open that you know, we're not marching to the cadence of Moore's Law in this industry anymore. It's a combination of data and then cloud for scale. So so people want competitive advantage. You've talked about some things that folks are doing to gain that competitive advantage. But the same time we heard from Rob Thomas that only about 4 to 10% penetration for a I. What? What are the key blockers that you see and how you're knocking them >>down? Well, I think there's. There's a number of key blockers, so one is of access to data, right? Cos have tons of data, but being able to even know what data is, they're being able to pull it all together and being able to do it in a way that is compliant with regulation because you got you can't do a I in a vacuum. You have to do it in the context of ever increasing regulation like GDP R and C, C, P A and all these other regulator privacy regulations that are popping up. So so that's that's really too so access to data and regulation can be blockers. The 2nd 1 or the 3rd 1 is really access to appropriate skills, which we talked a little bit about. Andi, how do you retrain, or how do you up skill, the talent you have? And then how do you actually bring in new talent that can execute what you want on then? Sometimes in some cos it's a lack of strategy with appropriate measurement, right? So what is your A II strategy, and how are you gonna measure success? And you and I have talked about this on Cuban on Cube before, where it's gotta measure your success in dollars and cents right cost savings, net new revenue. That's really all your CFO is care about. That's how you have to be able to measure and monitor your success. >>Yes. Oh, it's so that's that Last one is probably were where most organizations start. Let's prioritize the use cases of the give us the best bang for the buck, and then business guys probably get really excited and say Okay, let's go. But to up to truly operationalize that you gotta worry about these other things. You know, the compliance issues and you gotta have the skill sets. Yeah, it's a scale. >>And sometimes that's actually the first thing you said is sometimes a mistake. So focusing on the one that's got the most bang for the buck is not necessarily the best place to start for a couple of reasons. So one is you may not have the right data. It may not be available. It may not be governed properly. Number one, number two the business that you're building it for, may not be ready to consume it right. They may not be either bought in or the processes need to change so much or something like that, that it's not gonna get used. And you can build the best a I in the world. If it doesn't get used, it creates zero value, right? And so you really want to focus on for the first couple of projects? What are the one that we can deliver the best value, not Sarah, the most value, but the best value in the shortest amount of time and ensure that it gets into production because especially when you're starting off, if you don't show adoption, people are gonna lose interest. >>What are you >>seeing in terms of experimentation now in the customer base? You know, when you talk to buyers and you talk about, you know, you look at the I T. Spending service. People are concerned about tariffs. The trade will hurt the 2020 election. They're being a little bit cautious. But in the last two or three years have been a lot of experimentation going on. And a big part of that is a I and machine learning. What are you seeing in terms of that experimentation turning into actually production project that we can learn from and maybe do some new experiments? >>Yeah, and I think it depends on how you're doing the experiments. There's, I think there's kind of academic experimentation where you have data science, Sistine Data science teams that come work on cool stuff that may or may not have business value and may or may not be implemented right. They just kind of latch on. The business isn't really involved. They latch on, they do projects, and that's I think that's actually bad experimentation if you let it that run your program. The good experimentation is when you start identity having a strategy. You identify the use cases you want to go after and you experiment by leveraging, agile to deliver these methodologies. You deliver value in two weeks prints, and you can start delivering value quickly. You know, in the case of wonderment, Thompson again 88 weeks, four sprints. They got value. That was an experiment, right? That was an experiment because it was done. Agile methodologies using good coding practices using good, you know, kind of design up front practices. They were able to take that and put it right into production. If you're doing experimentation, you have to rewrite your code at the end. And it's a waste of time >>T to your earlier point. The moon shots are oftentimes could be too risky. And if you blow it on a moon shot, it could set you back years. So you got to be careful. Pick your spots, picked ones that maybe representative, but our lower maybe, maybe lower risk. Apply agile methodologies, get a quick return, learn, develop those skills, and then then build up to the moon ship >>or you break that moon shot down its consumable pieces. Right, Because the moon shot may take you two years to get to. But maybe there are sub components of that moon shot that you could deliver in 34 months and you start delivering knows, and you work up to the moon shot. >>I always like to ask the dog food in people. And I said, like that. Call it sipping your own champagne. What do you guys done internally? When we first met, it was and I think, a snowy day in Boston, right at the spark. Some it years ago. And you did a big career switch, and it's obviously working out for you, But But what are some of the things? And you were in part, brought in to help IBM internally as well as Interpol Help IBM really become data driven internally? Yeah. How has that gone? What have you learned? And how are you taking that to customers? >>Yeah, so I was hired three years ago now believe it was that long toe lead. Our internal transformation over the last couple of years, I got I don't want to say distracted there were really important business things I need to focus on, like gpr and helping our customers get up and running with with data science, and I build a data science elite team. So as of a couple months ago, I'm back, you know, almost entirely focused on her internal transformation. And, you know, it's really about making sure that we use data and a I to make appropriate decisions on DSO. Now we have. You know, we have an app on her phone that leverages Cognos analytics, where at any point, Ginny Rometty or Rob Thomas or Arvin Krishna can pull up and look in what we call E P M. Which is enterprise performance management and understand where the business is, right? What what do we do in third quarter, which just wrapped up what was what's the pipeline for fourth quarter? And it's at your fingertips. We're working on revamping our planning cycle. So today planning has been done in Excel. We're leveraging Planning Analytics, which is a great planning and scenario planning tool that with the tip of a button, really let a click of a button really let you understand how your business can perform in the future and what things need to do to get it perform. We're also looking across all of cloud and cognitive software, which data and A I sits in and within each business unit and cloud and cognitive software. The sales teams do a great job of cross sell upsell. But there's a huge opportunity of how do we cross sell up sell across the five different businesses that live inside of cloud and cognitive software. So did an aye aye hybrid cloud integration, IBM Cloud cognitive Applications and IBM Security. There's a lot of potential interplay that our customers do across there and providing a I that helps the sales people understand when they can create more value. Excuse me for our customers. >>It's interesting. This is the 10th year of doing the Cube, and when we first started, it was sort of the beginning of the the big data craze, and a lot of people said, Oh, okay, here's the disruption, crossing the chasm. Innovator's dilemma. All that old stuff going away, all the new stuff coming in. But you mentioned Cognos on mobile, and that's this is the thing we learned is that the key ingredients to data strategies. Comprised the existing systems. Yes. Throw those out. Those of the systems of record that were the single version of the truth, if you will, that people trusted you, go back to trust and all this other stuff built up around it. Which kind of created dissidents. Yeah. And so it sounds like one of the initiatives that you you're an IBM I've been working on is really bringing in the new pieces, modernizing sort of the existing so that you've got sort of consistent data sets that people could work. And one of the >>capabilities that really has enabled this transformation in the last six months for us internally and for our clients inside a cloud pack for data, we have this capability called IBM data virtualization, which we have all these independent sources of truth to stomach, you know? And then we have all these other data sources that may or may not be as trusted, but to be able to bring them together literally. With the click of a button, you drop your data sources in the Aye. Aye, within data. Virtualization actually identifies keys across the different things so you can link your data. You look at it, you check it, and it really enables you to do this at scale. And all you need to do is say, pointed out the data. Here's the I. P. Address of where the data lives, and it will bring that in and help you connect it. >>So you mentioned variances in data quality and consumer of the data has to have trust in that data. Can you use machine intelligence and a I to sort of give you a data confidence meter, if you will. Yeah. So there's two things >>that we use for data confidence. I call it dodging this factor, right. Understanding what the dodging this factor is of the data. So we definitely leverage. Aye. Aye. So a I If you have a date, a dictionary and you have metadata, the I can understand eight equality. And it can also look at what your data stewards do, and it can do some of the remediation of the data quality issues. But we all in Watson Knowledge catalog, which again is an in cloudpack for data. We also have the ability to vote up and vote down data. So as much as the team is using data internally. If there's a data set that had a you know, we had a hive data quality score, but it wasn't really valuable. It'll get voted down, and it will help. When you search for data in the system, it will sort it kind of like you do a search on the Internet and it'll it'll down rank that one, depending on how many down votes they got. >>So it's a wisdom of the crowd type of. >>It's a crowd sourcing combined with the I >>as that, in your experience at all, changed the dynamics of politics within organizations. In other words, I'm sure we've all been a lot of meetings where somebody puts foursome data. And if the most senior person in the room doesn't like the data, it doesn't like the implication he or she will attack the data source, and then the meeting's over and it might not necessarily be the best decision for the organization. So So I think it's maybe >>not the up, voting down voting that does that, but it's things like the E PM tool that I said we have here. You know there is a single source of truth for our finance data. It's on everyone's phone. Who needs access to it? Right? When you have a conversation about how the company or the division or the business unit is performing financially, it comes from E. P M. Whether it's in the Cognos app or whether it's in a dashboard, a separate dashboard and Cognos or is being fed into an aye aye, that we're building. This is the source of truth. Similarly, for product data, our individual products before me it comes from here's so the conversation at the senior senior meetings are no longer your data is different from my data. I don't believe it. You've eliminated that conversation. This is the data. This is the only data. Now you can have a conversation about what's really important >>in adult conversation. Okay, Now what are we going to do? It? It's >>not a bickering about my data versus your data. >>So what's next for you on? You know, you're you've been pulled in a lot of different places again. You started at IBM as an internal transformation change agent. You got pulled into a lot of customer situations because yeah, you know, you're doing so. Sales guys want to drag you along and help facilitate activity with clients. What's new? What's what's next for you. >>So really, you know, I've only been refocused on the internal transformation for a couple months now. So really extending IBM struck our cloud and cognitive software a data and a I strategy and starting to quickly implement some of these products, just like project. So, like, just like I just said, you know, we're starting project without even knowing what the prioritized list is. Intuitively, this one's important. The team's going to start working on it, and one of them is an aye aye project, which is around cross sell upsell that I mentioned across the portfolio and the other one we just got done talking about how in the senior leadership meeting for Claude Incognito software, how do we all work from a Cognos dashboard instead of Excel data data that's been exported put into Excel? The challenge with that is not that people don't trust the data. It's that if there's a question you can't drill down. So if there's a question about an Excel document or a power point that's up there, you will get back next meeting in a month or in two weeks, we'll have an e mail conversation about it. If it's presented in a really live dashboard, you can drill down and you can actually answer questions in real time. The value of that is immense, because now you as a leadership team, you can make a decision at that point and decide what direction you're going to do. Based on data, >>I said last time I have one more questions. You're CDO but you're a polymath on. So my question is, what should people look for in a chief data officer? What sort of the characteristics in the attributes, given your >>experience, that's kind of a loaded question, because there is. There is no good job, single job description for a chief date officer. I think there's a good solid set of skill sets, the fine for a cheap date officer and actually, as part of the chief data officer summits that you you know, you guys attend. We had were having sessions with the chief date officers, kind of defining a curriculum for cheap date officers with our clients so that we can help build the chief. That officer in the future. But if you look a quality so cheap, date officer is also a chief disruption officer. So it needs to be someone who is really good at and really good at driving change and really good at disrupting processes and getting people excited about it changes hard. People don't like change. How do you do? You need someone who can get people excited about change. So that's one thing. On depending on what industry you're in, it's got to be. It could be if you're in financial or heavy regulated industry, you want someone that understands governance. And that's kind of what Gardner and other analysts call a defensive CDO very governance Focus. And then you also have some CDOs, which I I fit into this bucket, which is, um, or offensive CDO, which is how do you create value from data? How do you caught save money? How do you create net new revenue? How do you create new business models, leveraging data and a I? And now there's kind of 1/3 type of CDO emerging, which is CDO not as a cost center but a studio as a p N l. How do you generate revenue for the business directly from your CDO office. >>I like that framework, right? >>I can't take credit for it. That's Gartner. >>Its governance, they call it. We say he called defensive and offensive. And then first time I met Interpol. He said, Look, you start with how does data affect the monetization of my organization? And that means making money or saving money. Seth, thanks so much for coming on. The Cube is great to see you >>again. Thanks for having me >>again. All right, Keep it right to everybody. We'll be back at the IBM data in a I form from Miami. You're watching the Cube?

>>Live from Atlanta, Georgia. It's the cube covering Ansible Fest 2019 brought to you by red hat. >>Welcome back. This is the cubes coverage of Ansible Fest 2019. I'm Stu Miniman. My cohost of the week is John farrier. And this is the cube insights where we share our independent analysis, break down what we're hearing from the community, what we've learned from all of our interviews. John, uh, you know, we knew community would be a big portion of what we did here. Uh, culture and collaboration were things that we talked a lot about that wasn't necessarily what I thought I would be hearing. Uh, you've been talking a lot about how observability and automation are the, the huge wave. We've seen, you know, acquisitions, we've seen IPOs, we've seen investments. So, you know, your, your, your take here as we're wrapping up. Sure, sure. Last to, um, as we said in our opening in the big scene here has been automation for all that's Ansible's kind of rap because they're, you know, they're announcing their main news ants, full automation platform. >>So that's the big news. But the bottom line is where this emerged from was configuration management and supple started out as a small little project that's solved a very specific problem. It solved configuring devices and all the automation around, you know, opening up ports and things that that were important beyond the basic static routing, the old web one. Dot. O web 2.0 model. And it grew into a software abstraction layer for automating because a lot of that stuff, the mundane tasks in configuring networks and servers frankly were boring and redundant. Everyone hated them patches. So easy ground to automate. And I think, um, it's evolved a lot into dev ops because with the cloud scale more devices, just because software's defining everything, it doesn't mean servers go away. So we know that is more servers is more storage, it's in the cloud, it's on premise, it's cloud operations. >>So automation I think, and I'm, my prediction is is that automation will be as big of a category as observability was. And remember we kinda missed observability we saw it as important. We've covered all those companies, but especially in network management on steroids with the cloud. But look what happened. Multiple companies when public big companies getting sold for billions of dollars, a lot of M and a activity observability is the most, one of the most important areas of cloud 2.0 it's not just some white space around network management. The data is super important. I think automation is going to grow into a highly competitive, highly relevant in the lucrative marketplace for companies and I think Ansible is in pole position to capture that with red hat and now red hat part of IBM. I think automation is going to be very big land grab. It's going to be where the value is created. >>I think observability and automation are going to go hand in hand and I think AI and data, those are the things programming infrastructure revolve around those two spheres. I think it is going to be super important. I think that's why the cube is here. We smelled it out, we sniffing it and we can see. We can touch it and the community here, they're doing it. They're there actually have proof points. Yup. These, this community is demonstrating that the process is going to be more efficient. The technology works and the people are transforming and that is a key piece with automation. People can work on other things and it's certainly changing the game. So all three aspects of digital transformation are in lockstep and, and, and, and expanding rapidly. >>Yeah. John, I would expect nothing less than a bold prediction from you on this space. You know, it's only $150 million acquisition, which is really small compared to a lot of the acquisitions that we see these as heck. You know, red hat Ansible didn't get talked about all that much when you know, IBM went and spent over $30 billion for red hat. But absolutely automation is so important that infrastructure is code movement that we've been tracking for quite a long time helps enable automation across the entire stack. A lot of discussion this week here, networking and security, two areas that we know need to make progress and we need to have, you know, less errors. We need to be able to make changes faster and cloud. We just as in the infrastructure space, that configuration management, we need to be able to simplify things. Absolutely. One of the things that will slow down the growth of cloud is that if we can't simplify those environments, so the same type of tooling and where Ansible is trying to, you know, span between the traditional environments and the cloud is to get this working in the containerization cloud native Kubernetes world that we're living in. >>Yeah, and it's still, you're right on, I mean this is the analysis and that it's spot on. I think one of the nuances in the industry landscape is a, when red hat got acquired by IBM for a massive amount of money, everyone's scratching their heads. But if you think about what red hat has done and you know I'm a real big fan of red hat, you are too. They're smart. They make great acquisitions, Ansible, not a big payout. They had coral West, they, they got open shifts there. They're the decouple their operating systems people. They get the notion of systems architecture. I think red hat is executed brilliantly in that systems mindset, which is perfect for cloud computing. I think Arvin Krishna at IBM really understood the impact of red hat and when I talked to him at red hat summit two years ago, right before the acquisition, he had the twinkle in his eye when I asked him about red at, because you can see them connecting the dots. Red hat brings a lot to the table and if IBM doesn't screw up red hat, then they're going to do well and we talk about red hat not screwing up Ansible and they didn't. Now part of it, if IBM doesn't screw up the red hat acquisition, let red hat bring that systems mindset in. I think IBM could use red has a beautiful way to bring a systems architecture into cloud, cloud native and really take a lot of territory down these new cloud native apps. >>John F automation is a force multiplier for customers and Ansible has that capability to be a force multiplier for red hat. When you look at the ecosystem they're building out here, the Ansible automation platform really helps it get customers more in lock steps. So you know, I was talking to the people and said, Oh, you know, AWS has an update. Oh we need to roll the entire core and put out another version. I can't wait for that. I need to be able to decouple the partner activity, which by the way, they talked about how the disk project is the six most popular in get hub decoupling collections might actually put them lower on the on the list, but that's okay because they're solving real customer problems. And it's interesting, John, we talk about the ecosystem here. One of, there's only a couple of other companies other than red hat that can commit without having to go through approval. Microsoft is one of them. So you talk about the, the collaboration, the ecosystem here where this can be, >>let's do the, the thing about Ansible is that it's a double edged sword. There value is also an Achilles heel. And one of the critical analysis that I have is, is that they're not broad enough yet. On and there and there. I won't say misunderstood the customers here in the community, they totally get it. Everyone here loves Ansible. The problem is is that in the global landscape of the industry, they're tiny red hat needs to bring this out faster. I think IBM has to get animal out there faster because they have all the elements kind of popping right now. You got community, very strong customer base, loyal and dynamic. You got champions developing. That's classic sign of success. They got a great product, perfectly fit for this glue layer, this integration layer, you know, below containers and maybe you can even sitting above containers depending on how you look at it. And then finally the ecosystem of partners. Not yet fully robust, but all the names are here. Microsoft, Cisco net app F five kind of feels like VMworld on a small scale. They have to up level it. I think that's the critical problem I see with with these guys is that it's almost too good and too small. >>Yeah. Uh, you know, when I look back at when red hat made the acquisition, there were a handful of companies, most of them embracing open source as to which configuration management tool you're going to do. Ansible did well against them and red hat helped make them the category leader in this space. There is a different competitive landscape today. Just public cloud. You know, Ansible can help, but there's some customers that would be like, Oh, I've got different tooling and it doesn't fit into what I'm doing today. So there's some different competitors in the landscape and we know John, every customer we've talked to, they've got a lot of tools. So how does Ansible get mind share inside the company? They had some great stories that we heard both on the Q from like ING and the Southern company as well as in the keynotes from JP Morgan where they're scaling out, they're building playbooks, they're doing this, but you know, this is not, you know, it's not just push a button to get all of this rolled out. >>The IBM marketing should help here. And if I'm, you know, um, uh, the marketing team at IBM, I'd be like all over this because this is a, a game changer because this could be a digital transformation ingredient. The people equation. The problem is, is that again, IBM to embrace this and Ansible has that glue layer integration. This could be great. Now the benefit to them, I think they're tailwind is they can solve a lot of problems. One nuance from the show that I learned was, okay, configuration management, dev ops, great. The network automation is looking good. Security is a huge opportunity because if you think about the basic blocking and tackling patches, configuration, misconfigurations, automation plays perfect role. So to get beachhead in the enterprise as an extraction layer is to own and dominate those basics. Because think about the big hacks. Capitol one, misconfigured firewall to an S three bucket, that wasn't Amazon's fault, but the data on Amazon, this is automation can solve a lot of these problems, patches, malware, vulnerabilities, the adversaries are going to be all over that. >>So I think the security piece, huge upside position, Ansible and red hat as an abstraction layer to solve those basic problems rather than overselling it could be a great strategy. I think they're doing a good job with that. Uh, it totally, you know, built on simplicity and modularity. Uh, this, this tooling is something that it can sit lots of places in the organization, uh, and help that cultural communication. Uh, I was a bit critical of, uh, you know, enterprise collaboration, uh, that, that top down push that you'd get. Um, but here, you know, you've got a tool that uh, as we, we just had on our final interview with, uh, Pirog, you know, developers, they didn't build this for developers, but developers are embracing it. The infrastructure people are embracing it. It gives a sense of some why we here to why we're here is I think Ansible fast as a community event, which we love. >>But two, I think this is early, you know, days in the Canadian, the coal mine and saying that the Ansible formula for automation is going to be a growth year. That's my prediction. And we have data to back it up. If you look at our our community and the folks out in the cube alumni know no that when we reach out to them and get some data. But here's what supports why I think the automation thing with Ansible and red hat is relevant because it applies what we just talked about. The number one thing that came back from the community stew was focused efforts on better results. Automation from time efficiency days, hours to minutes check. Security is absolutely a top driver for automation. That's a tailwind. The job satisfaction issue is not like a marketing feel. Good thing. People actually liked their jobs when they have to, don't have to come in on the weekends. >>So this automation does align with that. And finally infrastructure and developers re-skilling with new capabilities and new things. Is it just an uplift? So those are the drivers driving the automation. That's why RPA is so hot and this is a critical foundation in my opinion. So you know Ansible's is the leading the wave here in this new automation wave and I think it's going to be a big part because it's controlling the plumbing. Yeah, John wanted the machinery. Johnny is the, the, the future of work. We know that automation is going to be hugely important. You mentioned >>RPA, a huge one. I had an interview with the associate professor from Syracuse university or they're teaching this to education. It's not just, Oh Hey you got to go learn coding and learn this programming language. No, we need to have that. That combination of the business understanding and the technology and automation can sit right at that intersection. What's your big learning point? What did you take away? Yeah, so it is, it's that point here that this is not just to some, you know, cool little tool on the side. This is something you John, we've talked at many shows. Software can actually be a unifying factor inside companies to help build platforms and for customers to help them collaborate and work together. This a tool like Ansible isn't just something that is done tactically but strategically, you know, gets everyone on the same page enables that collaboration isn't just another channel of you know, some other thing that a, I don't want to have to deal with it. >>It helps me get my job better. Increases that job satisfaction. That's so hugely important as to if you think about the digital transformation form of the people, process technology, how many interviews have we done, how many interviews have we done, a companies we've talked to where they have the great product and on the process side to address the process. They have the tech but they fail on the people side. It's the cultural adoption, it's the, it's the real enablement and I think Ansible's challenge is to take the platform, the capabilities of their, of their, of their software, launch the platform and create value because if they're not enabling value out of the platform that does not cross check with what platforms are supposed to do, which is create value. And John, the thing I want to look for when we come back to this show next year is how much are they allowing customers delivered through data? >>When we heard from their engineering division here, okay, the platforms, the first piece, but how do I measure internally and how do I measure against our peers? We know that that people want to have, there's so much information out there. How am I doing? Am I, where am I on my the five, five step progression and adoption of automation and you know, Hey, am I doing good against my competition or are they smoking me? Well? That's the metrics with the insight piece and tying it to the rail. Now people can say, look, I just saved a bunch of money. I saved some time. That's the business impact and I think you know when you have the KPIs and you had the analysts to back it up, good things will happen. Students been great. All right, John, always a pleasure to catch up with you. We got lot more here toward the second half of 2019 a big thanks to the whole community for of course watching this here at antelopes Fest. Check out the cube.net for all the upcoming shows. Thank you to our whole production team and to our hosts. Red hat for giving this beautiful set right in the middle of the show. And thanks as always for watching the cube.

>> Live from San Francisco. It's the cube covering IBM thing twenty nineteen brought to you by IBM. >> Run. Welcome back to the Cubes live coverage here in San Francisco. Mosconi North while you're here as part of our exclusive covers. The Cube for IBM think twenty nineteen, 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 for a student. Um, in day. Volonte and Lisa Martin co hosting all week This week. Four days of wall to wall coverage. Day two of our kind Really Day one of the show Kickoff. We're here ending out that day and just had the CEO's keynote, and we're going to a review and analysis. David's do. We had a lot of interviews. Coming up to this theme is pretty clear. It's a I cloud and everything else going underneath that classic development application. Developers, developers in general, making applications That's classic, but eyes the big story. And, like like Always Cloud and the promise of Where That's Going, which is hybrid and multi cloud Dave, You set on the keynote. Any surprises from Ginny Rometty? >> I wouldn't say there were any surprises. First of all, I like Jenny. I think she she's a great presenter. I'd like to hang out with their like we were kids. That was what I wanted to hang out with us. He's a time person. I think I would feel comfortable talking to, you know, sports or business. She looked good. She had a really nice, sharp white suit on. She's self deprecating. She was drinking Starbucks. You know, they're obviously a client of IBM. I got the best moment was when Jim White hearse came on stage. He said, It's great to be here So he was like, Yeah, given thirty four billion reasons why it's great to be here kind of thing, So that was pretty funny. And she had. She made the comment. We've been dating Red Hat for twenty years before we decided to get married. She was trying to make a case You normally in Jenny's presentation, she she makes a really solid, puts forth the 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 embedding a I everywhere. It's about hybrid. It's about bringing mission critical APS, you know, move those forward. And she had a number of other lessons learned. I thought she laid it out, but I think it sort of missed the back end. I don't think they punctuated the tail end of Jenny's talk. The guests were great and they had guys on from Kaiser Permanente E. T. And they were very solid. Well, think they made the case as strong as the premises that she put forward. And you know, we could talk more about that. >> And Stewart see red hat on stage. We've been commenting. We've been analyzing the acquisition of Red Hat, big number, thirty four billion dollars critical point you guys talk 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 is a lot to bring to the bear in the cloud. They I anywhere telegraphs that they wanna 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 workload. That makes sense, right? Bm. This is their last stand. This is like, you know, the Alamo for them. They They need to make cloud work right now. Watson, move from a product or brand ballistically open step. Is it tied together? Stew your thoughts on open stack and how this fits into their narrative. >> So I think you mean open shift, right, John s o from red hat standpoint. Absolutely what they're doing. They are involved in open stack, but open stack. You got a small, >> but they're one of the few that are sanguine on Open, Zachary read. >> I mean, read had open shift. My bad >> way it absolutely. And it is complicated in the multi cloud world and 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 and a CZ we talked about in our open on yesterday. It's the developers is really what where IBM needs to go and where Red Hat has a bevy of them on DH John. What you said about Multi Cloud? Absolutely. It's if IBM thinks that buying Red hat will make them the Goebel Global player in Cloud. I think that's wrong, and I don't think that's what they're doing. When I wrote a block 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 there's cultural differences. We had Ah, Stephanie sheriffs on who's a longtime 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've many friends that have worked for it. Had I've, you know, worked with them, partner with them and cover them for most of those twenty years on DH? Absolutely. You've got over ten thousand people that are passionate involved in communities on DH. When you talk about the developer world, you talk about the cloud native world. This is what you know. Really. Red Hat moment has been waiting. >> It was interesting. John and I would like one if you could comment on this is you hearing IBM? Jenny talked about Chapter two. She took a digital reinvention. Here's yet another company using the reinvent terminology. I think that's what sort of pointed she talked. About forty percent of the world is going to be private. Sixty percent is going to be public Cloud. The sort of that's the first time I've heard those that she said It's flipped if you're ah, regulated industry. But what do your thoughts on people essentially using and Amazons narrative on reinvention? >> Everyone's using Amazons narrative. Here's the bottom line. Amazon is winning impact large margins. I think the numbers airway skewed in the favor of the people trying to catch up. I think that's more of a game. If vacation by the analyst firms, Amazon is absolutely blowing away the competition when it comes to public loud. The only game at the table right now for the Oracle's, IBM, Sze and Microsoft and Google is the slow down the adoption of Amazon. And you see the cloud adoption of Amazon, whether it's in the government sector, which I think is more acute. And Mohr illustrative, the Jet I contract a ten billion dollar contract. That is a quote sole source deal. But it was bid as a multi source deal means anyone could bid on it. Well, guess what? That is a going to be an award and probably to Amazon as the sole winner because IBM doesn't have the certification. Nor does Microsoft notice Oracle. Nobody's got Amazons winning that, and that begs the argument. Can you use one cloud? And the answer is Yes, you can. If the APP worked, Load works best for it, and procurement does not decide output for the cloud. For example, if it's a Jet I 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 D O d. Says no. So one cloud makes sense. If you're running office three sixty five, you want to use azure. So Microsoft has taken that, and their earnings have been phenomenal by specialising around their workloads. That makes sense for Azure, and they're catching up. IBM has an opportunity to do the same for their workload. The business workload. So aye, aye, 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 sold for the apple sole source for the workloads. That makes sense for those workload. So this is where the market's going, right? So this whole notion of there won't be multi class. It's going to be multi cloud and it's gonna winner, winner take most. And the game right now is to stop ama's. That is clearly the case, and you're seeing it in the bids you see in the customer base. And IBM is catching Oppa's fast as they can. They got the people and the technology. The question is, how much do they catch up and level up? Tamas on? >> Well, stew despite Jenny, you know, invoking the reinvent terminology, they're her. Kino was starkly different than what you would expect from an Amazon Kino. They may. She mentioned a couple of the announcements, Watson anywhere, which, by the way, is about time. It's about time that Watson ran on other people's clouds of it, which should have been a while ago and in hyper protect is the world's most secure cloud. But we don't have any really details on that. And then I'd be in business automation with Watson, and that was really it. I think it was by design not to give a big product pitch, you know, very non Steve jobs. Like very done, Andy Jazzy like which is all product product product. I mean, kind of surprising in a big show with all these customers. You think they'd be pitching, but I think their intent was to really be more content. Orient >> Well, So Dave, you know, goes back at the core. What is IBM's biggest business? IBM biggest businesses. So 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 and development for environments. You know, the multi cloud world. How do they know IBM has a long history with C. S, P s and M s peace? So they have large constituencies And sure, they have products. You know, great stuff talking about, You know, how do they have the best infrastructure to run your workloads and the strength that they haven't supercomputing in HPC. And how they can leverage that? Because IBM knows a thing or two about scale. But, you know, Dave, one of the questions I have for you is we've seen the big services organizations go through radical downsizing. You know, HP spun off their business. Del got rid of the Perot business. You know, IBM still is, you know, services. At its core, it is IBM built for the multi cloud cloud native. You know, Ai ai world, Or do they still need to go through some massive changes? >> Well, multi Cloud is complicated and complex. IBM does complicated services, you know, deal with complexity, but I still can't help but feel like, >> Well, I well, I thought, wouldn't comment on them. I think the services. If the Manual Services Professional Services dropped down, IBM has a great opportunity to move them to cloud based services, meaning I can write software. And this is where I think they have an advantage. They could really nail the business applications, which will become services, whether its domain expertise in a vertical. And I think this is their cloud opportunity. IBM could capture that they could take entirely new category of applications. Business applications and services, automate them with machine learning, automate them with cloud scale their cloud scale while making them portable on multiple clouds. So the notion of services will be the professional services classic your grandfather's services, too. Cloud based services at scale. >> Yeah, well, I think you're right. Look, that's one. IBM is biggest strengths, and Jenny did that acquisition. By the way. The PwC acquisition is one hundred thousand. People instantly brought IBM into that deep vertical industry expertise, and they're not going to give that up any time soon. And this so many opportunities to code. If I those services or that song you know, through software and make them repeatable services, I mean, they're at as a service. Business is one of the fastest growing parts of IBM, you know, revenue stream. So I don't see that going. Wait. All I do think there was a missed opportunity and maybe they can't talk about it for was some regulatory reason. They're just paranoid. But you had white hearse up on the stage. You just spent thirty four billion dollars. I would have liked to hurt Mohr about the rationale, even though we've heard it before. They did. You know, Jim and Jeannie did a tour there on all the big TV shows You're on Kramer. But I would have liked to heard sort of six months on what that rationale is and how they're going to help transform with this in this new chapter and what that role that red hat was going play, I thought it was a missed opportunity. >> Well, speculate on that. I think of things. Probably. They probably don't have their answer yet. IBM is very good on messaging. You know, they're pretty tight, but I think Arvin Krishna talked to assert this morning. On our first interview. He brought up the container ization and Coburn Eddie's trend. I think that's where red hat fits and melons and give them cloud Native developers in Enterprise Fortune one thousand. They also got the cloud native ecosystem behind that the C in C F etcetera. But Containers does for Legacy Container ization, and Cooper daddies really preserves legacy. It allows developers to essentially keep the old while bringing in the new and managing the life cycle of those applications, not a ribbon replace. This is an opportunity for IBM, and if I think the messaging folks and the product dies or probably figure out okay, how do we take the red hat and open shift and be cloud native and take all the goodness that comes in with cloud Native the new developers, the Devil Infrastructures code, make under the covers infrastructure programmable and is Rob Thomas pointed out, having horizontal data layer that enables new kinds of business services. So to me, container ization, it's kind of nerdy Cooper netease. But this is really a new linchpin to what could be a sea change for IBM in terms of revenue. Keeping the Legacy customs happy because then the pressure to move to Amazon goes away because I can say, Whoa, wait. If the question is, why adopt if customs have an answer for that that gives IBM time, This is what they want otherwise, cloud native worlds could move very, very fast. We've seen the velocity of the momentum, and I think that's a key move. >> 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 that lessons learned, she said. One. You can approach the world from outside in and focus on customer experience. Or you could do inside out, identify new ways to work and new work flows, you know, kind of driving change. The third lesson learned was You need a business platform fueled by data with invented A I. The fourth is you need an ai ai platform. And in the fifth is Rob Thomas is you can't have a eye without a word that you needed information, architecture, which, by the way, I believe it to be true. So those are business oriented discussions. It's not something that you necessarily here from Amazon there kind of chewy. There's the services component to all that. The big question I have is Well, Watson, be that ai ai platform. >> Yeah, I mean something, You know, I look at is why Doe I choose a platform and a partner. So we understand Amazon, you know, they want to be the leader and everything. They have a lot more services in anyone. But, you know, if I want data services, first cloud that comes to mind to me is Google. You know, Google has a real strength there, You know. Where does IBM have a leadership compared to Google business productivity? IBM has a lot of strength there, but Microsoft also has a place so you know, customers. If they're going to live, Multi cloud, they're going Teo in many ways go backto best of breed on DH. Therefore, where will IBM differentiate themselves from some of those? >> We have visibility down. It's clear now that the industry the fog is lifting, starting to see Cem clear lines of sight and a few major trends. And it's pretty clear on where the industry's going for the next ten years. Application developers at the top of the stack gonna build APS The infrastructures cloud cloud something multi cloud cloud, native infrastructures, code and data. And a I see that Amazon reinvent sage maker. You're seeing all the major innovations happening around APS using data power advice, cloud scale, that's it. Everything else to me is glue or some sort of fabric component. Or a piece of that distributed architecture and its cloud. Aye, aye, and an apple. >> A CZ. Dave is often said, it's the innovation sandwich of today. >> Yeah, well, so I guess the things I want to mention it because of me. There's been some high profile failed failures with Watson, But watching was trying to do some things that were not, you know, voice response to Alexa, you know, solve cancer, you know, world problems and so I think IBM is actually earned the right to be in the discussion, and the Red had acquisition gives IBM instant credibility in this game, especially in this a multi cloud game. >> Well, they got me. They have the right to be the zillions of customers. They have a lot of a lot of business model innovations with that that their customers are innovating on. And if they keep the cloud innovate, they gotta match the specs. Specs of the cloud. They gotta be there with Cloud. If they don't make the cloud work, they're going to be subservient to the other clouds. They have to make it in the top three. This is clear. Hey, I think I think we're working a lot of experience and data. I think Watson kind of finding his home is a brand's natural fit. Got a portfolio of data? I think IBM will do very well in the data front. It's the cloud game that they got a really sure up. They got to make sure that IBM cloud conserved. They're custom, >> but the good news is there is there. In the game we saw HPD tried to get into HPD, tried to get the cloud it failed. Cisco, for a while, was trying to get with Sawyer. AMC make of numerous attempts. VM were made, made numerous attempts. IBM spent two billion dollars in software. They they they've got a cloud. You know, they've transformed what was essentially a bare metal hosting platform, you know, into a cloud. They've jammed all there as a service products in there. They're SAS portfolio. So there, at least in the game and, you know, 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 What data? In the middle of a I. That's the formula, David said on the Q beer. All right day to coverage for the Cuba. Four days were here in the lobby of Mosconi North, part of the new refurbished Mosconi Center in San Francisco. Howard Street's closed. It feels like Salesforce. Dreamforce event. Big event in San Francisco. I'm John First Amendment Dave along. They were here for four days Day, two of four days of coverage for IBM think back tomorrow. Thanks for watching.

>> From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now here are your hosts, Dave Vellante and Stu Miniman. >> Hi everybody, Dave Vellante here with Stu Miniman. We're here to unpack the recent acquisition that IBM announced of Red Hat. $34 billon acquisition financed with cash and debt. And Stu, let me get us started. Why would IBM spend $34 billion on Red Hat? Its largest acquisition to date of a software company had been Cognos at $5 billion. This is a massive move. IBM's Ginni Rometty called this a game changer. And essentially, my take is that they're pivoting. Their public cloud strategy was not living up to expectations. They're pivoting to hybrid cloud. Their hybrid cloud strategy was limited because they didn't really have strong developer mojo, their Bluemix PaaS layer had really failed. And so they really needed to make a big move here, and this is a big move. And so IBM's intent, and Ginni Rometty laid out the strategy, is to become number one in hybrid cloud, the undisputed leader. And so we'll talk about that. But Stu, from Red Hat's perspective, it's a company you're very close to and you've observed for a number of years, Red Hat was on a path touting a $5 billion revenue plan, what happened? Why would they capitulate? >> Yeah Dave, on the face of it, Red Hat says that IBM will help it further its mission. We just listened to Arvin Krishna from IBM talking with Paul Cormier at Red Hat, and they talked about how they were gonna keep the Red Hat brand alive. IBM has a long history with open source. As you mentioned, I've been working with Red Hat, gosh, almost 20 years now, and we all think back to two decades ago, when IBM put a billion dollars into Linux and really pushed on open source. So these are not strangers, they know each other really well. Part of me looks at these from a cynicism standpoint. Somebody on Twitter said that Red Hat is hitting it at the peak of Kubernetes hype. And therefore, they're gonna get maximum valuation for where the stock is. Red Hat has positioned itself rather well in the hybrid cloud world, really the multicloud world, when you go to AWS, when you go to the Microsoft Azure environment, you talk to Google. Open source fits into that environment and Red Hat products specifically tie into those environments. Remember last year, in Boston, there's a video of Andy Jassy talking about a partnership with Red Hat. This year, up on stage, Microsoft with Azure partnering deeply with Red Hat. So Red Hat has done a nice job of moving beyond Linux. But Linux is still at its core. There definitely is concern that the operating system is less important today than it was in the past. It was actually Red Hat's acquisition of CoreOS for about $250 million earlier this year that really put a fine point on it. CoreOS was launched to be just enough Linux to live in this kind of container and Kubernetes world. And Red Hat, of course, like we've seen often, the company that is saying, "We're going to kill you", well you go and you buy them. So Red Hat wasn't looking to kill IBM, but definitely we've seen this trend of softwares eating the world, and open sources eating software. So IBM, hopefully, is a embracing that open source ethos. I have to say, Dave, for myself, a little sad to see the news. Red Hat being the paragon of open source. The one that we always go to for winning in this space. So we hope that they will be able to keep their culture. We've had a chance, many times, to interview Jim Whitehurst, really respected CEO. One that we think should stay involved in IBM deeply for this. But if they can keep and grow the culture, then it's a win for Red Hat. But still sorting through everything, and it feels like a little bit of a capitulation that Red Hat decides to sell off rather than keep its mission of getting to five billion and beyond, and be the leading company in the space. >> Well I think it is a bit of a capitulation. Because look, Red Hat is roughly a $3 billion company, growing at 20% a year, had that vision of five billion Its stock, in June, had hit $175. So while IBM's paying a 60% premium off of its current price, it's really only about 8 or 9% higher than where Red Hat was just a few months ago. And so I think, there's an old saying on Wall Street, the first disappointment is never the last. And so I think that Red Hat was looking at a long slog. They reduced expectations, they guided lower, and they were looking at the 90-day shot clock. And this probably wasn't going to be a good 'nother couple of years for Red Hat. And they're selling at the peak of the market, or roughly the peak of the market. They probably figured, hey, the window is closing, potentially, to do this deal. Maybe not such a bad time to get out, as opposed to trying to slog it out. Your thoughts. >> Yeah, Dave, I think you're absolutely right. When you look at where Red Hat is winning, they've done great in OpenStack but there's not a lot of excitement around OpenStack. Kubernetes was talked about lots in the announcement, in the briefings, and everything like that. I was actually surprised you didn't hear as much about just the core business. You would think you would be hearing about all the companies using Red Hat Enterprise Linux around the world. That ratable model that Red Hat really has a nice base of their environment. It was talking more about the future and where Kubernetes, and cloud-native, and all of that development will go. IBM has done middling okay with developers. They have a strong history in middleware, which is where a lot of the Red Hat development activity has been heading. It was interesting to hear, on the call, it's like, oh well, what about the customers that are using IBM too say, "Oh well, if customers want that, we'll still do it." What about IBM with Cloud Foundry? Well absolutely, if customers wanna still be doing it, they'll do that. So you don't hear the typical, "Oh well, we're going to take Red Hat technology "and push it through all of IBM's channel." This is in the IBM cloud group, and that's really their focus, as it is. I feel like they're almost limiting the potential for growth for Red Hat. >> Well so IBM's gonna pay for this, as I said, it's an all cash deal. IBM's got about 14 and a half billion dollars on the balance sheet. And so they gotta take out some debt. S&P downgraded IBM's rating from an A+ to an A. And so the ratings agency is going to be watching IBM's growth. IBM said this will add 200 basis points of revenue growth over the five year CAGR. But that means we're really not gonna see that for six, seven years. And Ginni Rometty stressed this is not a backend loaded thing. We're gonna find revenue opportunities through cross-selling and go-to-market. But we have a lot of questions on this deal, Stu. And I wanna sorta get into that. So first of all, again, I think it's the right move for IBM. It's a big move for IBM. Rumors were that Cisco might have been interested. I'm not sure if Microsoft was in the mix. So IBM went for it and, as I said, didn't pay a huge premium over where their stock was back in June. Now of course, back in June, the market was kind of inflated. But nonetheless, the strategy now is to go multi-cloud. The number one in the multi-cloud world. What is that multi-cloud leadership? How are we gonna measure multi-cloud? Is IBM, now, the steward of open source for the industry? To your point earlier, you're sad, Stu, I know. >> You bring up a great point. So I think back to three years ago, with the Wikibon we put together, our true private cloud forecast. And when we built that, we said, "Okay, here's the hardware, and software, "and services in private cloud." And we said, "Well let's try to measure hybrid cloud." And we spent like, six months looking at this. And it's like, well what is hybrid cloud? I've got my public cloud pieces, and I've got my private cloud pieces. Well there's some management layers and things that go in between. Do I count things like PaaS? So do you save people like Pivotal and Red Hat's OpenShift? Are those hybrid cloud? Well but they live either here or there. They're not usually necessarily helping with the migration and moving around. I can live in multiple environments. So Linux and containers live in the public, they live in the private, they don't just fly around in the ether. So measuring hybrid cloud, I think is really tough. Does IBM plus Red Hat make them a top leader in this hybrid multi-cloud world? Absolutely, they should be mentioned a lot more. When I go to the cloud shows, the public cloud shows, IBM isn't one of the first peak companies you think about. Red Hat absolutely is in the conversation. It actually should raise the profile of Red Hat because, while Red Hat plays in a lot of the conversations, they're also not the first company that comes to mind when you talk about them. Microsoft, middle of hybrid cloud. Oracle, positioning their applications in this multi-cloud world. Of course you can't talk about cloud, any cloud, without talking about Amazon's position in the marketplace. And SAS is the real place that it plays. So IBM, one of their biggest strengths is that they have applications. Dave, you know the space really well. What does this mean vis-à-vis Oracle? >> Well let's see, so Oracle, I think, is looking at this, saying, alright. I would say IBM is Oracle's number one competitor in the enterprise. You got SAP, and Amazon obviously in cloud, et cetera, et cetera. But let me put it this way, I think Oracle is IBM's number one competitor. Whether Oracle sees it that way or not. But they're clearly similar companies, in terms of their vertical integration. I think Oracle's looking at this, saying, hey. There's no way Oracle was gonna spend $34 billion on Red Hat. And I don't think they were interested in really spending any money on the alternatives. But does this put Canonical and SUSE in play? I think Oracle's gonna look at this and sort of message to its customers, "We're already number one in our world in hybrid cloud." But I wanna come back to the deal. I'm actually optimistic on the deal, from the standpoint of, I think IBM had to make a big move like this. Because it was largely just bumping along. But I'm not buying the narrative from Jim Whitehurst that, "Well we had to do this to scale." Why couldn't they scale with partners? I just don't understand that. They're open. This is largely, to me, a services deal. This is a big boon for IBM Services business. In fact, Jim Whitehurst, and Ginni even said that today on the financial analyst call, Jim said, "Our big constraint was "services scale and the industry expertise there." So what was that constraint? Why couldn't they partner with Accenture, and Ernie Young, and PwC, and the likes of Deloitte, to scale and preserve greater independence? And I think that the reason is, IBM sees an opportunity and they're going hard after it. So how will, or will, IBM change its posture relative to some of those big services plays? >> Yeah, Dave, I think you're absolutely right there. Because Red Hat should've been able to scale there. I wonder if it's just that all of those big service system integrators, they're working really closely with the public cloud providers. And while Red Hat was a piece of it, it wasn't the big piece of it. And therefore, I'm worried on the application migration. I'm worried about the adoption of infrastructure as a service. And Red Hat might be a piece in the puzzle, but it wasn't the driver for that change, and the move, and the modernization activities that were going on. That being said, OpenShift was a great opportunity. It plays in a lot of these environments. It'll be really interesting to see. And a huge opportunity for IBM to take and accelerate that business. From a services standpoint, do you think it'll change their position with regard to the SIs? >> I don't. I think IBM's gonna try to present, preserve Red Hat as an independent company. I would love to see IBM do what EMC did years ago with VMware, and float some portion of the company, and truly have it at least be quasi-independent. With an independent operating structure, and reporting structure from the standpoint of a public company. That would really signal to the partners that IBM's serious about maintaining independence. >> Yeah now, look Dave, IBM has said they will keep the brand, they will keep the products. Of all the companies that would buy Red Hat, I'm not super worried about kinda polluting open source. It was kinda nice that Jim Whitehurst would say, if it's a Red Hat thing, it is 100% open source. And IBM plays in a lot of these environments. A friend of mine on Twitter was like, "Oh hey, IBM's coming back to OpenDaylight or things like that." Because they'd been part of Cloud Foundry, they'd been part of OpenDaylight. There's certain ones that they are part of it and then they step back. So IBM, credibly open source space, if they can let Red Hat people still do their thing. But the concern is that lots of other companies are gonna be calling up project leads, and contributors in the open source community that might've felt that Red Hat was ideal place to live, and now they might go get their paycheck somewhere else. >> There's rumors that Jim Whitehurst eventually will take over IBM. I don't see it, I just don't think Jim Whitehurst wants to run Z mainframes and Services. That doesn't make any sense to me. Ginni's getting to the age where IBM CEOs typically retire, within the next couple of years. And so I think that it's more likely they'll bring in somebody from internally. Whether it's Arvin or, more likely, Jim Kavanaugh 'cause he's got the relationship with Wall Street. Let's talk about winners and losers. It's just, again, a huge strategic move for IBM. Frankly, I see the big winners is IBM and Red Hat. Because as we described before, IBM was struggling with its execution, and Red Hat was just basically, finally hitting a wall after 60-plus quarters of growth. And so the question is, will its customers win? The big concern I have for the customers is, IBM has this nasty habit of raising prices when it does acquisitions. We've seen it a number of times. And so you keep an eye on it, if I were a Red Hat customer, I'd be locking in some attractive pricing, longterm. And I would also be calling Mark Shuttleworth, and get his take, and get that Amdahl coffee cup on my desk, as it were. Other winners and losers, your thoughts on some of the partners, and the ecosystem. >> Yeah, when I look at this and say, compare it to Microsoft buying GitHub. We're all wondering, is this a real game changer for IBM? And if they embrace the direction. It's not like Red Hat culture is going to just take over IBM. In the Q&A with IBM, they said, "Will there be influence? Absolutely. "Is this a marriage of equals? No. "We're buying Red Hat and we will be "communicating and working together on this" But you can see how this can help IBM, as to the direction. Open source and the multi-cloud world is a huge, important piece. Cisco, I think, could've made a move like this. I would've been a little bit more worried about maintaining open source purity, if it was somebody like Cisco. There's other acquisitions, you mentioned Canonical and SUSE are out there. If somebody wanted to do this, the role of the operating system is much less important than it is today. You wouldn't have seen Microsoft up on stage at Red Hat Summit this year if Windows was the driver for Microsoft going forward. The cloud companies out there, to be honest, it really cements their presence out there. I don't think AWS is sitting there saying, "Oh jeez, we need to worry." They're saying, "Well IBM's capitulated." Realizing that, "Sure they have their own cloud, "and their environment, but they're going to be "successful only when they live in, "and around, and amongst our platform of Amazon." And Azure's gonna feel the same way, and same about Google. So there's that dynamic there. >> What about VMware? >> So I think VMware absolutely is a loser here. When I went back to say one of the biggest strengths of IBM is that they have applications. When you talk about Red Hat, they're really working, not only at the infrastructure layer, but working with developers, and working in that environment. The biggest weakness of VMware, is they don't own the applications. I'm paying licenses to VMware. And in a multi-cloud world, why do I need VMware? As opposed to Red Hat and IBM, or Amazon, or Microsoft, have a much more natural affinity for the applications and the data in the future. >> And what about the arms dealers? HPE and Dell, in particular, and of course, Lenovo. Wouldn't they prefer Red Hat being independent? >> Absolutely, they would prefer that they're gonna stay independent. As long as it doesn't seem to customers that IBM is trying to twist everybody's arms, and get you on to Z, or Power, or something like that. And continues to allow partnerships with the HPEs, Dells, Lenovos of the world. I think they'll be okay. So I'd say middling to impact. But absolutely, Red Hat, as an independent, was really the Switzerland of the marketplace. >> Ginni Rometty had sited three growth areas. One was Red Hat scale and go-to-market. I think there's no question about that. IBM could help with Red Hat's go-to-market. The other growth vector was IBM's products and software on the Red Hat stack. I'm less optimistic there, because I think that it's the strength of IBM's products, in and of themselves, that are largely gonna determine that success. And then the third was Services. I think IBM Services is a huge winner here. Having the bat phone into Red Hat is a big win for IBM Services. They can now differentiate. And this is where I think it's gonna be really interesting to see the posture of Accenture and those other big guys. I think IBM can now somewhat differentiate from those guys, saying, "Well wait, "we have exclusive, or not exclusive, "but inside baseball access to Red Hat." So that's gonna be an interesting dynamic to watch. Your final thoughts here. >> Yeah, yeah, Dave, absolutely. On the product integration piece, the question would be, you're gonna have OpenAPIs. This is all gonna work with the entire ecosystem. Couldn't IBM have done more of this without having to pay $34 billion and put things together? Services, absolutely, will be the measurement as to whether this is successful or not. That's probably gonna be the line out of them in financials, that we're gonna have to look at. Because, Dave, going back to, what is hybrid, and how do we measure it? What is success for this whole acquisition down the line? Any final pieces to what we should watch and how we measure that? >> So I think that, first of all, IBM's really good with acquisitions, so keep an eye on that. I'm not so concerned about the debt. IBM's got strong free cash flow. Red Hat throws off a billion dollars a year in free cash flow. This should be an accretive acquisition. In terms of operating profits, it might take a couple of years. But certainly from a standpoint of free cash flow and revenue growth, I think it's gonna help near-term. If it doesn't, that's something that's really important to watch. And then the last thing is culture. You know a lot of people at these companies. I know a lot of people at these companies. Look, the Red Hat culture drinks the Kool-Aid of open. You know this. Do they see IBM as the steward of open, and are they gonna face a brain drain? That's why it's no coincidence that Whitehurst and Rometty were down in North Carolina today. And Arvin and Paul Cormier were in Boston today. This is where a lot of employees are for Red Hat. And they're messaging. And so that's very, very important. IBM's not foolish. So that, to me, Stu, is a huge thing, is the culture. Dave, IBM is no longer the navy suit with the red tie, and everybody buttoned down. People are concerned about like, oh, IBM's gonna give the Red Hat people a dress code. Sure, the typical IBMer is not in a graphic tee and a hoodie. But, Dave, you've seen such a transformation in IBM over the last couple of decades. >> Yeah, definitely. And I think this really does, in my view, cement, now, the legacy of Ginny Rometty, which was kinda hanging on Watson, and Cognitive, and this sort of bespoke set of capabilities, and the SoftLayer acquisition. It, now, all comes together. This is a major pivot by IBM. I think, strategically, it's the right move for IBM. And I think, if in fact, IBM can maintain Red Hat's independence and that posture, and maintain its culture and employee base, I think it does change the game for IBM. So I would say, smart move, good move. Expensive but probably worth it. >> Yeah, where else would they have put their money, Dave? >> Yeah, right. Alright, Stu, thank you very much for unpacking this announcement. And thank you for watching. We'll see you next time. (mellow electronic music)