>> From "theCUBE" studios in Palo Alto, in Boston, bringing you data driven insights from "theCUBE" and ETR. This is "Breaking Analysis" with Dave Vellante. >> There are very few political issues that get bipartisan support these days, nevermind consensus spanning geopolitical boundaries. But whether we're talking across the aisle or over the pond, there seems to be common agreement that the power of big tech firms should be regulated. But the government's track record when it comes to antitrust aimed at big tech is actually really mixed, mixed at best. History has shown that market forces rather than public policy have been much more effective at curbing monopoly power in the technology industry. Hello, and welcome to this week's "Wikibon CUBE" insights powered by ETR. In this "Breaking Analysis" we welcome in frequent "CUBE" contributor Dave Moschella, author and senior fellow at the Information Technology and Innovation Foundation. Dave, welcome, good to see you again. >> Hey, thanks Dave, good to be here. >> So you just recently published an article, we're going to bring it up here and I'll read the title, "Theory Aside, Antitrust Advocates Should Keep Their "Big Tech" Ambitions Narrow". And in this post you argue that big sweeping changes like breaking apart companies to moderate monopoly power in the tech industry have been ineffective compared to market forces, but you're not saying government shouldn't be involved rather you're suggesting that more targeted measures combined with market forces are the right answer. Can you maybe explain a little bit more the premise behind your research and some of your conclusions? >> Sure, and first let's go back to that title, when I said, theory aside, that is referring to a huge debate that's going on in global antitrust circles these days about whether antitrust should follow the traditional path of being invoked when there's real harm, demonstrable harm to consumers or a new theory that says that any sort of vast monopoly power inevitably will be bad for competition and consumers at some point, so your best to intervene now to avoid harms later. And that school, which was a very minor part of the antitrust world for many, many years is now quite ascendant and the debate goes on doesn't matter which side of that you're on the questions sort of there well, all right, well, if you're going to do something to take on big tech and clearly many politicians, regulators are sort of issuing to do something, what would you actually do? And what are the odds that that'll do more good than harm? And that was really the origins of the piece and trying to take a historical view of that. >> Yeah, I learned a new word, thank you. Neo-brandzian had to look it up, but basically you're saying that traditionally it was proving consumer harm versus being proactive about the possibility or likelihood of consumer harm. >> Correct, and that's a really big shift that a lot of traditional antitrust people strongly object to, but is now sort of the trendy and more send and view. >> Got it, okay, let's look a little deeper into the history of tech monopolies and government action and see what we can learn from that. We put together this slide that we can reference. It shows the three historical targets in the tech business and now the new ones. In 1969, the DOJ went after IBM, Big Blue and it's 13 years later, dropped its suit. And then in 1984 the government broke Ma Bell apart and in the late 1990s, went after Microsoft, I think it was 1998 in the Wintel monopoly. And recently in an interview with tech journalist, Kara Swisher, the FTC chair Lena Khan claimed that the government played a major role in moderating the power of tech giants historically. And I think she even specifically referenced Microsoft or maybe Kara did and basically said the industry and consumers from the dominance of companies like Microsoft. So Dave, let's briefly talk about and Kara by the way, didn't really challenge that, she kind of let it slide. But let's talk about each of these and test this concept a bit. Were the government actions in these instances necessary? What were the outcomes and the consequences? Maybe you could start with IBM and AT&T. >> Yeah, it's a big topic and there's a lot there and a lot of history, but I might just sort of introduce by saying for whatever reasons antitrust has been part of the entire information technology industry history from mainframe to the current period and that slide sort of gives you that. And the reasons for that are I think once that we sort of know the economies of scale, network effects, lock in safe choices, lot of things that explain it, but the good bit about that is we actually have so much history of this and we can at least see what's happened in the past and when you look at IBM and AT&T they both were massive antitrust cases. The one against IBM was dropped and it was dropped in as you say, in 1980. Well, what was going on in at that time, IBM was sort of considered invincible and unbeatable, but it was 1981 that the personal computer came around and within just a couple of years the world could see that the computing paradigm had change from main frames and minis to PCs lines client server and what have you. So IBM in just a couple of years went from being unbeatable, you can't compete with them, we have to break up with them to being incredibly vulnerable and in trouble and never fully recovered and is sort of a shell of what it once was. And so the market took care of that and no action was really necessary just by everybody thinking there was. The case of AT&T, they did act and they broke up the company and I would say, first question is, was that necessary? Well, lots of countries didn't do that and the reality is 1980 breaking it up into long distance and regional may have made some sense, but by the 1990 it was pretty clear that the telecom world was going to change dramatically from long distance and fixed wires services to internet services, data services, wireless services and all of these things that we're going to restructure the industry anyways. But AT& T one to me is very interesting because of the unintended consequences. And I would say that the main unintended consequence of that was America's competitiveness in telecommunications took a huge hit. And today, to this day telecommunications is dominated by European, Chinese and other firms. And the big American sort of players of the time AT&T which Western Electric became Lucent, Lucent is now owned by Nokia and is really out of it completely and most notably and compellingly Bell Labs, the Bell Labs once the world's most prominent research institution now also a shell of itself and as it was part of Lucent is also now owned by the Finnish company Nokia. So that restructuring greatly damaged America's core strength in telecommunications hardware and research and one can argue we've never recovered right through this 5IG today. So it's a very good example of the market taking care of, the big problem, but meddling leading to some unintended consequences that have hurt the American competitiveness and as we'll talk about, probably later, you can see some of that going on again today and in the past with Microsoft and Intel. >> Right, yeah, Bell Labs was an American gem, kind of like Xerox PARC and basically gone now. You mentioned Intel and Microsoft, Microsoft and Intel. As many people know, some young people don't, IBM unwillingly handed its monopoly to Intel and Microsoft by outsourcing the micro processor and operating system, respectively. Those two companies ended up with IBM ironically, agreeing to take OS2 which was its proprietary operating system and giving Intel, Microsoft Windows not realizing that its ability to dominate a new disruptive market like PCs and operating systems had been vaporized to your earlier point by the new Wintel ecosystem. Now Dave, the government wanted to break Microsoft apart and split its OS business from its application software, in the case of Intel, Intel only had one business. You pointed out microprocessors so it couldn't bust it up, but take us through the history here and the consequences of each. >> Well, the Microsoft one is sort of a classic because the antitrust case which was raging in the sort of mid nineties and 1998 when it finally ended, those were the very, once again, everybody said, Bill Gates was unstoppable, no one could compete with Microsoft they'd buy them, destroy them, predatory pricing, whatever they were accusing of the attacks on Netscape all these sort of things. But those the very years where it was becoming clear first that Microsoft basically missed the early big years of the internet and then again, later missed all the early years of the mobile phone business going back to BlackBerrys and pilots and all those sorts of things. So here we are the government making the case that this company is unstoppable and you can't compete with them the very moment they're entirely on the defensive. And therefore wasn't surprising that that suit eventually was dropped with some minor concessions about Microsoft making it a little bit easier for third parties to work with them and treating people a little bit more, even handling perfectly good things that they did. But again, the more market took care of the problem far more than the antitrust activities did. The Intel one is also interesting cause it's sort of like the AT& T one. On the one hand antitrust actions made Intel much more likely and in fact, required to work with AMD enough to keep that company in business and having AMD lowered prices for consumers certainly probably sped up innovation in the personal computer business and appeared to have a lot of benefits for those early years. But when you look at it from a longer point of view and particularly when look at it again from a global point of view you see that, wow, they not so clear because that very presence of AMD meant that there's a lot more pressure on Intel in terms of its pricing, its profitability, its flexibility and its volumes. All the things that have made it harder for them to A, compete with chips made in Taiwan, let alone build them in the United States and therefore that long term effect of essentially requiring Intel to allow AMD to exist has undermined Intel's position globally and arguably has undermined America's position in the long run. And certainly Intel today is far more vulnerable to an ARM and Invidia to other specialized chips to China, to Taiwan all of these things are going on out there, they're less capable of resisting that than they would've been otherwise. So, you thought we had some real benefits with AMD and lower prices for consumers, but the long term unintended consequences are arguably pretty bad. >> Yeah, that's why we recently wrote in Intel two "Strategic To Fail", we'll see, Okay. now we come to 2022 and there are five companies with anti-trust targets on their backs. Although Microsoft seems to be the least susceptible to US government ironically intervention at this this point, but maybe not and we show "The Cincos Comas Club" in a homage to Russ Hanneman of the show "Silicon Valley" Apple, Microsoft, Google, and Amazon all with trillion dollar plus valuations. But meta briefly crossed that threshold like Mr. Hanneman lost a comma and is now well under that market cap probably around five or 600 million, sorry, billion. But under serious fire nonetheless Dave, people often don't realize the immense monopoly power that IBM had which relatively speaking when measured its percent of industry revenue or profit dwarf that of any company in tech ever, but the industry is much smaller then, no internet, no cloud. Does it call for a different approach this time around? How should we think about these five companies their market power, the implications of government action and maybe what you suggested more narrow action versus broad sweeping changes. >> Yeah, and there's a lot there. I mean, if you go back to the old days IBM had what, 70% of the computer business globally and AT&T had 90% or so of the American telecom market. So market shares that today's players can only dream of. Intel and Microsoft had 90% of the personal computer market. And then you look at today the big five and as wealthy and as incredibly successful as they've been, you sort of have almost the argument that's wrong on the face of it. How can five companies all of which compete with each other to at least some degree, how can they all be monopolies? And the reality is they're not monopolies, they're all oligopolies that are very powerful firms, but none of them have an outright monopoly on anything. There are competitors in all the spaces that they're in and increasing and probably increasingly so. And so, yeah, I think people conflate the extraordinary success of the companies with this belief that therefore they are monopolist and I think they're far less so than those in the past. >> Great, all right, I want to do a quick drill down to cloud computing, it's a key component of digital business infrastructure in his book, "Seeing Digital", Dave Moschella coined a term the matrix or the key which is really referred to the key technology platforms on which people are going to build digital businesses. Dave, we joke you should have called it the metaverse you were way ahead of your time. But I want to look at this ETR chart, we show spending momentum or net score on the vertical access market share or pervasiveness in the dataset on the horizontal axis. We show this view a lot, we put a dotted line at the 40% mark which indicates highly elevated spending. And you can sort of see Microsoft in the upper right, it's so far up to the right it's hidden behind the January 22 and AWS is right there. Those two dominate the cloud far ahead of the pack including Google Cloud. Microsoft and to a lesser extent AWS they dominate in a lot of other businesses, productivity, collaboration, database, security, video conferencing. MarTech with LinkedIn PC software et cetera, et cetera, Googles or alphabets of business of course is ads and we don't have similar spending data on Apple and Facebook, but we know these companies dominate their respective business. But just to give you a sense of the magnitude of these companies, here's some financial data that's worth looking at briefly. The table ranks companies by market cap in trillions that's the second column and everyone in the club, but meta and each has revenue well over a hundred billion dollars, Amazon approaching half a trillion dollars in revenue. The operating income and cash positions are just mind boggling and the cash equivalents are comparable or well above the revenues of highly successful tech companies like Cisco, Dell, HPE, Oracle, and Salesforce. They're extremely profitable from an operating income standpoint with the clear exception of Amazon and we'll come back to that in a moment and we show the revenue multiples in the last column, Apple, Microsoft, and Google, just insane. Dave, there are other equally important metrics, CapX is one which kind of sets the stage for future scale and there are other measures. >> Yeah, including our research and development where those companies are spending hundreds of billions of dollars over the years. And I think it's easy to look at those numbers and just say, this doesn't seem right, how can any companies have so much and spend so much? But if you think of what they're actually doing, those companies are building out the digital infrastructure of essentially the entire world. And I remember once meeting some folks at Google, and they said, beyond AI, beyond Search, beyond Android, beyond all the specific things we do, the biggest thing we're actually doing is building a physical infrastructure that can deliver search results on any topic in microseconds and the physical capacity they built costs those sorts of money. And when people start saying, well, we should have lots and lots of smaller companies well, that sounds good, yeah, it's all right, but where are those companies going to get the money to build out what needs to be built out? And every country in the world is trying to build out its digital infrastructure and some are going to do it much better than others. >> I want to just come back to that chart on Amazon for a bit, notice their comparatively tiny operating profit as a percentage of revenue, Amazon is like Bezos giant lifestyle business, it's really never been that profitable like most retail. However, there's one other financial data point around Amazon's business that we want to share and this chart here shows Amazon's operating profit in the blue bars and AWS's in the orange. And the gray line is the percentage of Amazon's overall operating profit that comes from AWS. That's the right most access, so last quarter we were well over a hundred percent underscoring the power of AWS and the horrendous margins in retail. But AWS is essentially funding Amazon's entrance into new markets, whether it's grocery or movies, Bezos moves into space. Dave, a while back you collaborated with us and we asked our audience, what could disrupt Amazon? And we came up with your detailed help, a number of scenarios as shown here. And we asked the audience to rate the likelihood of each scenario in terms of its likelihood of disrupting Amazon with a 10 being highly likely on average the score was six with complacency, arrogance, blindness, you know, self-inflicted wounds really taking the top spot with 6.5. So Dave is breaking up Amazon the right formula in your view, why or why not? >> Yeah, there's a couple of things there. The first is sort of the irony that when people in the sort of regulatory world talk about the power of Amazon, they almost always talk about their power in consumer markets, whether it's books or retail or impact on malls or main street shops or whatever and as you say that they make very little money doing that. The interest people almost never look at the big cloud battle between Amazon, Microsoft and lesser extent Google, Alibaba others, even though that's where they're by far highest market share and pricing power and all those things are. So the regulatory focus is sort of weird, but you know, the consumer stuff obviously gets more appeal to the general public. But that survey you referred to me was interesting because one of the challenges I sort of sent myself I was like okay, well, if I'm going to say that IBM case, AT&T case, Microsoft's case in all those situations the market was the one that actually minimized the power of those firms and therefore the antitrust stuff wasn't really necessary. Well, how true is that going to be again, just cause it's been true in the past doesn't mean it's true now. So what are the possible scenarios over the 2020s that might make it all happen again? And so each of those were sort of questions that we put out to others, but the ones that to me by far are the most likely I mean, they have the traditional one of company cultures sort of getting fat and happy and all, that's always the case, but the more specific ones, first of all by far I think is China. You know, Amazon retail is a low margin business. It would be vulnerable if it didn't have the cloud profits behind it, but imagine a year from now two years from now trade tensions with China get worse and Christmas comes along and China just says, well, you know, American consumers if you want that new exercise bike or that new shoes or clothing, well, anything that we make well, actually that's not available on Amazon right now, but you can get that from Alibaba. And maybe in America that's a little more farfetched, but in many countries all over the world it's not farfetched at all. And so the retail divisions vulnerability to China just seems pretty obvious. Another possible disruption, Amazon has spent billions and billions with their warehouses and their robots and their automated inventory systems and all the efficiencies that they've done there, but you could argue that maybe someday that's not really necessary that you have Search which finds where a good is made and a logistical system that picks that up and delivers it to customers and why do you need all those warehouses anyways? So those are probably the two top one, but there are others. I mean, a lot of retailers as they get stronger online, maybe they start pulling back some of the premium products from Amazon and Amazon takes their cut of whatever 30% or so people might want to keep more of that in house. You see some of that going on today. So the idea that the Amazon is in vulnerable disruption is probably is wrong and as part of the work that I'm doing, as part of stuff that I do with Dave and SiliconANGLE is how's that true for the others too? What are the scenarios for Google or Apple or Microsoft and the scenarios are all there. And so, will these companies be disrupted as they have in the past? Well, you can't say for sure, but the scenarios are certainly plausible and I certainly wouldn't bet against it and that's what history tells us. And it could easily happen once again and therefore, the antitrust should at least be cautionary and humble and realize that maybe they don't need to act as much as they think. >> Yeah, now, one of the things that you mentioned in your piece was felt like narrow remedies, were more logical. So you're not arguing for totally Les Affaire you're pushing for remedies that are more targeted in scope. And while the EU just yesterday announced new rules to limit the power of tech companies and we showed the article, some comments here the regulators they took the social media to announce a victory and they had a press conference. I know you watched that it was sort of a back slapping fest. The comments however, that we've sort of listed here are mixed, some people applauded, but we saw many comments that were, hey, this is a horrible idea, this was rushed together. And these are going to result as you say in unintended consequences, but this is serious stuff they're talking about applying would appear to be to your point or your prescription more narrowly defined restrictions although a lot of them to any company with a market cap of more than 75 billion Euro or turnover of more than 77.5 billion Euro which is a lot of companies and imposing huge penalties for violations up to 20% of annual revenue for repeat offenders, wow. So again, you've taken a brief look at these developments, you watched the press conference, what do you make of this? This is an application of more narrow restrictions, but in your quick assessment did they get it right? >> Yeah, let's break that down a little bit, start a little bit of history again and then get to Europe because although big sweeping breakups of the type that were proposed for IBM, Microsoft and all weren't necessary that doesn't mean that the government didn't do some useful things because they did. In the case of IBM government forces in Europe and America basically required IBM to make it easier for companies to make peripherals type drives, disc drives, printers that worked with IBM mainframes. They made them un-bundle their software pricing that made it easier for database companies and others to sell their of products. With AT&T it was the government that required AT&T to actually allow other phones to connect to the network, something they argued at the time would destroy security or whatever that it was the government that required them to allow MCI the long distance carrier to connect to the AT network for local deliveries. And with that Microsoft and Intel the government required them to at least treat their suppliers more even handly in terms of pricing and policies and support and such things. So the lessons out there is the big stuff wasn't really necessary, but the little stuff actually helped a lot and I think you can see the scenarios and argue in the piece that there's little stuff that can be done today in all the cases for the big five, there are things that you might want to consider the companies aren't saints they take advantage of their power, they use it in ways that sometimes can be reigned in and make for better off overall. And so that's how it brings us to the European piece of it. And to me, the European piece is much more the bad scenario of doing too much than the wiser course of trying to be narrow and specific. What they've basically done is they have a whole long list of narrow things that they're all trying to do at once. So they want Amazon not to be able to share data about its selling partners and they want Apple to open up their app store and they don't want people Google to be able to share data across its different services, Android, Search, Mail or whatever. And they don't want Facebook to be able to, they want to force Facebook to open up to other messaging services. And they want to do all these things for all the big companies all of which are American, and they want to do all that starting next year. And to me that looks like a scenario of a lot of difficult problems done quickly all of which might have some value if done really, really well, but all of which have all kinds of risks for the unintended consequence we've talked before and therefore they seem to me being too much too soon and the sort of problems we've seen in the past and frankly to really say that, I mean, the Europeans would never have done this to the companies if they're European firms, they're doing this because they're all American firms and the sort of frustration of Americans dominance of the European tech industry has always been there going back to IBM, Microsoft, Intel, and all of them. But it's particularly strong now because the tech business is so big. And so I think the politics of this at a time where we're supposedly all this great unity of America and NATO and Europe in regards to Ukraine, having the Europeans essentially go after the most important American industry brings in the geopolitics in I think an unavoidable way. And I would think the story is going to get pretty tense over the next year or so and as you say, the Europeans think that they're taking massive actions, they think they're doing the right thing. They think this is the natural follow on to the GDPR stuff and even a bigger version of that and they think they have more to come and they see themselves as the people taming big tech not just within Europe, but for the world and absent any other rules that they may pull that off. I mean, GDPR has indeed spread despite all of its flaws. So the European thing which it doesn't necessarily get huge attention here in America is certainly getting attention around the world and I would think it would get more, even more going forward. >> And the caution there is US public policy makers, maybe they can provide, they will provide a tailwind maybe it's a blind spot for them and it could be a template like you say, just like GDPR. Okay, Dave, we got to leave it there. Thanks for coming on the program today, always appreciate your insight and your views, thank you. >> Hey, thanks a lot, Dave. >> All right, don't forget these episodes are all available as podcast, wherever you listen. All you got to do is search, "Breaking Analysis Podcast". Check out ETR website, etr.ai. We publish every week on wikibon.com and siliconangle.com. And you can email me david.vellante@siliconangle.com or DM me @davevellante. Comment on my LinkedIn post. This is Dave Vellante for Dave Michelle for "theCUBE Insights" powered by ETR. Have a great week, stay safe, be well and we'll see you next time. (slow tempo music)

>> From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR, this is "Breaking Analysis" with Dave Vellante. >> If it weren't for Pat Gelsinger, Intel's future would be a disaster. Even with his clear vision, fantastic leadership, deep technical and business acumen, and amazing positivity, the company's future is in serious jeopardy. It's the same story we've been telling for years. Volume is king in the semiconductor industry, and Intel no longer is the volume leader. Despite Intel's efforts to change that dynamic With several recent moves, including making another go at its Foundry business, the company is years away from reversing its lagging position relative to today's leading foundries and design shops. Intel's best chance to survive as a leader in our view, will come from a combination of a massive market, continued supply constraints, government money, and luck, perhaps in the form of a deal with apple in the midterm. Hello, and welcome to this week's "Wikibon CUBE Insights, Powered by ETR." In this "Breaking Analysis," we'll update you on our latest assessment of Intel's competitive position and unpack nuggets from the company's February investor conference. Let's go back in history a bit and review what we said in the early 2010s. If you've followed this program, you know that our David Floyer sounded the alarm for Intel as far back as 2012, the year after PC volumes peaked. Yes, they've ticked up a bit in the past couple of years but they pale in comparison to the volumes that the ARM ecosystem is producing. The world has changed from people entering data into machines, and now it's machines that are driving all the data. Data volumes in Web 1.0 were largely driven by keystrokes and clicks. Web 3.0 is going to be driven by machines entering data into sensors, cameras. Other edge devices are going to drive enormous data volumes and processing power to boot. Every windmill, every factory device, every consumer device, every car, will require processing at the edge to run AI, facial recognition, inference, and data intensive workloads. And the volume of this space compared to PCs and even the iPhone itself is about to be dwarfed with an explosion of devices. Intel is not well positioned for this new world in our view. Intel has to catch up on the process, Intel has to catch up on architecture, Intel has to play catch up on security, Intel has to play catch up on volume. The ARM ecosystem has cumulatively shipped 200 billion chips to date, and is shipping 10x Intel's wafer volume. Intel has to have an architecture that accommodates much more diversity. And while it's working on that, it's years behind. All that said, Pat Gelsinger is doing everything he can and more to close the gap. Here's a partial list of the moves that Pat is making. A year ago, he announced IDM 2.0, a new integrated device manufacturing strategy that opened up its world to partners for manufacturing and other innovation. Intel has restructured, reorganized, and many executives have boomeranged back in, many previous Intel execs. They understand the business and have a deep passion to help the company regain its prominence. As part of the IDM 2.0 announcement, Intel created, recreated if you will, a Foundry division and recently acquired Tower Semiconductor an Israeli firm, that is going to help it in that mission. It's opening up partnerships with alternative processor manufacturers and designers. And the company has announced major investments in CAPEX to build out Foundry capacity. Intel is going to spin out Mobileye, a company it had acquired for 15 billion in 2017. Or does it try and get a $50 billion valuation? Mobileye is about $1.4 billion in revenue, and is likely going to be worth more around 25 to 30 billion, we'll see. But Intel is going to maybe get $10 billion in cash from that, that spin out that IPO and it can use that to fund more FABS and more equipment. Intel is leveraging its 19,000 software engineers to move up the stack and sell more subscriptions and high margin software. He got to sell what he got. And finally Pat is playing politics beautifully. Announcing for example, FAB investments in Ohio, which he dubbed Silicon Heartland. Brilliant! Again, there's no doubt that Pat is moving fast and doing the right things. Here's Pat at his investor event in a T-shirt that says, "torrid, bringing back the torrid pace and discipline that Intel is used to." And on the right is Pat at the State of the Union address, looking sharp in shirt and tie and suit. And he has said, "a bet on Intel is a hedge against geopolitical instability in the world." That's just so good. To that statement, he showed this chart at his investor meeting. Basically it shows that whereas semiconductor manufacturing capacity has gone from 80% of the world's volume to 20%, he wants to get it back to 50% by 2030, and reset supply chains in a market that has become important as oil. Again, just brilliant positioning and pushing all the right hot buttons. And here's a slide underscoring that commitment, showing manufacturing facilities around the world with new capacity coming online in the next few years in Ohio and the EU. Mentioning the CHIPS Act in his presentation in The US and Europe as part of a public private partnership, no doubt, he's going to need all the help he can get. Now, we couldn't resist the chart on the left here shows wafer starts and transistor capacity growth. For Intel, overtime speaks to its volume aspirations. But we couldn't help notice that the shape of the curve is somewhat misleading because it shows a two-year (mumbles) and then widens the aperture to three years to make the curve look steeper. Fun with numbers. Okay, maybe a little nitpick, but these are some of the telling nuggets we pulled from the investor day, and they're important. Another nitpick is in our view, wafers would be a better measure of volume than transistors. It's like a company saying we shipped 20% more exabytes or MIPS this year than last year. Of course you did, and your revenue shrank. Anyway, Pat went through a detailed analysis of the various Intel businesses and promised mid to high double digit growth by 2026, half of which will come from Intel's traditional PC they center in network edge businesses and the rest from advanced graphics HPC, Mobileye and Foundry. Okay, that sounds pretty good. But it has to be taken into context that the balance of the semiconductor industry, yeah, this would be a pretty competitive growth rate, in our view, especially for a 70 plus billion dollar company. So kudos to Pat for sticking his neck out on this one. But again, the promise is several years away, at least four years away. Now we want to focus on Foundry because that's the only way Intel is going to get back into the volume game and the volume necessary for the company to compete. Pat built this slide showing the baby blue for today's Foundry business just under a billion dollars and adding in another $1.5 billion for Tower Semiconductor, the Israeli firm that it just acquired. So a few billion dollars in the near term future for the Foundry business. And then by 2026, this really fuzzy blue bar. Now remember, TSM is the new volume leader, and is a $50 billion company growing. So there's definitely a market there that it can go after. And adding in ARM processors to the mix, and, you know, opening up and partnering with the ecosystems out there can only help volume if Intel can win that business, which you know, it should be able to, given the likelihood of long term supply constraints. But we remain skeptical. This is another chart Pat showed, which makes the case that Foundry and IDM 2.0 will allow expensive assets to have a longer useful life. Okay, that's cool. It will also solve the cumulative output problem highlighted in the bottom right. We've talked at length about Wright's Law. That is, for every cumulative doubling of units manufactured, cost will fall by a constant percentage. You know, let's say around 15% in semiconductor world, which is vitally important to accommodate next generation chips, which are always more expensive at the start of the cycle. So you need that 15% cost buffer to jump curves and make any money. So let's unpack this a bit. You know, does this chart at the bottom right address our Wright's Law concerns, i.e. that Intel can't take advantage of Wright's Law because it can't double cumulative output fast enough? Now note the decline in wafer starts and then the slight uptick, and then the flattening. It's hard to tell what years we're talking about here. Intel is not going to share the sausage making because it's probably not pretty, But you can see on the bottom left, the flattening of the cumulative output curve in IDM 1.0 otherwise known as the death spiral. Okay, back to the power of Wright's Law. Now, assume for a second that wafer density doesn't grow. It does, but just work with us for a second. Let's say you produce 50 million units per year, just making a number up. That gets you cumulative output to $100 million in, sorry, 100 million units in the second year to take you two years to get to that 100 million. So in other words, it takes two years to lower your manufacturing cost by, let's say, roughly 15%. Now, assuming you can get wafer volumes to be flat, which that chart showed, with good yields, you're at 150 now in year three, 200 in year four, 250 in year five, 300 in year six, now, that's four years before you can take advantage of Wright's Law. You keep going at that flat wafer start, and that simplifying assumption we made at the start and 50 million units a year, and well, you get to the point. You get the point, it's now eight years before you can get the Wright's Law to kick in, and you know, by then you're cooked. But now you can grow the density of transistors on a chip, right? Yes, of course. So let's come back to Moore's Law. The graphic on the left says that all the growth is in the new stuff. Totally agree with that. Huge term that Pat presented. Now he also said that until we exhaust the periodic table of elements, Moore's Law is alive and well, and Intel is the steward of Moore's Law. Okay, that's cool. The chart on the right shows Intel going from 100 billion transistors today to a trillion by 2030. Hold that thought. So Intel is assuming that we'll keep up with Moore's Law, meaning a doubling of transistors every let's say two years, and I believe it. So bring that back to Wright's Law, in the previous chart, it means with IDM 2.0, Intel can get back to enjoying the benefits of Wright's Law every two years, let's say, versus IDM 1.0 where they were failing to keep up. Okay, so Intel is saved, yeah? Well, let's bring into this discussion one of our favorite examples, Apple's M1 ARM-based chip. The M1 Ultra is a new architecture. And you can see the stats here, 114 billion transistors on a five nanometer process and all the other stats. The M1 Ultra has two chips. They're bonded together. And Apple put an interposer between the two chips. An interposer is a pathway that allows electrical signals to pass through it onto another chip. It's a super fast connection. You can see 2.5 terabytes per second. But the brilliance is the two chips act as a single chip. So you don't have to change the software at all. The way Intel's architecture works is it takes two different chips on a substrate, and then each has its own memory. The memory is not shared. Apple shares the memory for the CPU, the NPU, the GPU. All of it is shared, meaning it needs no change in software unlike Intel. Now Intel is working on a new architecture, but Apple and others are way ahead. Now let's make this really straightforward. The original Apple M1 had 16 billion transistors per chip. And you could see in that diagram, the recently launched M1 Ultra has $114 billion per chip. Now if you take into account the size of the chips, which are increasing, and the increase in the number of transistors per chip, that transistor density, that's a factor of around 6x growth in transistor density per chip in 18 months. Remember Intel, assuming the results in the two previous charts that we showed, assuming they were achievable, is running at 2x every two years, versus 6x for the competition. And AMD and Nvidia are close to that as well because they can take advantage of TSM's learning curve. So in the previous chart with Moore's Law, alive and well, Intel gets to a trillion transistors by 2030. The Apple ARM and Nvidia ecosystems will arrive at that point years ahead of Intel. That means lower costs and significantly better competitive advantage. Okay, so where does that leave Intel? The story is really not resonating with investors and hasn't for a while. On February 18th, the day after its investor meeting, the stock was off. It's rebound a little bit but investors are, you know, they're probably prudent to wait unless they have really a long term view. And you can see Intel's performance relative to some of the major competitors. You know, Pat talked about five nodes in for years. He made a big deal out of that, and he shared proof points with Alder Lake and Meteor Lake and other nodes, but Intel just delayed granite rapids last month that pushed it out from 2023 to 2024. And it told investors that we're going to have to boost spending to turn this ship around, which is absolutely the case. And that delay in chips I feel like the first disappointment won't be the last. But as we've said many times, it's very difficult, actually, it's impossible to quickly catch up in semiconductors, and Intel will never catch up without volume. So we'll leave you by iterating our scenario that could save Intel, and that's if its Foundry business can eventually win back Apple to supercharge its volume story. It's going to be tough to wrestle that business away from TSM especially as TSM is setting up shop in Arizona, with US manufacturing that's going to placate The US government. But look, maybe the government cuts a deal with Apple, says, hey, maybe we'll back off with the DOJ and FTC and as part of the CHIPS Act, you'll have to throw some business at Intel. Would that be enough when combined with other Foundry opportunities Intel could theoretically produce? Maybe. But from this vantage point, it's very unlikely Intel will gain back its true number one leadership position. If it were really paranoid back when David Floyer sounded the alarm 10 years ago, yeah, that might have made a pretty big difference. But honestly, the best we can hope for is Intel's strategy and execution allows it to get competitive volumes by the end of the decade, and this national treasure survives to fight for its leadership position in the 2030s. Because it would take a miracle for that to happen in the 2020s. Okay, that's it for today. Thanks to David Floyer for his contributions to this research. Always a pleasure working with David. Stephanie Chan helps me do much of the background research for "Breaking Analysis," and works with our CUBE editorial team. Kristen Martin and Cheryl Knight to get the word out. And thanks to SiliconANGLE's editor in chief Rob Hof, who comes up with a lot of the great titles that we have for "Breaking Analysis" and gets the word out to the SiliconANGLE audience. Thanks, guys. Great teamwork. Remember, these episodes are all available as podcast wherever you listen. Just search "Breaking Analysis Podcast." You'll want to check out ETR's website @etr.ai. We also publish a full report every week on wikibon.com and siliconangle.com. You could always get in touch with me on email, david.vellante@siliconangle.com or DM me @dvellante, and comment on my LinkedIn posts. This is Dave Vellante for "theCUBE Insights, Powered by ETR." Have a great week. Stay safe, be well, and we'll see you next time. (upbeat music)

>> From theCUBE Studios in Palo Alto and Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. >> As we reported last week, we believe that in the next decade, there will be changes in public policy that are going to restrict the way in which big internet companies are able to appropriate user data. Big tech came under fire again this week with the CEOs of Facebook, Twitter, and Google going toe to toe with several U.S. senators. Microsoft CEO Satya Nadella, however, was not one of those CEOs in the firing line. Microsoft doesn't heavily rely on ad revenues, rather, the company's momentum is steadily building around Azure, which by my estimates is now roughly 19% of Microsoft's overall revenues. It's surpassed, maybe nearly got to $7 billion for the first time on a quarterly basis. I'll come back to you on that. Hello everyone, and welcome to this week's Wikibon CUBE insights powered by ETR. In this Breaking Analysis, we'll respond to the many requests we've had to dig into the business of Microsoft a little bit deeper and provide a snapshot of how the company is faring in the ETR dataset. Let's take a quick look at Microsoft's financials, and the scope of Microsoft's business is actually mind-boggling. The company has roughly $150 billion in revenue, and it grew its top line 12% last quarter. It has more than $136 billion in cash on the balance sheet. Microsoft generates over $60 billion annually in operating cashflow. And last quarter alone threw off more than 19 billion in operating cash. Its gross margins are expanding across virtually all of its major business lines. So let's look at those business sectors. Microsoft, it doesn't suffer from the nagging problems that we've talked about with a lot of older tech companies. Companies like IBM and Dell and Cisco and Oracle and SAP, they struggle with growth sometimes because their growth businesses are not yet large enough to offset the declines in their traditional on-premises business segments. Now at the highest level, Microsoft breaks its business into three broad categories, and they're all growing quite nicely. Let me add some color here. Let's start with the productivity and business process line of business. LinkedIn, which is growing at 16%, is in this category as is Office. This business is shifting from one of on-prem licenses, which are really headwinds right now from Microsoft, to the cloud, in the form of SaaS with Office 365, which is growing at a 20% clip within its commercial market base. Even the consumer side of O365 is growing in the double digits. Dynamics is Microsoft's ERP and CRM business, and that falls into this slice of the pie, that's growing at 18%. And then the newer Dynamics 365, that's growing at 37%. So you can see, Microsoft is easily able to show growth despite the transitions from its legacy business. Intelligent cloud is the next segment. It's kind of the kitchen sink category, meaning there's stuff in there that includes a bit of cloud washing in my opinion, but Microsoft is not nearly as egregious as IBM with the liberties that it takes around its cloud categorization. For Microsoft it's a $13 billion quarterly business. And it's growing at 19%, as we show in the pie chart. Azure is an increasingly large portion of this segment. Azure is the most direct comparison with AWS. And I have said in the past quarter, I'd say it's around 50% of the intelligent cloud, and that it's approaching by my estimates around $7 billion a quarter. Azure grew at 47% annually this past quarter, the same growth rate as last quarter. Ironically, both AWS and Google Cloud grew at the same year over year rate this quarter as they did last quarter. AWS is 29% GCP in the high 50s by at my estimates. AWS revenue was 11.6 billion this past quarter, and I have GCP still well under 2 billion. We'll be updating our cloud numbers and digging deeper next week into this topic. So consider these estimates preliminary for Azure and GCP, which the respective companies don't break out for as Amazon, as you know, breaks out AWS explicitly. Now, back to Microsoft's intelligent cloud business. It includes on-prem server software, which is a managed decline business from Microsoft. They also include enterprise services in this category. So as you can see, it's not a clean cloud number for comparison purposes. Now finally, the third big slice of the pie is more personal computing. I know, it's kind of a dorky name, but nonetheless it's nearly a $12 billion business that's growing at 6% annually. The Windows OEM business is in here, as is Windows 10 and some security offerings. Surface is also in here as well and it's growing in the mid-thirties. Search revenue is in this category as well. It's declining per my earlier statements that it's not a main piece of Microsoft's business. Now, one of the most interesting areas of this sector is gaming. Microsoft's gaming business is growing at 21% and they just acquired ZeniMax Media for seven and a half billion dollars. Let me land on gaming for a minute. The gaming experts at theCUBE are really excited about Microsoft's XBox content services, which grew at about 30% this past quarter. Game Pass is essentially Microsoft's Netflix, or you can think of it as maybe like a Spotify model. You can get in for as low as $5 a month. I think you can pay as much as $15 a month and get access to a huge catalog of games that you can download. In November of last year, Microsoft launched its xCloud beta service, which allows you to download to a PC or a game box. Now eventually with 5G, the box goes away. All you'll need is a screen and you know, controller with the joysticks, no download. In fact, this is how it works today for Android. Now, interestingly, Apple is blocking Microsoft and some others like Google's Stadia, saying that they don't allow streaming game apps like Microsoft's xCloud service, because they don't follow the company's guidelines. What Apple's not telling you is that its adjacent offering, Apple Arcade, is considered subpar by hardcore gamers. And while Apple allows the streaming of movies and music from any service on the iPhone, it's decided not to allow streaming games. Now, the last thing I want to stress about Microsoft is its leverage point around developers. Developers is a big one here, we all remember the sweaty Steve Ballmer running around the stage like a mad man, screaming, "Developers, developers, developers!" Well, despite his obsession with Windows, he sure got that one right. The GitHub acquisition was Microsoft's way of buying more developer love. It does concentrate power with a tech giant, but you know what, if it wasn't Microsoft that bought GitHub, it would have been Facebook or Amazon or Google or one of the other tech giants. Now, despite some angst in the developer community over this, GitHub, it really is a linchpin for Microsoft to more tightly integrate GitHub with its pretty vast developer tool set. All right. Let's look deeper into the Microsoft data and focus on the enterprise. We'll bring in the ETR as we always do. We said last week that Google needed to look to the cloud and edge and get its head out of its ads. Well, Microsoft recovered from its Windows myopia after Satya Nadella took over in 2014, and by all accounts from the ETR survey data, Microsoft is killing it across the board. Let me start by putting Microsoft in context with some of the most prominent companies that both compete with, and sometimes partner with Microsoft. So this xy graph, it's one of our favorites. I show it all the time and it shows net score on the vertical axis, which is a measure of spending momentum from ETR, and the horizontal axis shows what we call market share, which is a measure of pervasiveness in the survey. Now in the upper right hand table, you can see the data for each of the companies. There's an ETR survey taken in October and it had more than 1400 completes. Several points stand out here. Microsoft is by far the most pervasive in the dataset, and yet its net score or spending velocity is right there with AWS, ServiceNow, Salesforce, and Workday. Only Snowflake, which I put in there for context, because of its consistently strong net scores, shows a meaningfully higher net score, of course from a much smaller base. Now what makes this so impressive is it represents a pan-Microsoft view across its entire portfolio. And you can see where companies like IBM and Oracle struggle from a momentum standpoint compared to Microsoft, which is a much, much larger company. It's that problem that I referred to earlier regarding the smaller size of their respective growth businesses. Also called Cisco and SAP, which despite some earnings challenges lately, are able to maintain net scores that while not in the green, they're not in the red, either. Green essentially means your overall install base is expanding. Red indicates contraction. Now let's look at the spending patterns for Microsoft customers. This chart shows the granularity of ETR's net score for Microsoft. The green represents increased spend and the red decreased spend. What's impressive is that Microsoft's red zone, I mean it's essentially negligible at 6%, when you add two reds up, the pink and the bright red. Their customers, they're all spending more, or the same, and very few are leaving the platform. Now I made the case last week that Google should double or triple its efforts and focus on cloud and the edge. Microsoft has already made that transition in its business and is the, that's the premise really of my discussion today. Specifically, Microsoft Azure is powering the company across all of its products and services. It's giving Microsoft tremendous operating leverage and steadily improving marginal economics. You can see that in the gross margin lines this quarter, across all of its businesses. And here's a graphic showing its position within cloud computing in terms of net score. Microsoft Azure functions, which is the first bar on this chart, and Azure overall, which is the third set of bars, shows momentum that's as strong as any cloud category, including AWS Lambda, which as we've talked about many times is killing it. Now five over from the left, count them over, one, two, three, four, five, you can see AWS overall. So that's a really important reference point. And while its levels are still elevated, Azure overall, which again is number three from the left, has meaningfully more momentum with 65% net score versus 52% for AWS overall. Now reasonable people can debate the quality of these respective clouds and you could argue over feature sets, who's got the most features, who's got the most regions, which regions are most reliable, who's got the most data centers and all that stuff, but it's really hard to argue against Microsoft's "Good enough" strategy. It's working in the cloud, and it has been working for the company for decades. Now another Microsoft strategy has been to be a late comer to a category and then bundle multiple capabilities into one suite. We saw this at first, really in the late 1980s with Office, and it's continued in a number of areas. The latest example, Microsoft Teams. Teams combines features like meetings, phone, chat, collaboration, as well as business process workflows that leverage tools like SharePoint and PowerPoint. I mean, it's a killer strategy, and you can see the results in this chart. I mean, it's essentially competing with Zoom, it's competing with Slack and all the sort of productivity plays there in that space. And this graphic compares net scores from the year ago October survey for reference, the July survey from this year, and the most recent October survey, as I said, 1400 respondents. Look at the lead that Teams has relative to the competition. There's a story across Microsoft's portfolio. Look at Microsoft's products in the ETR taxonomy. Video conferencing with Teams, productivity apps, RPA, cloud, cloud functions, machine learning, artificial intelligence, containers, security, end point, analytics, mobile, even database. The only signs of softness are really seen in the company's legacy businesses like Skype or on-prem licenses business, which I said were a headwind for them. And while PCs and tablets are weaker, that's what you'd expect from this mature industry relative to some of these other categories. Now, again, the premise here today is that by pivoting to the cloud and going all in competing with infrastructure as a service, Microsoft has created a platform for innovation for its business, and its developer chops are really credible, so it's evolving its install base very successfully to Azure. It's got a very solid hybrid and multi-cloud strategy and story with Microsoft Arc, which eventually it can take to the edge. You know, we think its edge strategy needs some work, but nonetheless, the company is really, really well positioned. Microsoft has a huge partner ecosystem, heck, it even partners with Oracle and database, as well as using Azure to enter new markets, including vertical clouds like healthcare, which it talked about on its earnings call. I mean, there's really not much on which you can criticize Microsoft. You know, sure, they've had some high profile failures in the past. The Nokia acquisition, the Windows phone, you remember Zune? Mixer, you know, Bing. Is Bing a fail? I don't know. Maybe not really. I guess the fail is, you know, what I was talking about last week with antitrust, Microsoft was distracted by the DOJ and maybe that caused it to miss search, give it to Google, and in that sense, maybe it was a failure, but overall, pretty good track record from Microsoft. Yeah, maybe you can say Microsoft is somewhat of a copycat, you know, the graphical user interface that they copied from the Mac, but hey, even Steve Jobs stole that. Surface, okay. The cloud? But so what, ideas, they're plentiful, execution is the key, really. No matter how you slice it, the data doesn't lie. Microsoft's financial performance, its pivot to the cloud, and the success of its adjacent businesses, make it one of the most remarkable rebirths in the history of technology industry. Now I didn't use the word turnaround because the company was never really in trouble. It just became irrelevant and kind of boring. Today, Microsoft is far from immaterial. Okay. That's it for this week. Remember all these episodes are available as podcasts wherever you listen. So please subscribe. I publish weekly on Wikibon.com and Siliconangle.com. And don't forget to check out ETR.plus for all the survey data and analytics. I appreciate always the comments on my LinkedIn posts or you can DM me @DVellante, or email me at David.Vellante@SiliconAngle.com. This is Dave Vellante for theCUBE Insights powered by ETR. Thanks for watching everybody, be well, and we'll see you next time. 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>> From the CUBE studios in Palo Alto in Boston, bringing you data-driven insights from the CUBE in ETR. This is breaking analysis with Dave Vellante. >> Earlier these week, the U S department of justice, along with attorneys general from 11 States filed a long expected antitrust lawsuit, accusing Google of being a monopoly gatekeeper for the internet. The suit draws on section two of the Sherman antitrust act, which makes it illegal to monopolize trade or commerce. Of course, Google is going to fight the lawsuit, but in our view, the company has to make bigger moves to diversify its business and the answer we think lies in the cloud and at the edge. Hello everyone. This is Dave Vellante and welcome to this week's Wiki Bond Cube insights powered by ETR. In this Breaking Analysis, we want to do two things. First we're going to review a little bit of history, according to Dave Vollante of the monopolistic power in the computer industry. And then next, we're going to look into the latest ETR data. And we're going to make the case that Google's response to the DOJ suit should be to double or triple its focus on cloud and edge computing, which we think is a multi-trillion dollar opportunity. So let's start by looking at the history of monopolies in technology. We start with IBM. In 1969 the U S government filed an antitrust lawsuit against Big Blue. At the height of its power. IBM generated about 50% of the revenue and two thirds of the profits for the entire computer industry, think about that. IBM has monopoly on a relative basis, far exceeded that of the virtual Wintel monopoly that defined the 1990s. IBM had 90% of the mainframe market and controlled the protocols to a highly vertically integrated mainframe stack, comprising semiconductors, operating systems, tools, and compatible peripherals like terminal storage and printers. Now the government's lawsuit dragged on for 13 years before it was withdrawn in 1982, IBM at one point had 200 lawyers on the case and it really took a toll on IBM and to placate the government during this time and someone after IBM made concessions such as allowing mainframe plug compatible competitors to access its code, limiting the bundling of application software in fear of more government pressure. Now the biggest mistake IBM made when it came out of antitrust was holding on to its mainframe past. And we saw this in the way it tried to recover from the mistake of handing its monopoly over to Microsoft and Intel. The virtual monopoly. What it did was you may not remember this, but it had OS/2 and Windows and it said to Microsoft, we'll keep OS/2 you take Windows. And the mistake IBM was making with sticking to the PC could be vertically integrated, like the main frame. Now let's fast forward to Microsoft. Microsoft monopoly power was earned in the 1980s and carried into the 1990s. And in 1998 the DOJ filed the lawsuit against Microsoft alleging that the company was illegally thwarting competition, which I argued at the time was the case. Now, ironically, this is the same year that Google was started in a garage. And I'll come back to that in a minute. Now, in the early days of the PC, Microsoft they were not a dominant player in desktop software, you had Lotus 1-2-3, WordPerfect. You had this company called Harvard Presentation Graphics. These were discreet products that competed very effectively in the market. Now in 1987, Microsoft paid $14 million for PowerPoint. And then in 1990 launched Office, which bundled Spreadsheets, Word Processing, and presentations into a single suite. And it was priced far more attractively than the some of the alternative point products. Now in 1995, Microsoft launched Internet Explorer, and began bundling its browser into windows for free. Windows had a 90% market share. Netscape was the browser leader and a high flying tech company at the time. And the company's management who pooed Microsoft bundling of IE saying, they really weren't concerned because they were moving up the stack into business software, now they later changed that position after realizing the damage that Microsoft bundling would do to its business, but it was too late. So in similar moves of ineptness, Lotus refuse to support Windows at its launch. And instead it wrote software to support the (indistinct). A mini computer that you probably have never even heard of. Novell was a leader in networking software at the time. Anyone remember NetWare. So they responded to Microsoft's move to bundle network services into its operating systems by going on a disastrous buying spree they acquired WordPerfect, Quattro Pro, which was a Spreadsheet and a Unix OS to try to compete with Microsoft, but Microsoft turned the volume and kill them. Now the difference between Microsoft and IBM is that Microsoft didn't build PC hardware rather it partnered with Intel to create a virtual monopoly and the similarities between IBM and Microsoft, however, were that it fought the DOJ hard, Okay, of course. But it made similar mistakes to IBM by hugging on to its PC software legacy. Until the company finally pivoted to the cloud under the leadership of Satya Nadella, that brings us to Google. Google has a 90% share of the internet search market. There's that magic number again. Now IBM couldn't argue that consumers weren't hurt by its tactics. Cause they were IBM was gouging mainframe customers because it could on pricing. Microsoft on the other hand could argue that consumers were actually benefiting from lower prices. Google attorneys are doing what often happens in these cases. First they're arguing that the government's case is deeply flawed. Second, they're saying the government's actions will cause higher prices because they'll have to raise prices on mobile software and hardware, Hmm. Sounds like a little bit of a threat. And of course, it's making the case that many of its services are free. Now what's different from Microsoft is Microsoft was bundling IE, that was a product which was largely considered to be crap, when it first came out, it was inferior. But because of the convenience, most users didn't bother switching. Google on the other hand has a far superior search engine and earned its rightful place at the top by having a far better product than Yahoo or Excite or Infoseek or even Alta Vista, they all wanted to build portals versus having a clean user experience with some non-intrusive of ads on the side. Hmm boy, is that part changed, regardless? What's similar in this case with, as in the case with Microsoft is the DOJ is arguing that Google and Apple are teaming up with each other to dominate the market and create a monopoly. Estimates are that Google pays Apple between eight and $11 billion annually to have its search engine embedded like a tick into Safari and Siri. That's about one third of Google's profits go into Apple. And it's obviously worth it because according to the government's lawsuit, Apple originated search accounts for 50% of Google search volume, that's incredible. Now, does the government have a case here? I don't know. I'm not qualified to give a firm opinion on this and I haven't done enough research yet, but I will say this, even in the case of IBM where the DOJ eventually dropped the lawsuit, if the U S government wants to get you, they usually take more than a pound of flesh, but the DOJ did not suggest any remedies. And the Sherman act is open to wide interpretation so we'll see. What I am suggesting is that Google should not hang too tightly on to it's search and advertising past. Yes, Google gives us amazing free services, but it has every incentive to appropriate our data. And there are innovators out there right now, trying to develop answers to that problem, where the use of blockchain and other technologies can give power back to us users. So if I'm arguing that Google shouldn't like the other great tech monopolies, hang its hat too tightly on the past, what should Google do? Well, the answer is obvious, isn't it? It's cloud and edge computing. Now let me first say that Google understandably promotes G Suite quite heavily as part of its cloud computing story, I get that. But it's time to move on and aggressively push into the areas that matters in cloud core infrastructure, database, machine intelligence containers and of course the edge. Not to say that Google isn't doing this, but there are areas of greatest growth potential that they should focus on. And the ETR data shows it. But let me start with one of our favorite graphics, which shows the breakdown of survey respondents used to derive net score. Net score remembers ETR's quarterly measurement of spending velocity. And here we show the breakdown for Google cloud. The lime green is new adoptions. The forest green is the percentage of customers increasing spending more than 5%. The gray is flat and the pinkish is decreased by 6% or more. And the bright red is we're replacing or swapping out the platform. You subtract the reds from the greens and you get a net score at 43%, which is not off the charts, but it's pretty good. And compares quite favorably to most companies, but not so favorite with AWS, which is at 51% and Microsoft which is at 49%, both AWS and Microsoft red scores are in the single digits. Whereas Google's is at 10%, look all three are down since January, thanks to COVID, but AWS and Microsoft are much larger than Google. And we'd like to see stronger across the board scores from Google. But there's good news in the numbers for Google. Take a look at this chart. It's a breakdown of Google's net scores over three survey snapshots. Now we skip January in this view and we do that to provide a year of a year context for October. But look at the all important database category. We've been watching this very closely, particularly with the snowflake momentum because big query generally is considered the other true cloud native database. And we have a lot of respect for what Google is doing in this area. Look at the areas of strength highlighted in the green. You've got machine intelligence where Google is a leader AI you've got containers. Kubernetes was an open source gift to the industry, and linchpin of Google's cloud and multi-cloud strategy. Google cloud is strong overall. We were surprised to see some deceleration in Google cloud functions at 51% net scores to be on honest with you, because if you look at AWS Lambda and Microsoft Azure functions, they're showing net scores in the mid to high 60s. But we're still elevated for Google. Now. I'm not that worried about steep declines, and Apogee and Looker because after an acquisitions things kind of get spread out around the ETR taxonomy so don't be too concerned about that. But as I said earlier, G Suite may just not that compelling relative to the opportunity in other areas. Now I won't show the data, but Google cloud is showing good momentum across almost all interest industries and sectors with the exception of consulting and small business, which is understandable, but notable deceleration in healthcare, which is a bit of a concern. Now I want to share some customer anecdotes about Google. These comments come from an ETR Venn round table. The first comment comes from an architect who says that "it's an advantage that Google is "not entrenched in the enterprise." Hmm. I'm not sure I agree with that, but anyway, I do take stock in what this person is saying about Microsoft trying to lure people away from AWS. And this person is right that Google essentially is exposed its internal cloud to the world and has ways to go, which is why I don't agree with the first statement. I think Google still has to figure out the enterprise. Now the second comment here underscores a point that we made earlier about big query customers really like the out of the box machine learning capabilities, it's quite compelling. Okay. Let's look at some of the data that we shared previously, we'll update this chart once the company's all report earnings, but here's our most recent take on the big three cloud vendors market performance. The key point here is that our data and the ETR data reflects Google's commentary in its earning statements. And the GCP is growing much faster than its overall cloud business, which includes things that are not apples to apples with AWS the same thing is true with Azure. Remember AWS is the only company that provides clear data on its cloud business. Whereas the others will make comments, but not share the data explicitly. So these are estimates based on those comments. And we also use, as I say, the ETR survey data and our own intelligence. Now, as one of the practitioners said, Google has a long ways to go as buddy an eighth of the size of AWS and about a fifth of the size of Azure. And although it's growing faster at this size, we feel that its growth should be even higher, but COVID is clear a factor here so we have to take that into consideration. Now I want to close by coming back to antitrust. Google spends a lot on R&D, these are quick estimates but let me give you some context. Google shells out about $26 billion annually on research and development. That's about 16% of revenue. Apple spends less about 16 billion, which is about 6% of revenue, Amazon 23 billion about 8% of the top line, Microsoft 19 billion or 13% of revenue and Facebook 14 billion or 20% of revenue, wow. So Google for sure spends on innovation. And I'm not even including CapEx in any of these numbers and the hype guys as you know, spend tons on CapEx building data centers. So I'm not saying Google cheaping out, they're not. And I got plenty of cash in there balance sheet. They got to run 120 billion. So I can't criticize they're roughly $9 billion in stock buybacks the way I often point fingers at what I consider IBM's overly wall street friendly use of cash, but I will say this and it was Jeff Hammerbacher, who I spoke with on the Cube in the early part of last decade at a dupe world, who said "the best minds of my generation are spending there time, "trying to figure out how to get people to click on ads." And frankly, that's where much of Google's R&D budget goes. And again, I'm not saying Google doesn't spend on cloud computing. It does, but I'm going to make a prediction. The post cookie apocalypse is coming soon, it may be here. iOS 14 makes you opt in to find out everything about you. This is why it's such a threat to Google. The days when Google was able to be the keeper of all of our data and to house it and to do whatever it likes with that data that ended with GDPR. And that was just the beginning of the end. This decade is going to see massive changes in public policy that will directly affect Google and other consumer facing technology companies. So my premise is that Google needs to step up its game and enterprise cloud and the edge much more than it's doing today. And I like what Thomas Kurian is doing, but Google's undervalued relative to some of the other big tech names. And I think it should tell wall street that our future is in enterprise cloud and edge computing. And we're going to take a hit to our profitability and go big in those areas. And I would suggest a few things, first ramp up R&D spending and acquisitions even more. Go on a mission to create cloud native fabric across all on-prem and the edge multicloud. Yes, I know this is your strategy, but step it up even more forget satisfying investors. You're getting dinged in the market anyway. So now's the time the moon wall street and attack the opportunity unless you don't see it, but it's staring you right in the face. Second, get way more cozy with the enterprise players that are scared to death of the cloud generally. And they're afraid of AWS in particular, spend the cash and go way, way deeper with the big tech players who have built the past IBM, Dell, HPE, Cisco, Oracle, SAP, and all the others. Those companies that have the go to market shops to help you win the day in enterprise cloud. Now, I know you partner with these companies already, but partner deeper identify game-changing innovations that you can co-create with these companies and fund it with your cash hoard. I'm essentially saying, do what you do with Apple. And instead of sucking up all our data and getting us to click on ads, solve really deep problems in the enterprise and the edge. It's all about actually building an on-prem to cloud across cloud, to the edge fabric and really making that a unified experience. And there's a data angle too, which I'll talk about now, the data collection methods that you've used on consumers, it's incredibly powerful if applied responsibly and correctly for IOT and edge computing. And I don't mean to trivialize the complexity at the edge. There really isn't one edge it's Telcos and factories and banks and cars. And I know you're in all these places Google because of Android, but there's a new wave of data coming from machines and cars. And it's going to dwarf people's clicks and believe me, Tesla wants to own its own data and Google needs to put forth a strategy that's a win-win. And so far you haven't done that because your head is an advertising. Get your heads out of your ads and cut partners in on the deal. Next, double down on your open source commitment. Kubernetes showed the power that you have in the industry. Ecosystems are going to be the linchpin of innovation over the next decade and transcend products and platforms use your money, your technology, and your position in the marketplace to create the next generation of technology leveraging the power of the ecosystem. Now I know Google is going to say, we agree, this is exactly what we're doing, but I'm skeptical. Now I think you see either the cloud is a tiny little piece of your business. You have to do with Satya Nadella did and completely pivot to the new opportunity, make cloud and the edge your mission bite the bullet with wall street and go dominate a multi-trillion dollar industry. Okay, well there you have it. Remember, all these episodes are available as podcasts, so please subscribe wherever you listen. I publish weekly on Wikibond.com and Siliconangle.com and I post on LinkedIn each week as well. So please comment or DM me @DVollante, or you can email me @David.Vollante @Siliconangle.com. And don't forget to check out etr.plus that's where all the survey action is. This is Dave Vollante for the Cube Insights powered by ETR. Thanks for watching everybody be well. And we'll see you next. (upbeat instrumental)

>> Narrator: From around the globe, it's theCUBE! Covering HPE Discover Virtual Experience. Brought to you by HPE. >> Welcome back, I'm Stu Miniman, and this is theCUBE's coverage of HPE Discover 2020 the Virtual Experience, really happy to welcome to the program, we have a returning guest. Tarkan Maner is the Chief Commercial Officer at Nutanix, in a new role since the last time we had him on the program, and joining him, we have Herman Brown, who's the CIO for the City of San Francisco's District Attorney. Gentlemen, thank you so much for joining us. >> Thank you for having me. >> So, Tarkan, help set the stage for us. As I mentioned, we know you, our network knows you, but, new to Nutanix in the last year, and talk to us a little bit about this HPE Nutanix partnership. >> Yeah, if you noticed, first of all, thank you for hosting us, great to be here. This is probably, who knows, my fiftieth CUBE I guess, over the past two decades, especially the last twenty years have been crazy for us, obviously in the industry, lots of movement, lots of change. So let me go into the context, that led to Nutanix joining the company, about six months ago in the capacity of Chief Commercial Officer, a hybrid role with some product aspects, business development global market, our cloud infrastructure digitalizes and some of the Corp Dev we're working on. In that context, obviously, HPE is a very, very important strategic partner to us. As you know, the companies, the two companies have been working together for a long time, but especially the last, I would say, six to twelve months, we have this phenomenal relationship around what I call "three focused areas" of our business. Around our digital infrastructure, upward converge infrastructure, a business on top of that, our solutions from data center to DevOps and to this stuff, services, it's three specific segments, we built this really interesting really strong relationship with HPE with some of our philosophies and HPE's platform, now obviously, working through a multicloud channel, who are our own Nutanix cloud, our own hosted cloud, in addition to it, our Telco and SSP partners using their cloud infrastructure as well as some of the hyperscaling work we're doing, with Azure, AWS in addition to our direct SalesForce and private cloud approach, HPE and Nutanix are working hand in hand in this multicloud so to speak operating model. So it's a new relationship in some ways, from a multicloud perspective, but if it has to grow in segments, we had a phenomenal quarter in the last three months, we just released our results, and HPE is growing for us. And we're given definitely a great suite of solutions to our customers with the typical usual, simple to deploy, simple to use mechanics customer delight on the HPE platform. So I'm sure we've got a whole lot more, but glad to be here also with Herman Brown, from the DA's office in San Francisco, my favorite city in the world, so glad to be here. Thank you, Stu, again, for hosting us. >> Great, thanks so much, Tarkan. You know, Herman, we're going to get into a lot of the technology pieces, you with your CIO hat on, you know, want to understand how cloud, how modern infrastructure, your applications are changing, but, give us a little bit about your personal background and really the purview that you cover in the city of San Francisco District Attorney's office. >> Yes, well, you know, I've been with the DA's office for just over 3 years, it'll be 4 years I guess in August of this year, and I come from twenty plus years of private sector experience, some government experience. And, you know, the city and county, the government is really no different than any other organization other than we're known to be a little bit slower to adopt the technologies, which is why I'm here. I want to help government become more efficient, more productive through the use of technology, and so I'm excited to be here and thank you, first and foremost, for having me on the show. I appreciate it. >> I love that you brought that up, because we've been doing theCUBE for just over a decade now, and in the early parts of that, it's like, right, okay, I'm talking to a local government, we understand, your budgets are tight, you're using older technology, you've got duct tape and baling wire to keep things going. The last few years, some of my favorite conversations have been in the public sector, because you talk about some of the tools that are out there, and don't need a huge capital investment to get started, I can modernize, so Herman, digital transformation, is that a term that you've brought from the private sector over to the public sector, or what kind of transformations are you going through and what is it that's I guess driving the need for transformation in your world? >> So yeah, I've been with the city and county of San Francisco for nine years, so I'd love to say that I brought digital transformation or at least the term with me, but I was actually here in the DA's office or in the city and county's employment when that terminology came out. Being the CIO for the San Francisco District Attorney's office, I mean, we're essentially a law firm. And law firms are historically just paper intensive organizations, right, you have court filings and rap sheets, all these physical documents that have to be physically ink signed and transferred from one attorney to another to the courts, and between police departments and sheriffs and so forth and so on. And we just looked at, what are we doing, how can we work more efficient, you know? As a lot of organizations, we're always finding ourselves to be understaffed for the amount of work that we have going on, the city and county of San Francisco, the DA's office, we see roughly 26,000 cases a year, we try about half of those cases per year. And we're a staff of 320 people. That includes everyone, the attorneys, the paralegals, finance folks, IT, investigators. And so it was like, we need to really embrace technology and be able to help transform this paper intensive processes into automated, digital forms and documents that can minimize the physical transferring of data, especially now, during Covid-19. >> Yeah, Herman, that transformation process is often multi-step, there's a lot of people, there's technology, and then there's the applications. It was at a Nutanix show that the comment I made is, well, let's modernize the platform, then you can modernize the applications on top of it. Tarkan, maybe, I'd love to hear just a little commentary from you, you've got a great perspective on this. That modernization effort, where your customers are, some of the levers that Nutanix is helping them along that journey. >> Yeah, so everything Herman said is very interesting, and obviously, a delight to my ears, because as a technologist in the industry for the past three decades, we're dealing with this, what I call, transformational waves, and you know, in the last ten years, the cloud transformation from the server to transition transformation now, increasingly, we're seeing this very fast migrations from the old school legacy data centers with legacy infrastructure and apps, basically are lifting and shifting these applications to a new cloud, so to speak, opened the model. The cloud to us, in a sense, it's not a destination, it's an open model, so if we see the customer's needs at the end of the day, just like Herman outlined, Herman is not trying to do cloud or digitization for the digital cloud's sake, he's trying to lead his team and the DA's office, with the most DAs by the way, in the nation, making sure that they can process data faster. They can achieve their goals, working especially in this post-pandemic world, and the entire change that are happening in our country, in a big way over the past few weeks, the events, and how our country is going to change for the future. So there's going to be a lot of work going to be happening in the government, this transformation or digitization, migration to the cloud, is going to be a big deal, so as a company, it very quickly we've seen this as a huge opportunity for our customers, as we're partnering with them in a multi cloud way. We still believe our server partners are super important in this context with HPE, but the cloud services around HPE Greenlake, the things we are doing with them, at the same time, working with HPE and some of our partners delivering our own Nutanix cloud services as well as some of the things we have been doing with some of Telco's and service providers, to give choice to our customers to consume the services we provide on-prem, through our old cloud services through a third party telephone service provider, or the choice of hyper scale into the U.S. As your Google, unlimited oracle. So in this context this partnership is hugely important, so there's a lot going on with HPE with Antonio, with our CEO, with Tarak, our CFO, with Tom Black, it's Sonali. The entire executive team are working very closely with them, and with Hyko in the fuel organization, our fuel organization, and we really cherish customers like the DA's office who are doing the transformation, who are leading the transformation, during this pandemic and during this massive change in our country and hopefully it's going to make a transformative change to our world in terms of obviously not only technology, but social change, so you see this as a transformative time frame for companies like us and HPE and partners like Herman and DA's office. >> Herman, please! >> Yeah, I was just going to say, and absolutely I agree with Tarkan, and the way that we're able to react so quickly to this pandemic is the fact that we've already have started this digital transformation, that we've already been looking at these cloud services, we've already started down this path, and so it's made the transition with this surging overnight change of the office nine to five, five days a week to you know, everyone is remote every day now, we couldn't do that without having these cloud services such as Nutanix and HPE partnership, to make that possible. >> Yeah, is there something specific you talk, the work from home initiative, did you have to scale something out, did you have to, you know, bring us inside that change that helped enable your workforce that you wouldn't have been able to do without this technology. >> Yeah, we absolutely had to scale out the workforce. I would say that before the beginning of this pandemic, we had roughly 15 people that probably had VPN access from outside the office, now you have to also understand that the DA's office is very unique in the form of the types of data that we handle and deal with, so I have HIPPA data, I have CJIS, which is criminal justice information, that's managed by DOJ, so there are certain systems that we normally would not be able to access from outside the office that we had to be able to access now remotely. And so it's taken some time to get us there to that point, but you know, having this environment that allowed us to scale up easily, start looking at digitizing this process and being able to have the storage and compute and processing power to be able to support that initiative is really what we're talking about, and that's what we've been doing. We've been quickly scaling, adding in additional storage but popping in drives and making this all possible in a very quickly and seamlessly process. >> Excellent. Maybe we've talked a little bit about the results and how you can move faster, you know, digital information all about leveraging your data and be able to react more quickly, so you know, the pandemic definitely has put services to the test and it sounds like they're doing well. Maybe step us back a little bit as to what led you to HPE and Nutanix, how you made that decision. >> Well, you know, we went through a trial, a period, proof of concept, we looked at Dell, we looked at HPE and Nutanix, we looked at a few different solutions, and it really boiled down to cost, and what we were getting, bang for the dollar. I think there are some other great solutions out there or good solutions out there but none of them came to the value that the partnership with HPE and Nutanix actually have to offer to us. You know, one of the things is that with this partnership is when there's a support issue, I call Nutanix, I'm not calling HPE, I'm not calling this, the other third party vendor, I'm not getting the runaround of "oh, that's not our problem, that's someone else's problem, you need to call the software team, you need to call the hardware team," no. It's one person that you know, we call, as I like to say, "one throat to choke." And fortunately, we haven't had to go that route, Nutanix has been an excellent partner for ours and they have been great to work with, and on the ball, and that's what I always talk about, success is not just the success of the organization, but the success of the individuals and the success of the partnership between organizations. And that's what I looked for is a business partner that wants to help me at my role at my organization be successful. >> Great. Herman, we talked about modernizing the environment, bring us inside the applications, if you would, what applications you're using, you know, are there new initiatives that you're doing from an application standpoint? >> Yeah, so we're running the same standard applications that most organizations are running, with DHCPISS, you know, I have some other systems that we run just because of the CIO, CICA hat that I also wear within the organization, I'm very security conscious about talking about those applications. But we run pretty much the same basic applications as most organizations do. Those specialized applications that we also operate on, we do see an improvement in performance, we do see the speediness of the access, the more stability and reliability of the solutions, and so we're very pleased with the performance that we're getting. >> Excellent. You also, you talked about the efficiency of what you're doing. I mentioned earlier that, public sector, you can get started, you know, for smaller chunks using things like Nutanix, but budget, obviously, still a concern, I'm sure, anything you're doing with the verbalization in the infrastructure that is helping you keep budget under control? >> Absolutely, I mean, the Nutanix environment is scalable, it allows us to be able to look at other solutions such as CDI, which we're talking about and looking at, potentially doing for staff members that don't have laptops that may need laptops or need remote access into the system. We also have that ability to scale up with just another leg, more storage, it makes it very easy to go with where you're looking at cost-saving measures, currently running BMWare on the back end, but looking to convert that over AHV, yes, in the future, that can also help us reduce those costs in the future as well. Especially at this point in time, where city and county is looking for department budget savings. >> Excellent. Tarkan, I guess this would be a good point for you to chime in on, you know, generally, AHV and any other commentary you've got regarding-- >> I was just trying to hold my words back, because the things that Herman is doing are so exciting in a way, you know, techies like myself still get really excited. Like Herman talked about we're not doing infrastructure for infrastructure's sake. At the end of the day, Herman and his office like many government offices both in the fed as in state or local, have to do more with less. Obviously in this post-pandemic world, you get even more efficient, more innovative, and get most output from our input. In that context, bringing storage, compute, networking, all integrated in a converged way, it's smart, it's not just adding them up, one plus one plus one equals three, but one plus one plus one equals less than one, in terms of cost, making it make sure it's infrastructures are simplified, easy to deploy, easy to use, that's why we keep an NPS score of 90, by the way, part of the reason, a little bit of shameless plug there for you. I don't know many companies who have an NPS 90 because we make infrastructure simple. So if you settle this, to Herman's point, all those applications he's managing and building and then obviously digitizing, and in some way, lifting a shifting and creating a new cloud digitized model, he want to make sure Herman and companies and organizations like the DA's office under leadership, with innovative CIOs like Herman, making sure they have choice. They can choose the prem model they want, on-prem, off-prem, hybrid, or multicloud, or in a government cloud fashion, and deliver these services. To give you an example, we talked about home as the extended enterprise. Our home office is now part of the office. I have to secure my home the way I secure my Nutanix headquarters because I'm now running my business from home. So in the past, there was a delineation between home and office. Now home is part of the extended office. The way I manage my trash, the way I manage my peer flows, applications, the network, latency, everything has to be dealt with in a very smart way. But even our paper trash in our office, we manage it carefully because of the IP, you know, people steal IP. Guess what, now at home, I have to have the same vigor. Guess what, you know, DA's office, the things that Herman is dealing with, they have to be so careful, not only in the office, but at home. So in that sense, that's the better service, your two desktops, all these new technologies I'm going to deal with in this simple way. Our new solution, all requires a browser, that's it, and no deliver a browser-based application, integration, to home, in a secure way, the things that we've been praying for for a long, long time. So this post-pandemic world is going to make us more agile, is going to make us more efficient, and hopefully we're going to do much more with less. >> Excellent, well, Herman, I have one more question for you, if you can, give us a little bit of a look forward. We always love to hear from a CIO just, number one, what's on your plate, and as you look at this solution, what you'll be using it for and going, and secondly, if you've got anything, if you could have something more that the ecosystem, maybe HPE and Nutanix, or maybe just in general from the ecosystem out there, that would make your life and your staff's easier. >> Well, you know, that's a great question. We have over 30 projects on our project list right now that are active projects that's going on. I have a staff of 9 IT professionals with three open positions, so I should say, 9, I have six, actual staff members with three open positions, currently, and we're on a hiring freeze. So one of the great things about the Nutanix HP solution has been that I've been able to downsize from the two systems engineer to the one system engineer without necessarily losing any bandwidth or knowledge or experience because the environment is so easy to manage, which has been great. We will continue to move forward with the digitization of our records and utilizing the cloud services that are available, through the various channels, and it's just an unprecedented time. I see that this is going to be the new norm. >> Excellent, so Tarkan, we'll let you put the exclamation point on it, give us the final takeaway for HPE and Nutanix. >> So, look, at the end of the day, we are in this new software defined growth and multicloud fashion having a partnership within two companies which covers data center services, DevOps services, as well as end user services, end to end, both in private clouds, also in a multicloud fashion, through telco as well as hyperscalers and Azure, deliver the service, with the open end model the customer chooses. Again, end to end, from data center, to DevOps, to end user, is the perfect marriage that HPE and Nutanix's relationship delivers. So we are really looking forward to working with customers like Herman, to deliver on that dream, on that journey, making sure that cloud migration and cloud consolidation happens efficiently end to end. Again, from the data center, to DevOps, to end user, all the way in a fashion that we do more with less in this post-pandemic world, and we're looking forward to that partnership as we move forward, and thank you Stu and thank you, Herman, for the time today. >> Excellent, well, Tarkan Maner, always a pleasure to catch up with you, really great to get all the update from you and really appreciate HPE and Nutanix bringing us Herman Brown, CIO, Herman, thank you so much for joining us, really appreciate you sharing your story, hopefully, you'll be able to open up and hire those three people that you're looking to hire in your future. Thank you both so much for joining us. >> Thank you, thank you very much for having me, Tarkan, it's always a pleasure, thanks Nutanix and HPE for just making a solid, great solution that can help in the success of the DA's office. Really do appreciate it. >> Thank you so much, Herman, again, I really appreciate it. >> We'll be back with more coverage from HPE Discover 2020, the Virtual Experience. I'm Stu Miniman, thank you, as always, for watching theCUBE. (gentle music)

>> Narrator: From around the globe, it's theCUBE! Covering HPE Discover Virtual Experience. Brought to you by HPE. >> Welcome back, I'm Stu Miniman, and this is theCUBE's coverage of HPE Discover 2020 the Virtual Experience, really happy to welcome to the program, we have a returning guest. Tarkan Maner is the Chief Commercial Officer at Nutanix, in a new role since the last time we had him on the program, and joining him, we have Herman Brown, who's the CIO for the City of San Francisco's District Attorney. Gentlemen, thank you so much for joining us. >> Thank you for having me. >> So, Tarkan, help set the stage for us. As I mentioned, we know you, our network knows you, but, new to Nutanix in the last year, and talk to us a little bit about this HPE Nutanix partnership. >> Yeah, if you noticed, first of all, thank you for hosting us, great to be here. This is probably, who knows, my fiftieth CUBE I guess, over the past two decades, especially the last twenty years have been crazy for us, obviously in the industry, lots of movement, lots of change. So let me go into the context, that led to Nutanix joining the company, about six months ago in the capacity of Chief Commercial Officer, a hybrid role with some product aspects, business development global market, our cloud infrastructure digitalizes and some of the Corp Dev we're working on. In that context, obviously, HPE is a very, very important strategic partner to us. As you know, the companies, the two companies have been working together for a long time, but especially the last, I would say, six to twelve months, we have this phenomenal relationship around what I call "three focused areas" of our business. Around our digital infrastructure, upward converge infrastructure, a business on top of that, our solutions from data center to DevOps and to this stuff, services, it's three specific segments, we built this really interesting really strong relationship with HPE with some of our philosophies and HPE's platform, now obviously, working through a multicloud channel, who are our own Nutanix cloud, our own hosted cloud, in addition to it, our Telco and SSP partners using their cloud infrastructure as well as some of the hyperscaling work we're doing, with Azure, in addition to our direct sales floors and private cloud approach, HPE and Nutanix are working hand in hand in this multicloud so to speak operative model. So it's a new relationship in some ways, from a multicloud perspective, but if it has to grow in segments, we had a phenomenal quarter in the last three months, we just released our results, and HPE is growing with us. And we're given definitely a great suite of solutions to our customers with the typical usual, simple to deploy, simple to use mechanics customers like on the HPE platform. So I'm sure we've got a whole lot more, but glad to be here also with Herman Brown, from the DA's office in San Francisco, my favorite city in the world, so glad to be here. Thank you, Stu, again, for hosting us. >> Great, thanks so much, Tarkan. You know, Herman, we're going to get into a lot of the technology pieces, you with your CIO hat on, you know, want to understand how cloud, how modern infrastructure, your applications are changing, but, give us a little bit about your personal background and really the purview that you cover in the city of San Francisco District Attorney's office. >> Yes, well, you know, I've been with the DA's office for just over 3 years, it'll be 4 years I guess in August of this year, and I come from twenty plus years of private sector experience, some government experience. And, you know, the city and county, the government is really no different than any other organization other than we're known to be a little bit slower to adopt the technologies, which is why I'm here. I want to help government become more efficient, more productive through the use of technology, and so I'm excited to be here and thank you, first and foremost, for having me on the show. I appreciate it. >> I love that you brought that up, because we've been doing theCUBE for just over a decade now, and in the early parts of that, it's like, right, okay, I'm talking to a local government, we understand, your budgets are tight, you're using older technology, you've got duct tape and baling wire to keep things going. The last few years, some of my favorite conversations have been in the public sector, because you talk about some of the tools that are out there, and don't need a huge capital investment to get started, I can modernize, so Herman, digital transformation, is that a term that you've brought from the private sector over to the public sector, or what kind of transformations are you going through and what is it that's I guess driving the need for transformation in your world? >> So yeah, I've been with the city and county of San Francisco for nine years, so I'd love to say that I brought digital transformation or at least the term with me, but I was actually here in the DA's office or in the city and county's employment when that terminology came out. Being the CIO for the San Francisco District Attorney's office, I mean, we're essentially a law firm. And law firms are historically just paper intensive organizations, right, you have court filings and rap sheets, all these physical documents that have to be physically ink signed and transferred from one attorney to another to the courts, and between police departments and sheriffs and so forth and so on. And we just looked at, what are we doing, how can we work more efficient, you know? As a lot of organizations, we're always finding ourselves to be understaffed for the amount of work that we have going on, the city and county of San Francisco, the DA's office, we see roughly 26,000 cases a year, we try about half of those cases per year. And we're a staff of 320 people. That includes everyone, the attorneys, the paralegals, finance folks, IT, investigators. And so it was like, we need to really embrace technology and be able to help transform this paper intensive processes into automated, digital forms and documents that can minimize the physical transferring of data, especially now, during Covid-19. >> Yeah, Herman, that transformation process is often multi-step, there's a lot of people, there's technology, and then there's the applications. It was at a Nutanix show that the comment I made is, well, let's modernize the platform, then you can modernize the applications on top of it. Tarkan, maybe, I'd love to hear just a little commentary from you, you've got a great perspective on this. That modernization effort, where your customers are, some of the levers that Nutanix is helping them along that journey. >> Yeah, so everything Herman said is very interesting, and obviously, a delight to my ears, because as a technologist in the industry for the past three decades, we're dealing with this, what I call, transformational waves, and you know, in the last ten years, the cloud transformation from the server to transition transformation now, increasingly, we're seeing this very fast migrations from the old school legacy data centers with legacy infrastructure and apps, basically are lifting and shifting these applications to a new cloud, so to speak, opened the model. The cloud to us, in a sense, it's not a destination, it's an open model, so if we see the customer's needs at the end of the day, just like Herman outlined, Herman is not trying to do cloud or digitization for the digital cloud's sake, he's trying to lead his team and the DA's office, with the most DAs by the way, in the nation, making sure that they can process data faster. They can achieve their goals, working especially in this post-pandemic world, and the entire change that are happening in our country, in a big way over the past few weeks, the events, and how our country is going to change for the future. So there's going to be a lot of work going to be happening in the government, this transformation or digitization, migration to the cloud, is going to be a big deal, so as a company, it very quickly we've seen this as a huge opportunity for our customers, as we're partnering with them in a multi cloud way. We still believe our server partners are super important in this context with HPE, but the cloud services around HPE Greenlake, the things we are doing with them, at the same time, working with HPE and some of our partners delivering our own Nutanix cloud services as well as some of the things we have been doing with some of Telco's and service providers, to give choice to our customers to consume the services we provide on-prem, through our old cloud services through a third party telephone service provider, or the choice of hyper scale into the U.S. As your Google, unlimited oracle. So in this context this partnership is hugely important, so there's a lot going on with HPE with Antonio, with our CEO, with Tarak, our CFO, with Tom Black, it's Sonali. The entire executive team are working very closely with them, and with Hyko in the fuel organization, our fuel organization, and we really cherish customers like the DA's office who are doing the transformation, who are leading the transformation, during this pandemic and during this massive change in our country and hopefully it's going to make a transformative change to our world in terms of obviously not only technology, but social change, so you see this as a transformative time frame for companies like us and HPE and partners like Herman and DA's office. >> Herman, please! >> Yeah, I was just going to say, and absolutely I agree with Tarak, and the way that we're able to react so quickly to this pandemic is the fact that we've already have started this digital transformation, that we've already been looking at these cloud services, we've already started down this path, and so it's made the transition with this surging overnight change of the office nine to five, five days a week to you know, everyone is remote every day now, we couldn't do that without having these cloud services such as Nutanix and HPE partnership, to make that possible. >> Yeah, is there something specific you talk, the work from home initiative, did you have to scale something out, did you have to, you know, bring us inside that change that helped enable your workforce that you wouldn't have been able to do without this technology. >> Yeah, we absolutely had to scale out the workforce. I would say that before the beginning of this pandemic, we had roughly 15 people that probably had VPN access from outside the office, now you have to also understand that the DA's office is very unique in the form of the types of data that we handle and deal with, so I have HIPPA data, I have CJIS, which is criminal justice information, that's managed by DOJ, so there are certain systems that we normally would not be able to access from outside the office that we had to be able to access now remotely. And so it's taken some time to get us there to that point, but you know, having this environment that allowed us to scale up easily, start looking at digitizing this process and being able to have the storage and compute and processing power to be able to support that initiative is really what we're talking about, and that's what we've been doing. We've been quickly scaling, adding in additional storage but popping in drives and making this all possible in a very quickly and seamlessly process. >> Excellent. Maybe we've talked a little bit about the results and how you can move faster, you know, digital information all about leveraging your data and be able to react more quickly, so you know, the pandemic definitely has put services to the test and it sounds like they're doing well. Maybe step us back a little bit as to what led you to HPE and Nutanix, how you made that decision. >> Well, you know, we went through a trial, a period, proof of concept, we looked at Dell, we looked at HPE and Nutanix, we looked at a few different solutions, and it really boiled down to cost, and what we were getting, bang for the dollar. I think there are some other great solutions out there or good solutions out there but none of them came to the value that the partnership with HPE and Nutanix actually have to offer to us. You know, one of the things is that with this partnership is when there's a support issue, I call Nutanix, I'm not calling HPE, I'm not calling this, the other third party vendor, I'm not getting the runaround of "oh, that's not our problem, that's someone else's problem, you need to call the software team, you need to call the hardware team," no. It's one person that you know, we call, as I like to say, "one throat to choke." And fortunately, we haven't had to go that route, Nutanix has been an excellent partner for ours and they have been great to work with, and on the ball, and that's what I always talk about, success is not just the success of the organization, but the success of the individuals and the success of the partnership between organizations. And that's what I looked for is a business partner that wants to help me at my role at my organization be successful. >> Great. Herman, we talked about modernizing the environment, bring us inside the applications, if you would, what applications you're using, you know, are there new initiatives that you're doing from an application standpoint? >> Yeah, so we're running the same standard applications that most organizations are running, with DHCPISS, you know, I have some other systems that we run just because of the CIO, CICA hat that I also wear within the organization, I'm very security conscious about talking about those applications. But we run pretty much the same basic applications as most organizations do. Those specialized applications that we also operate on, we do see an improvement in performance, we do see the speediness of the access, the more stability and reliability of the solutions, and so we're very pleased with the performance that we're getting. >> Excellent. You also, you talked about the efficiency of what you're doing. I mentioned earlier that, public sector, you can get started, you know, for smaller chunks using things like Nutanix, but budget, obviously, still a concern, I'm sure, anything you're doing with the verbalization in the infrastructure that is helping you keep budget under control? >> Absolutely, I mean, the Nutanix environment is scalable, it allows us to be able to look at other solutions such as CDI, which we're talking about and looking at, potentially doing for staff members that don't have laptops that may need laptops or need remote access into the system. We also have that ability to scale up with just another leg, more storage, it makes it very easy to go with where you're looking at cost-saving measures, currently running BMWare on the back end, but looking to convert that over AHV, yes, in the future, that can also help us reduce those costs in the future as well. Especially at this point in time, where city and county is looking for department budget savings. >> Excellent. Tarkan, I guess this would be a good point for you to chime in on, you know, generally, AHV and any other commentary you've got regarding-- >> I was just trying to hold my words back, because the things that Herman is doing are so exciting in a way, you know, techies like myself still get really excited. Like Herman talked about we're not doing infrastructure for infrastructure's sake. At the end of the day, Herman and his office like many government offices both in the fed as in state or local, have to do more with less. Obviously in this post-pandemic world, you get even more efficient, more innovative, and get most output from our input. In that context, bringing storage, compute, networking, all integrated in a converged way, it's smart, it's not just adding them up, one plus one plus one equals three, but one plus one plus one equals less than one, in terms of cost, making it make sure it's infrastructures are simplified, easy to deploy, easy to use, that's why we keep an NPS score of 90, by the way, part of the reason, a little bit of shameless plug there for you. I don't know many companies who have an NPS 90 because we make infrastructure simple. So if you settle this, to Herman's point, all those applications he's managing and building and then obviously digitizing, and in some way, lifting a shifting and creating a new cloud digitized model, he want to make sure Herman and companies and organizations like the DA's office under leadership, with innovative CIOs like Herman, making sure they have choice. They can choose the prem model they want, on-prem, off-prem, hybrid, or multicloud, or in a government cloud fashion, and deliver these services. To give you an example, we talked about home as the extended enterprise. Our home office is now part of the office. I have to secure my home the way I secure my Nutanix headquarters because I'm now running my business from home. So in the past, there was a delineation between home and office. Now home is part of the extended office. The way I manage my trash, the way I manage my peer flows, applications, the network, latency, everything has to be dealt with in a very smart way. But even our paper trash in our office, we manage it carefully because of the IP, you know, people steal IP. Guess what, now at home, I have to have the same vigor. Guess what, you know, DA's office, the things that Herman is dealing with, they have to be so careful, not only in the office, but at home. So in that sense, that's the better service, your two desktops, all these new technologies I'm going to deal with in this simple way. Our new solution, all requires a browser, that's it, and no deliver a browser-based application, integration, to home, in a secure way, the things that we've been praying for for a long, long time. So this post-pandemic world is going to make us more agile, is going to make us more efficient, and hopefully we're going to do much more with less. >> Excellent, well, Herman, I have one more question for you, if you can, give us a little bit of a look forward. We always love to hear from a CIO just, number one, what's on your plate, and as you look at this solution, what you'll be using it for and going, and secondly, if you've got anything, if you could have something more that the ecosystem, maybe HPE and Nutanix, or maybe just in general from the ecosystem out there, that would make your life and your staff's easier. >> Well, you know, that's a great question. We have over 30 projects on our project list right now that are active projects that's going on. I have a staff of 9 IT professionals with three open positions, so I should say, 9, I have six, actual staff members with three open positions, currently, and we're on a hiring freeze. So one of the great things about the Nutanix HP solution has been that I've been able to downsize from the two systems engineer to the one system engineer without necessarily losing any bandwidth or knowledge or experience because the environment is so easy to manage, which has been great. We will continue to move forward with the digitization of our records and utilizing the cloud services that are available, through the various channels, and it's just an unprecedented time. I see that this is going to be the new norm. >> Excellent, so Tarkan, we'll let you put the exclamation point on it, give us the final takeaway for HPE and Nutanix. >> So, look, at the end of the day, we are in this new software defined growth and multicloud fashion having a partnership within two companies which covers data center services, DevOps services, as well as end user services, end to end, both in private clouds, also in a multicloud fashion, through telco as well as hyperscalers and Azure, deliver the service, with the open end model the customer chooses. Again, end to end, from data center, to DevOps, to end user, is the perfect marriage that HPE and Nutanix's relationship delivers. So we are really looking forward to working with customers like Herman, to deliver on that dream, on that journey, making sure that cloud migration and cloud consolidation happens efficiently end to end. Again, from the data center, to DevOps, to end user, all the way in a fashion that we do more with less in this post-pandemic world, and we're looking forward to that partnership as we move forward, and thank you Stu and thank you, Herman, for the time today. >> Excellent, well, Tarkan Maner, always a pleasure to catch up with you, really great to get all the update from you and really appreciate HPE and Nutanix bringing us Herman Brown, CIO, Herman, thank you so much for joining us, really appreciate you sharing your story, hopefully, you'll be able to open up and hire those three people that you're looking to hire in your future. Thank you both so much for joining us. >> Thank you, thank you very much for having me, Tarkan, it's always a pleasure, thanks Nutanix and HPE for just making a solid, great solution that can help in the success of the DA's office. Really do appreciate it. >> Thank you so much, Herman, again, I really appreciate it. >> We'll be back with more coverage from HPE Discover 2020, the Virtual Experience. I'm Stu Miniman, thank you, as always, for watching theCUBE. (gentle music)

>> Announcer: Live, from Copenhagen, Denmark, it's theCUBE! Covering Nutanix.NEXT 2019. Brought to you by Nutanix. >> Welcome back everyone to theCUBE's live coverage of Nutanix.NEXT. We are at the Bella Center in Copenhagen, Denmark. I'm your host, Rebecca Knight, alongside of Stu Miniman, of course. We are joined by a good friend of theCUBE, Ray Wang, principal analyst and CEO of Constellation Research. Thank you so much for returning to theCUBE. >> Hey, how you doing? Good morning! >> Good morning, good morning! >> Good morning! (laughing) >> Good morning! >> I don't know. I get all my accents wrong out here. >> (laughing) So, you got a shout out on the main stage this morning, from Monica Kumar, congratulations on that. She talked about you and your research on the infinite role of computing. You also do a lot with the future of work. I know that that is really right in your wheelhouse right now. What are you hearing, what are you seeing, what kinds of conversations are you having that are interesting you? >> Yeah, so, this infinite computing option, it's one of the that we're talking about, the fact that you can scale out forever, right? And the problem that's holding us back has been technical debt, right? So all that legacy that everyone's got to figure out. It's like, my connections, my server, my disk-rack recovery, my disaster recovery, my backup, everything. It's a pain in the butt. And I'm still trying to get onto the cloud. So on that end, we're like, okay, all this stuff is holding us back, how do we get there? Now, the future of work is a little bit different. We're seeing a very very different set of work. People have talked about where we are the gig economy, but that's just one aspect of it. Everything is being decomposed into microservices. Large processes are becoming smaller and smaller microservices, they're being reusable, well our work and tasks are following the same way. We're getting smaller and smaller tasks, some are more repetitive, some are going to be automated, and it's really about where we actually find the difference between augmentation of humanity, and full automation, and that's where the next battle's going to be. >> Yeah, Ray, some of the discussions we've been having this week, is how do we really simplify the environment? The balance I hear from customers, on the one hand, they're always like, I don't have enough money, I don't have enough personnel, on the other hand, oh my gosh, that full automation sounds like you're going to put me out of a job. We know we're not putting everybody out of work in the next couple of years. There are challenges; we worry about the hollowing out of the center of the economy, but here, what Nutanix is trying to do, of course, is, I don't want to have to thrive in that complexity anymore, I want to be able to drive innovation, keep up with that, take advantage of that unlimited resources out there, so, where do you see, you've been here at the show, what are you hearing from the customers here? Anything different in Europe versus back in North America that you'd share about that journey onto the changing roles? >> Oh it's a great point. It's about simplifying everything where you can, it's about areas of automation where they make sense. Here in Europe it's slightly different because a lot of the focus in Europe has been about cost and efficiency, followed by of course regulatory. Those have been the two drivers. And they've been battling that in order to be, even they will look at some level of innovation. Where in the US, people are head on doing innovation, regulatory and operational efficiency at the same time. So that creates a very very different environment. But what we have noticed are some patterns, especially when we look at automation and AI; there are four areas out of seven where we see a lot more automation that's happening. The first one is massively repetitive tasks, those are things, yeah, got to get that out of the way, we don't do this very very well. The second one is really thinking about massive nodes of interaction. When you're connected to multiple places, multiple organizations, multiple instances, that's something where we start to get overwhelmed, and then of course, there's lots of volume. If you've got lots of volume or requests that are coming through, you can't possibly handle that, and that's a place where we see a lot of machine scale. And the last piece is really when you have to scale, humans don't scale very well. However, it's actually not a hollowing out of the middle; it's actually a hollowing out of the ends in a very, very real end, because really really simple tasks go away, super complex tasks go away, and the middle actually remains, and the middle is things that are complex that cannot be recreated by math, they're also areas that require a lot of creativity, humans make the rules, we break the rules, and then the last part is really fine motor skills and presence, the machines still aren't as good. So we still have some hope. So the middle stays, it's the hollowing out of the ends, the high end jobs and the low end jobs are the ones where we're going to see a lot of risk. >> So what does that mean? So we have, leaving the middle there, and as you said, the high end jobs and the low end jobs go away, but what does that mean in terms of the skills? In terms of what employers are looking for, in terms of what they need in their prospective applicants and hirees. >> That's a great point. Soft skills are important; it's the qualitative skills that become even more important, it's also being able to manage and orchestrate the hard skills; because you don't necessarily have to know how to do the calculation, you have to just know which algorithm to apply. >> Okay, and then also, these soft skills of managing people, I'm assuming too? Because computers are not so good at that either. >> Yes. Soft skills are managing people, but also manage the human and machine equation that's going to happen. Because we have to train the machines, the machines aren't going to know that level of intuition, and there's a large amount of training that's going to happen over time. >> All right. So, Ray, one of the things Nutanix is doing is, as they've been transforming to not only subscription, software's always been at their core, but they're starting to do not just infrastructure software, but application software. I know you live in that world quite a lot, so when you hear Nutanix talking about building databases, delivering these services, it's something that I look at, Amazon does some of that, but for the most part they're infrastructure and build on top of us. How do you think, how is Nutanix doing, what are some of the challenges for them, going up against some of the bellwethers out there in tech, and all the open source projects that are out there. >> So the challenge is always going to be, there is a one dominant player in every market. And what they're providing is an alternative to allow the orchestration of not having that, not only that dominant player, but a choice. So in every single market, they're focused on giving users choice, and giving the ability to aggregate, and bring everything into one single plane. That is tough to do, right? And the fact that they see that as their big hairy audacious goal, that's impressive. If you said they were going to do this three years ago, I wouldn't have believed them. >> Well yeah, I think back to, remember almost 10 years ago, VMware tried to get into applications, they bought Zimbra, they bought a few others. Cisco did like 26 adjacencies, they were going to take over video and do all these things, and we've seen lots of failures over the years. They refocused on their core, was a big thing that I heard, that the users seem to be excited about. Are there areas that you're find especially interesting as to where Nutanix is poking? >> So, I would say that Nutanix three years ago was a little bit sleepy. They got comfortable, they did the stuff that they did really well, and it feels like, maybe about 12 months ago, Dheeraj had a different vision. Like something snapped, something hit, he said this isn't working, we're going to change things, and we've seen a whole bunch of new talent come into play. We've also seen a huge expansion of what they're trying to do, and a cleanup of all those side projects that were all going on before. So I think they've actually honed in on, okay, if we can simplify this piece, this is a money-winning business for some time, and they're talking about 80% margins last quarter, I mean that's huge, and that's just trying to save customers money, and make their lives simpler. >> Do you think that they have the messaging right? Because, I mean, they're going to this Thoreauvian/Emersonian idea of simplify, simplify, simplify, and it does resonate, of course! What customer doesn't want a simpler computing experience? But do you think that they are reaching the right people, and they have obviously very passionate customers, but are they getting into new businesses. >> I think they're getting to the businesses that their customers are asking them to, those adjacencies are huge, I think and when you think about cleaning up technical debt, all that legacy debt that you actually have to fix, I mean, this is where you begin. It's so hard to make that cloud journey to begin with, it's even harder to carry all that legacy with you. And we're going to see a lot more of this going forward. >> All right. So, Ray, talk a little bit about, I loved an event you did last year, the people's centered digital future. Help explain to our audience what this is about, and where you're taking it again this year. >> So that event was a one-time event. We were celebrating the 70th anniversary of the United Nations founding, we were celebrating almost 50 years of the internet, and 50% of the world being connected to the internet. And part of the reason that was an important event was, we really felt that there was a need to get back to the roots of where the internet had begun, and more importantly, talk about where we are today in the world of privacy. One of the biggest challenges we have in the a digital world is that your personal data, your genomics, all this information about you is being brokered for free. And what we have to do is take that back. And by taking that back, what I mean is, we've got to make all these rights, property right. If we can make that a property right, we can leverage the existing rules and legislation that's there, and we can actually start paying people for that data through consent, and giving people that ability, on consent to data, could create lots of things, from universal basic income, to a brand new set of data economy that equalizes the playing field, while keeping the large tech giants. >> There's some of those big journeys that we went on, you talk about the internet, this year's 50th anniversary of the first walking on the moon, and you look at how entire countries rallied together, so much technology was-- >> Yeah, look at India. >> Spun off of what they've done there, it's like we need some rallying cries in today's day and age to solve some of these big day and age. Is that AI? Where are some of the big areas that you see tech needing to drive forward in the next decade? >> I think the big area's going to be around decentralization, giving individuals more empowerment. We've got large, big tech companies, that are, I'd say, imbalanced. We start companies right away, building monopolies on day one, and we don't open up those markets. And the question is, how do we create a level playing field for the individual to be to compete, to bring a new idea, and to innovate, if that's continuously stifled by big technology companies without an opportunity, we're in trouble. And so that starts by making data a property right, to the personal data. It starts by also creating marketplaces for that data, and those marketplaces have to have regulations, similar to capital market flows. The way treat exchanges, we treat marketplaces, we need to do the same thing with the way we do with data, and then the third piece, there has to be some level of a tax, that goes to all these data economies, so that they can fund the infrastructure and the watch dogs that are there. Now this is coming from a free market, I'm a free market capitalist, okay? I can't stand regulation, but I also realize that it's so important that we have a fair market. >> But do you, we know so much about how Americans are so much more cavalier about their privacy than even Europeans, what will it take to galvanize Americans to care about those little crumbs that they're leaving on the internet, that is the data that you say should be a property right, that we should be paid for? >> I think it's going to start with companies actually take, and do the right thing, where they actually give them that opportunity to monetize that information. >> Will they do that? >> I think the new set of startups are starting to do that, because they're looking at the risk that's being posed, at Facebook and Google and Amazon, on the anti-trust, DOJ, FCC, they're all coming in at the same time, the FTC, they're all wondering, do we break these companies up or not? The short answer is, I don't think they're going to, because we're competing with China, and when you're looking at that scale of data, where Amazon's transactions are only 1/10 of Ali Baba's? That's huge. So the consolidation has to happen, but we need to create a layer that actually democratizes and creates a fair trading play. >> And those startups, you think, can compete with established players? >> I think once we set the roles, and the ground rules, I think people are going to be able to do that, but once you free that data, what are we competing on now? You have to pay for my consent, you have to earn my business, you can't trade it for free, or just say, "Hey look, you are the product." That changes everything. >> Rebecca: Yeah, that's a good point. >> Ray, I know you spend a lot of time talking to, and giving advice to some of the leaders in technology, you're welcome to get into some specifics about Nutanix, or some of the cloud players, but what are some of the key themes, what are people getting right, and what are they still doing wrong? >> Okay, so theme number one, this is going to be a multicloud hybrid world for a long time. Anybody that's bucking the multicloud trend, they've missed the point, right? Because we want portability in data, there's only two or three players in every single market, if I can't move my data, my workloads, and my IO in and out, then you've actually created vendor lock-in from hell. And I think customers are going to protest against that. The second one, and you guys are probably following this trend a lot, is really about AI ethics and design principles for AI. So what is ethical AI? We've got five things that are important: The first one is make sure it's transparent. See the algorithms, see what they write. Second one, make sure it's explainable. Hey, bias is not a bad thing, so if I'm discriminating against redheads, with, left-handed, and that happened to like, I don't know, Oracle, fine. But, if that was unintended, and you're discriminating against that, then we have to get rid of that, right? And so we have to figure out how to reduce that kind of bias, if it's unwanted bias. If you discover that you're discriminating, and not being inclusive, you've got to make sure that you address that. So then the next part is, it's got to be reversible. And once you have that reversibility, we also make sure that we can train these systems over time. And then the last piece is, Musk could be right! Musk could be right, the machines might take over, but if you insert a human at the beginning of the process, and at the end of the process, you won't get taken over. >> I want to hear about what the future of work looks like for Ray Wang. You are on the road constantly, you are (laughs) you are moving your data from one place, you are everywhere, all the time. So what do you have on next, what's exciting you about your professional life? >> I think the challenge's that we are living in a world where there's too much information, too much content. And you guys say this all the time, right? Separating the signal from the noise. And people are willing to pay for that signal. But that is a very very tough job, right? It's about the analysis, the insights, and when you have that, people don't want to read through your reports. They don't want to watch through the videos. They just want to call you up and say, "Hey, what's going on?" And get the short version of it. And that's what's making it very interesting, because you would expect this would be in a chat bot, it'd be in a robo advisor, doesn't work that way. People still want the human connection, especially given all that data out there, they want the analysis and insights that you guys provide, that's very very important, but even more important right now, it's really about getting back to those relationships. I think people are very careful about the relationships they're keeping, they're also curating those relationships, and coming back to spending more time. And so we're seeing a lot more of in-person meetings, in-person events, very very small, curated conversations, and I think that's coming back. I mean that's why we do our conference every year, as well, we try to keep 200 to 300 people intimately together. >> Those human connections, not going away. (laughs) >> Nope, not going away, in an automated, AI, digital world! This is our post-digital future. >> That's excellent. Well Ray, thanks you so much for coming on theCUBE, it's always so much fun to talk to you. >> Hey, thanks a lot. >> High energy guy (laughs). >> Low energy. >> I'm Rebecca Knight for Stu Miniman, we will have more from the Bella Center at Nutanix.NEXT coming up in just a little bit. (upbeat music)

from the silicon angle media office in Boston Massachusetts it's the queue now here's your host David on tape hi everybody Dave Volante here with Stu minumum we have some breaking analysis we're gonna break down the acquisition of IBM Red Hat by IBM was announced today that it closed Stu was originally announced in October a 34 billion dollar acquisition so not a surprise surprise that it closed a little bit earlier than people thought people would thinkin you know well into the second half closed in July they got through all the all the issues in Europe what does this mean in your view to the industry yeah so Dave we did a lot of analysis when the deal was announced absolutely the the cloud and the ripples of change that are happening because of cloud are the impetus for this and you know the the question we've been having for years Dave is you know how many companies can stay kind of independent in you know their swimlane to what they're doing or are we going to see more massive consolidations we're not that far off of the 67 billion dollar acquisition of Dell buying EMC to go heavily into the enterprise market and of course there are cloud implications what happened there and you know we're watching the growth of cloud what's happening in the developer world you know we've watched Red Hat for a long time and you know Red Hat has a nice position in the world and it carved themselves out a nice role into what has been emerging as hybrid and multi cloud and in my opinion that's you know the number one reason why arvind and the IBM team you know when to take that 20-year partnership and turn it into you know now just part of the IBM portfolio Arvind Krishna executive at IBM a longtime player there so the the the deal is so you talked about Dells acquisition we've talked a lot about the VMware model keeping the company separate and of course Red Hat is not going to be a separately traded public company it is going to be a distinct unit inside of IBM's cloud and cognitive software group as I understand it is that right so the question is will it be reported separately or is it going to be oh we're gonna throw everything into our cloud number yeah so Dave this is where all of us that have watched and known IBM you know for our entire careers because they've been around over a hundred years on ask what's going to happen so from a reporting structure Jim Whitehurst reports to Ginny from a Wall Street standpoint it sounds like it's gonna be just thrown into the cloud piece you know Dave isn't it that the the the standard practice today that you throw lots of stuff in there so we can't figure out what your cloud business really is I mean let's look at Oracle or even Microsoft and what they had you know Amazon's probably the only one that clearly differentiates you know this is revenue that we all understand is cloud and can you know touch and feel it so sure I IBM you know you've got all of the the piece that used to be soft layer it's now the IBM cloud piece there are lots of software pieces in that mix the cloud and cognitive is a big umbrella and you know Red Hat adds a few billion dollars worth of revenue into that stream so IBM's assumptions here juni talks a lot about chapter two chapter one was a lot of front-end systems that sort of the growth was everybody thought everything was going into the cloud that's really not the way it is 80% of the workloads are still on Prem and in Chapter two was all about you know connecting those to any cloud multi-cloud heard her words the IBM cloud or the Amazon Google or Microsoft cloud etc etc she made the statement that that we are the only hybrid multi-cloud open source company okay I guess that's true does it matter that they're the only hybrid multi-cloud open source company and are they yeah so I mean Dave anytime a vendor tries to paint themselves as the number one or you know leader in the space it's you know that's how they're defining it that's not how customers think of it customers you know don't think is much about whether it's multi cloud or hybrid cloud they're doing cloud and they're working with you know more than one supplier it is very rare that you find somebody I'm all-in and then you dig in oh yeah wait I'm using office 365 and Salesforce and oh wait there was that cool new thing that Google announced that somebody off on the sides doing so we understand that today it's a multi cloud world tomorrow to be a multi cloud we're absolutely open source is growing you know at great leaps and bounds Red Hat is you know the you know best example we've had of that that trend something I've been watching for the last 20 years and you know it is impressive to see it but you know even when you talk to customers of you know most customers are not you know flag-waving I must do everything open-source you know that they have a little bit more nuanced view of it sure lots of companies are participating in contributing to open source but you know I've yet to talk to too many companies that were like well when I'm making this decision you know this is absolutely what it is am i concerned about my overall costs and I'm concerned about transparency am i concerned about you know security and how fast I can get things resolved and by the way open-source can help with a lot of those things that's what they need to think about but look IBM you know had a longtime partnership with Red Hat Red Hat has a strong position in the marketplace but they're not the only ones there you know you mentioned VMware Dave VMware cross has a strong play across multi cloud environments you know we see Red Hat at all of the cloud shows you see yeah IBM at many of the cloud shows but you've got Cisco out there with their play it is still you know this this chapter - if you agree with Ginny's terminology we are relatively early in that but you know IBM I believe is strengthened in their positioning I don't think it radically changes the landscape just because you know Red Hat is still going to stay you know working with the Amazons and Microsoft and Google's and and and other players out there so it doesn't dramatically change the landscape it just consolidates two players that already worked closely let me ask a question so I mean was clearly positioning this as a cloud play you know generally and you know in a multi cloud specifically is this a cloud play okay um so I'll say yes but Dave so absolutely the future and where the growth for Red Hat and where IBM and for this thirty four billion dollars to be successful the tip of the spear is open shift and therefore you know how does that new cloud native multi cloud environment you know where do they play but at its core you know red heads still Linux Red Hat Enterprise Linux you know is it stills you know that is the primary driver of revenue and Linux isn't going away as a matter of fact Linux is growing Microsoft you know just revealed that there are more Linux workloads sitting in Azure than there are windows we already knew that there were you know strong Linux out there and Microsoft is embrace Linux we saw Satya Nadella at Red Hat summit and you know we've seen that proliferation of linux out there so linux is still you know growing in it where it's being used out there and in the cloud you know linux is what most people are using so the reason why I think this acquisition is interesting Jim Whitehurst today said publicly that it was a great deal that IBM was getting but then he couched he said of course it's a great deal for our shareholders too so and Ginni chimed in and said yes it was a fair deal okay fine 34 billion you know we'll see the reason why I think IBM likes this deal and IBM you know generally has been been good over in history with acquisitions you know clearly some mega acquisitions like PwC which was transformative me we have time to talk about that Cognos and some of the other software acquisitions done quite well not a hundred percent but the reason why I think IBM likes this deal is because it's a good cash flow deal so I think in many ways and they don't talk about this because it's not sexy marketing but iBM is a services company over 60% of the company's revenue comes from professional services IBM loves complexity because they can bring in services throw the big blue blanket around you and do a lot of integration work and the reason is that I think this is an interesting acquisition from from a financial standpoint and Ginny says this all the time this is not about cost synergies this is about revenue opportunities when you try to put everything in the cloud you always run into the back-end systems and her point is that those back-end systems need to be modernized how do you modernize those back-end systems openshift it's not trivial to do that you need services and so iBM has a large install base probably by my estimate you know certainly tens of billions of dollars of opportunity there to modernize back-end systems using Red Hat technology and that means that it's a front-loaded deal from a cash flow standpoint that they will find automatically revenue Cyn to plug in to IBM's captive install base what are your thoughts yeah Dave III think that your analysis is spot-on so RedHat has been one of these most consistent you know revenue companies out there you steadily when they went from a billion dollars to now they're right around three billion dollars they had the March to five billion dollars they had a couple of minor blips in their quarterly earnings but if you plug in that IBM services organization you really have the opportunity to supercharge this is not the opportunity is to have that that huge IBM services organization really helped you know grow those engagements do more openshift you know get more Linux help ansible you know really become the standard for you know automation in the modern workplace the challenge is that too many IBM people get involved because the the thing that everybody's a little worried about is IBM's done well with a lot of those acquisitions but they don't leave them stand alone even you know VMware for many years was a standalone company today VMware in Dell they're one company they're in lockstep from a management standpoint and they're working closely together what differentiates RedHat is you know iBM has groups that are much larger than RedHat that do some of the same things but RedHat with their open-source mission and and where they're driving things and the innovation they drive they move a little bit faster than IBM traditionally does so can will the Red Hat brand the Red Hat people and Red Hat still stay independent enough so that they can till you know hop on that next wave you know they they jumped early into kubernetes and that was the wave that really helped them drive for what they're doing the open shift you know even Dave you know Red Hat ahead bought core OS which was a smaller company moving even faster than Red Hat and while they've done a really good job of integrating those people absolutely from what I've heard it is slowed things down a little bit just because Red Hat compared to core OS was a much bigger company and of course IBM is a be a myth compared to Red Hat so will they throw these groups together and you know who will be making the decisions and can they you know maintain that that culture and that growth mindset well the point is structure we bring up VMware a lot as the model and of course when EMC bought VMware for paltry six hundred million six thirty five million dollars it folded it in and then spun it back out which was the right move certainly allowed the ecosystem to blossom I don't think IBM is gonna take that same approach blue wash is the term they'll probably blue wash that now cuz no Dave they said iBM has said they will not blue eyes there's no purple red stay separate absolutely there's concerns you know so to get those revenue synergies there's there's you're gonna have to plug into IBM systems and that requires some some work and IBM generally good at that so we'll see we'll keep our eyes on that it's but but I would predict that IBM is not going to do a VMware like well it's going to be some kind of hybrid Dave one of the other things is you talked about so Jim Whitehurst you know executive respective had him on the cube a lot he's reporting to Ginny you know the question is is this Ginny's last big move and who replaces her yeah let's talk about succession planning so a lot of a lot of rumors that Whitehurst is is next he's 52 years old I've said I don't I don't think they would do that but but let's talk about it first of all just you know Jim white her side sort of interviewed him the number of times but but you know I'm quite well you think even watch the job so you know I talked with Jim a little bit at red hat summit you know he kind of makes light of it he said you know knowing IBM the way we all know IBM IBM has always taken somebody from inside to do that he feels that he has a strong mission still to drive Red Hat he is super passionate about Red Hat he wrote a book book about the open source culture and is still driving that so I think from everything I see from him that's still the job that he loves and wants to do and you know it's a very different challenge to run IBM I'm not saying he would turn it down if that was the direction that it went if it went down to it but I did not see him angling and positioning like that would be where he wants to go well and of course you know Jim is from North Carolina he's got that kind of southern folksy demeanor you know comes across as the so the nicest guy in the room he's also the smartest guy in the room but oh we'll see we'll see what happens there I've said that I think Martin Schroder is going to be the next CEO of IBM Martin Schroder did three years of combat duty as the CFO in in what was a tough time for IBM to be a CFO they were going through those big transitions talking about you know they had to had to do the the SoftLayer acquisition they had to put together those strategic initiatives and so he's has he has CFO chops so he understands finance deeply he ran you know when IBM's big services business he's now responsible for IBM's revenue generation he's a spokesperson you know in many ways for the company he's like the prototypical choice he would not be surprising at all to see IBM plug him right in a little bit of history as you know still him a bit of a history historian of the industry have been around for a while John Akers back in the early 1990s when IBM's mainframe business was was tanking and the whole company was was tanking and it was at the risk of actually believe it or not running out of money they were gonna split up the company because the industry was breaking apart Intel and microprocessors Microsoft and software C gated disk drives you know Oracle and databases and to be more competitive from a product standpoint they were gonna split the company up into pieces Gerstner came in and said no way Gerson it was you know CEO of American Express said no that's not how customers want to buy he bought PwC for a song compared to what Carly Fiorina at HP a Carly Fiorina at HP wanted to pay I think 15 billion for it I want to say IBM paid five billion or maybe even less for PwC it completely transformed the company it transformed IBM into a services company and that's where what IBM is today they don't like when you say that but that's where the revenue was coming from what that did now and they also started to buy software companies IBM was restricted from getting into applications for years and years and years because of the DOJ because they owned the mainframe they had a monopoly while Microsoft and Intel changed all that IBM started to buy software companies and bought lots of them so they became a services company with a collection of software assets and the main mainframe and you know the power they have a storage business and you know Finance I'd be a global finance business etc etc so my my point is I'm not sure Jim Whitehurst would want to run that you know it's it's kind of messy now what you need run that is somebody who really understands finance knows how to turn the knobs and that's why I think you know Martin Schroeder is actually an excellent pick for that to keep the cash flow going to keep the dividend going to keep the stock buybacks going it's still in my view not a growth play I think there's certainly near-term growth that can be had by modernizing applications but I don't look at IBM as a growth company I look at IBM as a portfolio company that throws off a lot of cash and if and when the market stops rewarding growth and profit list growth a company like IBM will become more favorable to investors yeah and the question at the end of the day is after spending thirty four billion dollars for red hat does IBM help weather the storm of what is happening with the phenomenal growth of AWS the changes happening in Microsoft build more of a relationship than they've already had with Google and help position themselves for this next wave of IT there's IBM helped create a lot of the waves that you know happen in IT well the pure play cloud players are in it for the long game you know you know Amazon's philosophy is give tools to builders and allow them to disrupt the you know traditional old guard whether it's old guard technology companies or old guard industry players and you've seen the stat of how many Fortune 1000 companies or you know have gone out of business in the last 20 or 30 years or whatever it is that's going to continue and Amazon and and certainly Google and Microsoft want to support that disruption by providing cloud tooling and put the data in the hands of people that allows them to create new business models now that doesn't mean everybody's gonna throw up there mainframes it's it's not gonna happen it's certainly not gonna happen overnight and probably will never happen but I just don't see how IBM becomes a growth company in that scenario the growth is going to be continue to be with the cloud well but Dave we had seen IBM I'd say struggle a little bit when it comes to the the developers these days and the Red Hat acquisition is definitely going to be a boon to them in this space because Red Hat all about the developers that that's what you know that their customers are so you know that that's such a huge community that they've already tapped into so Ginny has said this hybrid multi-cloud is a chapter two with a trillion dollar opportunity so who else is going after that trillion dollar opportunity let's let's lay it out there who are the multi cloud players VMware obviously IBM Red Hat with open shift is in there Google with anthos Cisco is coming at it from a network perspective so they have coming at it from their position of strength even though you know you know they're relatively new entrants well ever everybody wants to be the new management layer in this multi cloud environment what VMware had done is had you know vCenter became you know the console for everyone as they were consolidating all of their silos and when I go to a multi cloud environment right where do I live you know Microsoft has a strong play there that's the other you know VMware IBM Red Hat anthos Google Mentos Cisco and Microsoft yeah and of course the one that while they won't say that they are multi cloud you can't talk about multi cloud without talking about Amazon because Amazon is a piece of everyone's cloud environment we were seeing what they're doing with outpost there so they are the kind of Spectre looming over this entire multi-cloud discuss yeah right on I think you got to put Amazon into that mix they will be an entrance into this multi cloud play and it's not gonna be a winner-take-all deal I could say cisco is coming at it from a position of networking strength Microsoft has its software estate and it's gonna do very well there IBM Red Hat coming at it from a standpoint of modernizing applications and there's a services could play and services component there and VMware of course coming at it from the the infrastructure operating system I don't see Oracle as interested in that market there may be some smaller players like turbo anomic you know who probably get gobbled up by one of these guys that we just mentioned but that really is the landscape and this is you know five six companies a trillion dollars there's plenty to go around all right Stu final thoughts on on the the Red Hat news the IBM news that they've finalized the Red Hat acquisition yes so you know what you want to look for is you know first of all you know what's happening organizationally you know if open shift is the primary you know the the tip of the sphere what we're talking about here for this you know cloud native multi-cloud world you know what does you know the IBM Cloud messaging looked like they're gonna have an analyst event here in a couple of weeks that you know that they've invited all the analysts to going into what does that cloud portfolio looks like how do they sort through all of the kubernetes options that they've had today do they try to elevate IBM cloud to be a stronger player or will they let Red Hat continue to play across all of the cloud environments that they have so you know organization and product positioning of the two things that I'm looking at the most Tom Siebel said publicly yesterday that IBM is a great company national international treasure but they miss cloud and they missed a I I wouldn't agree totally they didn't miss cloud they were late to cloud they had to buy software they're in cloud just like Oracle's in cloud not as competitive as the AWS cloud but they're they've got a cloud yeah HP doesn't have a cloud Dell doesn't have a cloud these these two companies that I just mentioned do AI yeah they're not sound of generalized AI like what Google and Amazon and Facebook and Microsoft are doing IBM's trying to solve you know big chewy problems iBM is a services company as they said so you know Watson you see a lot of negative stories about Watson but Watson requires a lot of services to make it work and it's as they say solving different problems so they're a player in AI multi cloud is new and this move the acquisition of red hat yes thirty four billion dollars expensive it's not gonna be pretty on the balance sheet but they get good cash flow so they'll deal with that over time it puts them right in the mix as a leader in multi cloud so thanks to for breaking down the the acquisition and thank you for watching this is Dave Volante what's do min and then we'll see you next time

>> live from Boston, Massachusetts. It's the Cube covering A W s reinforce 2019. Brought to you by Amazon Web service is and its ecosystem partners. >> Hey, welcome back and run cubes. Live coverage of A W S Amazon Webster's reinforced their inaugural conference around security here in Boston. Messages. I'm John for a day. Volante Day we've been talking about Blockchain has been part of security, but no mention of it here. Amazon announced a Blockchain intention, but was more of a service model. Less of a pure play infrastructure or kind of a new game changes. So we thought we would get our friends to come on, the Cuban tell. Tell us about it. Val Birch, Avicii CEO and founder. A pencil day that Cube alumni formerly of NetApp, among other great companies, and Ed You, founder and CEO of Strong Salt. Welcome to the Q. Tell us why aren't we taught him a Blockchain at a security conference on cloud computing, where they always resource is different. Paradigm is decentralized. What's your take? >> So maybe having been in this world for about 18 24 months now, Enterprise lodging reinvents about six months ago and jazz he mentioned that he finally understood US enterprise an opportunity, and it was the integrity value, finest complex, even announced a specific product announced database available, >> maybe bythe on cryptographic verifiability of transactions minus the complexity of smart contract wallets. Wait, you party with Amazon way too. Versions right? One for distributed use cases. When I call, everyone rises. Never like you need to know what >> the Amazon wants to be that hard on top like complexity. But the reality is, they're they're They're world is targeting a new generation star 14 show is the new generation of developing >> a >> new generation of David. They were. Some of those are in trouble, and I'm hard core on this because it's just so obvious. >> I just can't get him behind myself if you don't >> see this out quicker. The new developers are younger and older systems people. There's a range of ages doing it. They're they're seeing the agility, and it's a cultural shift, not just the age thing. Head this. They're not here right now. This is the missing picture of this show, and my criticism of reinforces big, gaping hole around crypto and blocks, >> and I actually know that people I don't see anything here because it is difficult to currency. >> Blocking is very important that people understand way. Launch strong allows you to see the launching. I don't think that works. Basically, Just like Well, well said everything you do, you always have a single source. I think that's something that people doing this thing here. You want to get your thoughts on this because you made a comment >> about security native being the team here and security native implying that Dev ops what they did for configuration hardening the infrastructures code. You have to consider this token economic business model side of it with the apple cases, a decision application is still an application. Okay. Blockchain is still in infrastructure dynamic their software involved. I mean, we're talking about the same thing is they're lost in translation. In your opinion? >> Well, yeah, I think that you know, to your point, Val, if you can abstract that complexity away, But the fundamentals of of cryptography and software engineering and game theory coming together is what always has fascinated me about this space. And so you're right. I think certainly enterprise customers don't wanna you know, they hear crypto, though no, although it's interesting it was just a conference IBM yesterday. They talk a lot about Blockchain. Don't talk about crypto to me. They go together. Of course, IBM. They don't like to talk a lot about job loss and automation, but But the reality is it's there and it's it's it's has a lot of momentum, which is why you started the company. >> Yeah, we're actually seeing it all over right now. And again, our thing is around reducing, If not eliminating the friction towards adopting Blockchain so less is more. In our case, we're explicitly choosing not to do crypto wallets or currency transactions. It's that Andy Jassy observation the integrity value, the core integrity, value for financial reconciliation, for detecting supply chain counterfeiting for tracking assets and inventory across to your distribution. Unifying multiple source systems of record into a shared state. Those are the kinds of applications received >> culture, and there's so many different use cases, obviously, so >> an Amazon likes to use that word. Words raised the bar, which is more functionality, but on the other, phrases undifferentiated, heavy lifting. There's a lot of details involved in some of those complexity exactly what you're talking about that can be automated away. That's goodness. But you still have a security problem of mutability, which is a beautiful thing with Blockchain. >> Actually, a lot of times people actually forgot to mention one thing that blotchy and all you do that's actually different before was Actually privacy is actually not just security is also privacy, which actually is getting bigger and bigger. As we know, it's something that people feel very strongly about because it's something they feel personal about. And that's something that, in fact, took economics encourages a lot of things that enables privacy that was not able to do before. >> Well, look at Facebook. What do you think about >> face? I'm wonder that you know, I'm a public face book critic. I think they've been atrocious job on the privacy front so far in protecting our data. On the other hand, if you know it's kind of like the mullahs report, if you actually read Facebook's white paper, it's a it's not a launch. It's an announcement. That's a technical announcement. It's so well written, designed so far, and it's Facebook doesn't completely control it. They do have a vision for program ability. They're evolving it from being a permissions toe, ultimately a permission less system. So on paper, I like what I read. And I think it will start to, you know, popularizing democratize the notion of crypto amongst the broader population. I'm going to take a much more weight see approach. Just you know, >> I always love Facebook. I think the den atrocious job. But I'm addicted. I have all my stuff on there, um, centralized. They're bringing up, they bring in an education. Bitcoin is up for a reason. They're bringing the masses. They're showing that this is real market. This is kind of like when the web was still viewed as Kitty Playground for technologists say, Oh, well, it's so slow. And that was for dummies. And you had the Web World Wide Web. So when that hit, that same arguments went down right this minute, crypto things for years. But with Facebook coming, it really legitimizes that well, you bring 2,000,000,000 people to the party. Exactly a lot of good. Now the critics of Facebook is copied pass craft kind of model and there's no way they're gonna get it through because the world's not gonna let Facebook running run commerce and currents. It's like it's like and they don't do it well anyway. So I think it's gonna be a game changing market making move. I think they'll have a play in there, but I don't think that's not gonna have a global force. Says a >> lot that you get 100 companies to put up 10 >> 1,000,000 Starship is already the first accomplice. >> They don't need any more money. We have my dear to us, but >> still the power but the power of that ecosystem to me. I was a big fan of this because I think it gives credibility. So many companies get get interested in it, and I'm not sure exactly what's gonna come out of it. It's interesting that, you know, Bitcoins up. They said, Oh, cell, you're becoming like No, no, no, this is This is a very mature >> Well, I I think open is gonna always win. If you look at you know, the Web's kind of one example of kind of maturity argument. I think the rial analog for me, at least my generation value probably relate to this. David, you as well, you know, I've been born yet you are But, you know, T c p I p came after S n a which IBM on the deck net was the largest network at that time to >> not serious. Says >> mammal. Novell was land all three proprietary network operating systems. So proprietary Narcisse decimated by T c p i p. So to me, I think even their Facebook does go in there. They will recognize that unless they stay open, I think open will always win. I think I think this is the beginning of the death of the closed platform. >> Yeah, they're forced her. I think they have to open it up because if you didn't open up, people won't trust them, and people will use them. And if a Blockchain if you don't have a community behind it, there will be nothing. >> Well, so the thing about the crypto spraying everywhere with crypto winter, But but to your point d c p i p h t t p d >> N s SMTP >> Those were government funded or academic funded protocols. People stop spending money on him, and then the big Internet companies just co opted. No, no, that's what G mails built on. >> Well, I've always said >> so But when you finish the thought, is all this crypto money that came in drove innovation? Yeah, So you're seeing, you know, this new Internet emerge, and I think it's it's really think people, you know, sort of overlooked a lot of the innovation that's >> coming. I have always said, Dave, that Facebook is what the Web would look like if Tim Berners Lee took venture financing. Okay, because what they had at the time was a browser and the way that stand up websites for self service information. They kept it open and it drives. Facebook became basically the Web's version of a, well, lengthen does the same Twitter has opened. They have no developer community. So yeah, I think it is the only company in my opinion, actually does a good job opening up their data. Now they charge you for that. It brings up way still haven't encrypt those. The only community that's entire ethos is based on openness and community you mentioned. And that is a key word >> in traditional media. Of course, focus on the bad stuff that happens, but you know those of us in the business who will pay attention to it, see There's a lot of goodness to is a lot of mission driven, a lot of openness, and it's a model for innovation. What do you guys think about the narrative now to break up big tech? You know you're hearing Facebook, Amazon, Google coming under fire. What are your thoughts on that? >> So I wrote a block, maybe was ahead of its time about 18 months ago. Is coincided with Ginny Rometty, a Davos and 2018 2019 talking about data responsibility. Reason we're having this conversation is at the tech industry. By and large and especially the fang stocks or whatever we're calling them now have been irresponsible with our data. The backlash is palpable in Europe. It's law in Europe. Backlash we knew was going to start at the state level here. There's already ahead of my personal schedule. Federal discussions, FTC DOJ is in a couple weeks ago, so it's inevitable that this sort of tech reckoning is coming in. Maur responsibility is gonna have to be demonstrated by all the custodians of our data, and that's why we're positioning. Check it as a chain of custody is a service to demonstrate to the regulators your customers, your partners, suppliers, you know, transparency, irrefutable transparency, using Blockchain for how you're handling data. You know, if you don't have that, transparency can prove it. Or back to the same old discussions were back Thio Uninformed old legislators making you know Internet, his tubes type regulations. So here, here >> and DOJ, you could argue that they may be too slow to respond to Microsoft back in the nineties. I'm not sure breaking up big tech is the right thing, because I think it's almost like a t. The little Tex will become big checks again, but they should not be breaking the law. >> I think there's a reason why is there's actually a limitation off. What is possible in technology because they understand and also Facebook understands well, is that it's actually very, very hard to have data that's owned by your customers. But you are the one who's keeping track over everything, and you are the one using the data right. It's like a no win, because if you think about encryption cryptography, yes, you can make the data encrypted. That way, the customer has the key. They control it, but then Facebook can offer the service is. So now you have a Congress thinking, Well, if there's no technological way of doing this, what can you do in a legal perspective on a, you know, on the law perspective, toddy make it so that the customer actually owned the data. We actually think that is a perfect reason why you have to actually fix the book. Actually, technical should be built on our platform because we actually allow them to have a day that's encrypted and stupid able to operations holiday tha if the customer give them the permission to do so. And I think that's the perfect word way to go forward. And I think Blockchain is the fundamental thing that brings everybody together, you know, way that actually benefits everyone knows >> and take him into explain strong salt your project. What's it about? What's the mission? Where you >> so so we see strong saw as actually privacy. First, we literally are beauty, a platform where developers including Facebook linked and salesforce can't you build on top of platform, right? So what happens when you do this is that they actually give the data governess to the customers, customers Mashona data. But because our cryptography they actually can offer service is to the customers. When a customer allowed them to do so, for example, we have something. All search of encryption allows you to encrypt the data and still give the search. Aubrey on the data without decrypting the data. First, by giving the power to developers and also the community there, you can have our abstract you currently use. But they're not hard to use that frictionless and still offer the same service that Frank Facebook or sell stolen offer the favor. >> You could do some discovery on it. >> You can't do things >> some program ability around >> exactly, even though the data is encrypted. But custom owns the day. So the customer has to give them permission to do so Right this way. Actually, in fact, launched the first app that I told you it's called strong vote. You can Donald ios or Andrew it And you can't you see the Blockchain play little You can see the rocking your fingerprint. I think a fingertip to see what happens to a data. You see everything that happens when Sheriff I or you open a fire or something, I guess. >> Congratulations, Val. Give a quick plug for your project chain kid into the new branding. They're like it. Pencil data. Where are you on your project? >> So after nine months of hard selling, we're finding out what customers actually paying for right now. In our case, it's hardening their APS, their data and their logs and wrapping the chain of custody around those things. And the use case of the security conference like this is actually quite existential When you think about it, One of the things that the industry doesn't talk enough about is that every attack we read about in the headlines was three privilege escalation. So the attackers somehow hacked. Your Web server managed to get administrative credentials and network or domain administrative credentials. And here's what professional attackers do once they have godlike authority on your network. They identify all the installed security solutions, and they make themselves invisible because they can. After that, they operate with impunity. Our technology, the security use case that we're seeing a lot of traction is, is we can detect that we're applying Blockchain. We're agnostic, so bring your own Blockchain in our case. But we're able >> chain kit a product. Is it a development environment >> globally. Available service Jose on AWS rest ful AP eyes and fundamentally were enabling developers to harden their app stuff to wrap a chain of custody around key data or logs in their laps so that when the attacker's attempt a leverage at administrative authority and tamper with locks tamper >> with service, not a software, >> it's a apply. It's a developer oriented service, but >> this is one of the biggest problems and challenges security today. You see the stat after you get infiltrated. It takes 250 or 300 days to even detect, and I have not heard that number shrink. I've heard people aspire number streaking this. >> We can get it down to realize a crime tip of the spear. That's what we're excited to be here. We're excited to talk about One of the dirty secrets of the security industry is that it shouldn't take a year to detect in advance attack. >> Guys, Thanks for coming on. Cuban sharing your insight. Concussions in your head. Well, great to see you. >> Likewise. And thank you, j for having us on here, and we're looking forward to coming back and weigh. Appreciate. Absolutely >> thankful. Spj Thanks for you. >> It was always paying it forward. Of course, really the most important conversation, that security is gonna be a Blockchain type of implementation. This is a reality that's coming very soon, but we're here. They do is reinforce. I'm talking about the first conference with Amazon Web sources dedicated to sightsee. So's Cee Io's around security jumper. Develop the stables for more coverage. After this short break, >> my name is David.

>> Live from San Francisco, California, it's theCUBE covering the IBM Chief Data Officer Summit. Brought to you by IBM. >> Hi everybody, welcome back to theCUBE's coverage of the IBM Chief Data Officer Event. We're here at Fisherman's Wharf in San Francisco at the Centric Hyatt Hotel. This is the 10th anniversary of IBM's Chief Data Officer Summits. In the recent years, anyway, they do one in San Francisco and one in Boston each year, and theCUBE has covered a number of them. I think this is our eighth CDO conference. I'm Dave Vellante, and theCUBE, we like to go out, especially to events like this that are intimate, there's about 140 chief data officers here. We've had the chief data officer from AstraZeneca on, even though he doesn't take that title. We've got a panel coming up later on in the day. And I want to talk about the evolution of that role. The chief data officer emerged out of kind of a wonky, back-office role. It was all about 10, 12 years ago, data quality, master data management, governance, compliance. And as the whole big data meme came into focus and people were realizing that data is the new source of competitive advantage, that data was going to be a source of innovation, what happened was that role emerged, that CDO, chief data officer role, emerged out of the back office and came right to the front and center. And the chief data officer really started to better understand and help companies understand how to monetize the data. Now monetization of data could mean more revenue. It could mean cutting costs. It could mean lowering risk. It could mean, in a hospital situation, saving lives, sort of broad definition of monetization. But it was really understanding how data contributed to value, and then finding ways to operationalize that to speed up time to value, to lower cost, to lower risk. And that required a lot of things. It required new skill sets, new training. It required a partnership with the lines of business. It required new technologies like artificial intelligence, which have just only recently come into a point where it's gone mainstream. Of course, when I started in the business several years ago, AI was the hot topic, but you didn't have the compute power. You didn't have the data, you didn't have the cloud. So we see the new innovation engine, not as Moore's Law, the doubling of transistors every 18 months, doubling of performance. Really no, we see the new innovation cocktail as data as the substrate, applying machine intelligence to that data, and then scaling it with the cloud. And through that cloud model, being able to attract startups and innovation. I come back to the chief data officer here, and IBM Chief Data Officer Summit, that's really where the chief data officer comes in. Now, the role in the organization is fuzzy. If you ask people what's a chief data officer, you'll get 20 different answers. Many answers are focused on compliance, particularly in what emerged, again, in those regulated industries: financial service, healthcare, and government. Those are the first to have chief data officers. But now CDOs have gone mainstream. So what we're seeing here from IBM is the broadening of that role and that definition and those responsibilities. Confusing things is the chief digital officer or the chief analytics officer. Those are roles that have also emerged, so there's a lot of overlap and a lot of fuzziness. To whom should the chief data officer report? Many say it should not be the CIO. Many say they should be peers. Many say the CIO's responsibility is similar to the chief data officer, getting value out of data, although I would argue that's never really been the case. The role of the CIO has largely been to make sure that the technology infrastructure works and that applications are delivered with high availability, with great performance, and are able to be developed in an agile manner. That's sort of a more recent sort of phenomenon that's come forth. And the chief digital officer is really around the company's face. What does that company's brand look like? What does that company's go-to-market look like? What does the customer see? Whereas the chief data officer's really been around the data strategy, what the sort of framework should be around compliance and governance, and, again, monetization. Not that they're responsible for the monetization, but they responsible for setting that framework and then communicating it across the company, accelerating the skill sets and the training of existing staff and complementing with new staff and really driving that framework throughout the organization in partnership with the chief digital officer, the chief analytics officer, and the chief information officer. That's how I see it anyway. Martin Schroeder, the senior vice president of IBM, came on today with Inderpal Bhandari, who is the chief data officer of IBM, the global chief data officer. Martin Schroeder used to be the CFO at IBM. He talked a lot, kind of borrowing from Ginni Rometty's themes in previous conferences, chapter one of digital which he called random acts of digital, and chapter two is how to take this mainstream. IBM makes a big deal out of the fact that it doesn't appropriate your data, particularly your personal data, to sell ads. IBM's obviously in the B2B business, so that's IBM's little back-ended shot at Google and Facebook and Amazon who obviously appropriate our data to sell ads or sell goods. IBM doesn't do that. I'm interested in IBM's opinion on big tech. There's a lot of conversations now. Elizabeth Warren wants to break up big tech. IBM was under the watchful eye of the DOJ 25 years ago, 30 years ago. IBM essentially had a monopoly in the business, and the DOJ wanted to make sure that IBM wasn't using that monopoly to hurt consumers and competitors. Now what IBM did, the DOJ ruled that IBM had to separate its applications business, actually couldn't be in the applications business. Another ruling was that they had to publish the interfaces to IBM mainframes so that competitors could actually build plug-compatible products. That was the world back then. It was all about peripherals plugging into mainframes and sort of applications being developed. So the DOJ took away IBM's power. Fast forward 30 years, now we're hearing Google, Amazon, and Facebook coming under fire from politicians. Should they break up those companies? Now those companies are probably the three leaders in AI. IBM might debate that. I think generally, at theCUBE and SiliconANGLE, we believe that those three companies are leading the charge in AI, along with China Inc: Alibaba, Tencent, Baidu, et cetera, and the Chinese government. So here's the question. What would happen if you broke up big tech? I would surmise that if you break up big tech, those little techs that you break up, Amazon Web Services, WhatsApp, Instagram, those little techs would get bigger. Now, however, the government is implying that it wants to break those up because those entities have access to our data. Google's got access to all the search data. If you start splitting them up, that'll make it harder for them to leverage that data. I would argue those small techs would get bigger, number one. Number two, I would argue if you're worried about China, which clearly you're seeing President Trump is worried about China, placing tariffs on China, playing hardball with China, which is not necessarily a bad thing. In fact, I think it's a good thing because China has been accused, and we all know, of taking IP, stealing IP essentially, and really not putting in those IP protections. So, okay, playing hardball to try to get a quid pro quo on IP protections is a good thing. Not good for trade long term. I'd like to see those trade barriers go away, but if it's a negotiation tactic, okay. I can live with it. However, going after the three AI leaders, Amazon, Facebook, and Google, and trying to take them down or break them up, actually, if you're a nationalist, could be a bad thing. Why would you want to handcuff the AI leaders? Third point is unless they're breaking the law. So I think that should be the decision point. Are those three companies, and others, using monopoly power to thwart competition? I would argue that Microsoft actually did use its monopoly power back in the '80s and '90s, in particular in the '90s, when it put Netscape out of business, it put Lotus out of business, it put WordPerfect out of business, it put Novell out of the business. Now, maybe those are strong words, but in fact, Microsoft's bundling, its pricing practices, caught those companies off guard. Remember, Jim Barksdale, the CEO of Netscape, said we don't need the browser. He was wrong. Microsoft killed Netscape by bundling Internet Explorer into its operating system. So the DOJ stepped in, some would argue too late, and put handcuffs on Microsoft so they couldn't use that monopoly power. And I would argue that you saw from that two things. One, granted, Microsoft was overly focused on Windows. That was kind of their raison d'etre, and they missed a lot of other opportunities. But the DOJ definitely slowed them down, and I think appropriately. And if out of that myopic focus on Windows, and to a certain extent, the Department of Justice and the government, the FTC as well, you saw the emergence of internet companies. Now, Microsoft did a major pivot to the internet. They didn't do a major pivot to the cloud until Satya Nadella came in, and now Microsoft is one of those other big tech companies that is under the watchful eye. But I think Microsoft went through that and perhaps learned its lesson. We'll see what happens with Facebook, Google, and Amazon. Facebook, in particular, seems to be conflicted right now. Should we take down a video that has somewhat fake news implications or is a deep hack? Or should we just dial down? We saw this recently with Facebook. They dialed down the promotion. So you almost see Facebook trying to have its cake and eat it too, which personally, I don't think that's the right approach. I think Facebook either has to say damn the torpedoes. It's open content, we're going to promote it. Or do the right thing and take those videos down, those fake news videos. It can't have it both ways. So Facebook seems to be somewhat conflicted. They are probably under the most scrutiny now, as well as Google, who's being accused, anyway, certainly we've seen this in the EU, of promoting its own ads over its competitors' ads. So people are going to be watching that. And, of course, Amazon just having too much power. Having too much power is not necessarily an indication of abusing monopoly power, but you know the government is watching. So that bears watching. theCUBE is going to be covering that. We'll be here all day, covering the IBM CDO event. I'm Dave Vallente, you're watching theCUBE. #IBMCDO, DM us or Tweet us @theCUBE. I'm @Dvallente, keep it right there. We'll be right back right after this short break. (upbeat music)

>> live from Boston, Massachusetts. It's the queue covering your red hat. Some twenty nineteen lots. You buy bread >> and good morning. Welcome to Beantown, Boston, Massachusetts to Mina Mons Hometown by the police Town of residents. John Wallis was stupid from here on the Q. Bert had summit and stew for you. Good to see you here. And a home game. >> Yeah, John, Thanks so much. Nice. You know, Boston, The Cube loves Boston. The B C E C is actually where the first cube event was way back in twenty ten. And we wish there were more conferences here in Boston. Gorgeous weather here in the spring. Ah, little chilly at night with the wind coming off the water, but really good. Here is the sixth year we've had the Cube here, right? Had some in my fifth year at the show. Great energy. And, you know, thirty four billion reasons why people are spending a lot of time keeping a close eye on. Let's just know. Yeah, >> jump right in thirty four billion dollar deal. I am red hatt gotta prove by doj uh, here in the States. But there's still some hurdles that they have to get over in order for that to come to fruition, Maybe later this year. That's the expectation. But just your thoughts right now about about that synergy about that opportunity that that we think is about to have. >> Yeah, so? So right, let's get this piece out of the way. Because here at the conference, we're talking about Red Hat. The acquisition has not completed. So while the CEO of IBM you know Jenny will be up on stage tonight along with, you know, Jim White Hirsi over at Hat and Sakina della, you know, flying in from Seattle, where you might get your name yesterday. So you know, at least two of those three your Cuba Lem's. So we'LL get Jenny on one of these days. But, you know, this is a big acquisition, the largest software acquisition ever, and third largest acquisition in tech history. Now we watched the first biggest tech acquisition in history, which was Del buying AMC just a couple of years ago. And this is not the normal. Okay? Hey, we announced it and you know, it closed quietly in a few months. So as you mentioned, DOJ approved it. There's a few more government agencies Europe needs to go through. You never know what China might ask to come in here, but, you know, really, at the core if you look at it, you know, IBM and Red Hat have worked together for decades. You know, we wrote a lot about this when the announcement happened. You know, IBM is no stranger to open source. IBM is no stranger to the clinics and the areas where Red Hat has been growing and expanded too. You see, IBM, they're so communities, you know, super hot space. If you look, you know, Red hat is they're they're open shift platform, which is what Red Hat does for cloud. Native Development has over a thousand customers. They're adding between one hundred one hundred fifty a quarter is what they talk about publicly. We're gonna have some of those customers on this week. So huge area. That multi cloud hybrid cloud world absolutely is where it's at. We did four days of broadcast from IBM. Think earlier this year in San Francisco. And, you know, once again, Jim white hairs and Jenny were on stage together. They're talking about where they've been working together for a long time. and just, you know, some things will change, but from IBM standpoint, they said, Look, you know, the day after this closes, you know, Red Hat doesn't go away. That had just announced new branding, and everybody's like, Well, why are they changing their branding? You know, when you know IBM is taking over and the answer was, Look, Red Hat's going to stay as a standalone entity. IBM says they're not going to have a single lay off, not even HR consolidation, at least in the beginning. We understand, you know, give me your stuff to work out some of these pieces, but there are ears. They will work together. I look at it. John is like the core. What is the biggest piece of IBM's business is services. That Army of services, both from IBM and all of their Esai partners and everybody they worked with Khun really supercharge and help scale some of the environment that red hats doing so really interesting. Expect them to talk a little bit about it. Red hat is way more transparent than your average company. They had an analyst event like a week or two after it happened, and I was really surprised how much they would tell us and that we could talk about publicly. As I said, just cause I've seen so many acquisitions happen, including some you know, mega ones in the past. And we know how little usually you talk about until it it's done and it's signed. And, you know, the bankers and lawyers have been paid all their fees. >> Let me ask you, you raise an interesting point. Um, you know that there are some different approaches, obviously, between IBM redhead, just in terms of their institutional legacies in terms of processes. Red hat. You mentioned very transparent organization. Open source. Right. So we're all about the rebrand. They come out, you know, the drop shadow, man, They got the hat. What's that cultural mix going to be like? Can they truly run independently? Yeah, they're a big piece. So And if your IBM can you let that run on its own? >> So, John, that is the question most of us have. So, you know, I've worked with Red Hat for coming up on twenty years now, you know, Remember when Lennox was just this mess of colonel dot organ. So much changes that red hat came and gave, you know, adult supervision to help move that forward on. The thing I I wrote about is what Red Hat is really, really good at. If you look at the core, there do is managing that chaos and change on the industry. If you look how many changes happen, toe Lennox, you know every you know, day, week, month and they package all that together and they test all that same thing in Kou Burnett is the same thing in so many different spaces where that open source world is just frenetic and changing. So they're really geared for today's industry. You talk what's the only constant in our industry? John is it is changed. IBM, on the other hand, is like, you know, over one hundred years old, and I tried and true, you know, Big Blue. You know, I ibm is this, you know, the big tanker, you know, it's not like they turn on a dime and you know, rapid pace of change. You think of IBM, you think of innovation. You think of, you know, trust. You think of all the innovations that have come out over the century. Plus do there and absolutely there is a little bit of impeded mismatch there and we'LL see So if ibm Khun truly let them do their own thing and not kind of merged suit groups and take over where the inertia of a larger group can slow things down I hope it will be successful But they're definitely our concerns And time will tell we'll see But you know analytics front You know, they just announced this morning Rehl eight Red hat enterprise linen, you know, just got announced and definitely something will be spent a lot of time So >> let's just jump in a relative Look again, We're gonna hear a little bit later on. We have several folks coming on board to talk aboutthe availability. Now what? What do you see from the outside? Looking at that. What is it going to allow you or us to do that? Seven Didn't know. Where did they improve? Is that on the automation side? Is it being maybe more attentive, Teo Hybrid environment or just What is it about? Really? That makes that special? >> Yes. So you know, first of all, you know these things take a while in the nice thing about being open sources. We've had transparency. If you wanted to know it was going to be in relate. You just look in the Colonel and and it's all out there. They've been working on this since twenty thirteen. Well, seven came out back in June of twenty fourteen. This has been a number of years in the mix. You know, security. The new, like crypto policy is a big piece that that's in their thie bullets that I got when I got the pre briefing on, It was, you know, faster and easier Deploy faster on boarding for non lennox users on, you know, seamless nondestructive migration from earlier versions of rail. So that's one of the things they really want to focus on is that it needs to be predictable, and I need to be able to move from one version the other. If you look at the cloud world, you know, when you don't go asking customers say, Hey, what version of Azure a ws are you running on your running on the latest and greatest? But if you look at traditional shrink wrap software, it was well, what virginity running? Well, I'm running in minus two and Why is that? Because I have to get it. I have to test it out. And then I, you know, find a time that I'm gonna roll that out, work it in my environment. So there is stability and understanding of the release cycle. My understanding is that they're going to do major releases every three years and minor releases every six months. So that cadence a little bit more like the cloud. And as I said, getting from one version a rail to the next should be easier and more non disruptive. Ah, a lot of people are going to want manage offerings where they don't really think about this. I have the latest version because that has not just the latest features but the latest security setting, which, of course, is a major piece of my infrastructure today to make sure that if there was some vulnerability released, I can't wait, You know, six or nine months for me to bake that in there. The limits community's always good have done a good job of getting fixes into it. But how fast can I roll that out into my environment is >> something I would assume that's that's a major factor in any consideration right now is is on the security front, because every day we hear about one more problem and these are just small little issues. These these air are could be multi billion dollar problems. But in terms of making products available today, how Muchmore important? How's that security shift? If you could put a percentage on it used to be, you know, axe and now it's X plus. I mean I mean, what kind of considerations are being given? >> You know what I'd say? Used to be that security got great lip service A. Said it was usually top of mind, but often towards bottom of budget. When you talk to administrators and you say, Oh, hey, where's your last security initiative? And that, like I've had that thing sitting on my desk for the last six months and I haven't had a chance to roll that out. I will get to it, but I want to again. If you go to that cloud operating model. If you talk about you know Dev, Ops movement is, I need to bake security into the process. If I'm doing C i D. It's not, I do something and then think about security afterwards. Security needs to be built in from the ground level. A CZ. You know, I I've heard people in the industry. Security is everyone's responsibility, and security must be baked in everywhere. So from the application all the way down to the chipset, we need to be thinking about security along the bar. Mind it is a board level discussion. Any user you talk too, you know, you don't say, Hey, where's the security sitting? Your priorities. You know, it's up there towards the top, if not vey top, because that's the thing that could put us out of business or, you know, definitely ruin careers. If if it doesn't go >> right, so there are there are probably a couple of platforms, every will or pillars. I think you like to call them that. You're looking forward to learning more about this week. I think in terms of red hats work one of those green hybrid cloud infrastructure, and we'LL get to the other to a little bit. But just your thoughts about how they're addressing that with the products that they offered the services they offer and where they're going in that >> Yeah, so look everything for red at start with rail. Everything is built on Lenox, and that's a good thing, because Lennox Endeavor is everywhere. If last year is that Microsoft ignite for the first time. And when you hear them talking a Microsoft talking about how Lennox is the majority of the environment, more than fifty percent of the environment are running linen goto a ws Same thing. All the cloud deployment Lennox is the preferred substrate underneath and Rehl doing very well to live in all those environment. So what we look at is, you know, some people say, is this olynyk show. It's like, well, at the core. Lin IX is the piece of it and relate the latest and greatest substantiation. But everywhere you go, there's going to be Lennox there from doing container ization. If a building on top of it with the the new cloud native models, it's there. And if you talk about how I get from my data center to a multi cloud environment, it's building things like Cooper Netease, which read that of course, uses open shift and you know those ties to eight of us and azure and you know, Google they're all there. So we mention Santina della's on stage tonight at Microsoft build. Yesterday there was announcement of this thing called Kita ke e d A, which has, like as your functions and ties in with open shift and spend a little time squinting it, trying to tease it apart. We've got some guests this week that'LL hopefully give some clarity, but it is. The answer is people today have multiple clouds and they have a lot of different ways they want. They want to do things, and Red has going to make sure that they help bridge the gap and simplify those environments across the board. Two years ago, when we were at the show big announcement about how open shift integrates with a W s so that if I'm using a ws But I want to have things in my environment still leverage some of those services. That was something that that Red had announced. I was, you know, quite impressed a time it was, you know, just last week being at the Del Show, it's V m. Where is the del strategy for how they get you know, A W, S, G, C, P and Azure and, you know, Red Hat does that themselves. Their software company. They live in all these cloud worlds, and therefore, open shift will help you extend from your data center through all of those public cloud environments on DH, you know? Yeah. So it's fascinating >> you've talked about Lennox to we're going to hear a little bit later on to about a fascinating the global economic study, that Red Hat Commission with the I. D. C. Of that talks about this ten trillion dollar impact of Lennox around the globe like to dive into that a little bit later on. >> Yeah, well, it's interesting, you know, it's the line I used is you say, and you say, Oh, well, how much impact is Lennox had? You know? You know, Red hats now, a three billion dollar company. That's good. But I was like, Okay, let's just take Google. You know, no slots of a company. Google underneath. It's not Red Hat Lennox, but Lennox is the foundation. I don't really think that Google could become the global search and advertising powerhouse they were. If it wasn't for Lennox to be able to help them get environment, there's a CZ we always talk with these technologies. You talk about Lennox, you talk about How do you talk about, you know, Cooper Netease? There are companies that will monetize it, but the real value is what business models and creation by. You know, all the enterprise is the service riders in the hyper scales that those technologies help enable. And that's where open source really shines is, you know, the order of magnitude network effect, that open source solutions have that its you say okay, three billion dollars? And is that what ten trillion dollars? It doesn't faze me, doesn't surprise me at all, but because my attention it look it. I'm not trying to trivialize. There's no But, you know, I've been watching clinics for twenty years, and I've seen the ripples of that effect. And if you dig down underneath your often finding it inside, >> I mentioned pillars that you were talking about cloud native development being another. But automation, let's just hit on that real quick before we head off on DH just again, with how that is being, I guess, highlighted. Or that's a central focus at and relate and and what automation? How that's playing in there I guess the new efficiencies they're trying to squeeze out. >> Yes. So? So what we always looked for it shows you're probably the last year is you know, you. How are they getting beyond the buzzwords? Aye, aye. When you talk about automation on area that that we've really enjoyed digging into is like robotic process automation. How do I take something that was manual? And maybe it was a fish injure? Not great. How can I make it perfectly efficient and use software robots to do that? So where are the places where I know that the amount of change and the scale and the growth that we have that I couldn't just put somebody to keyboard, you know, and have them typing or even a dashboard to be able to monitor and keep up with things? If I don't have the automation and intelligence in the system to manage things, I can't reach the scale and the growth that I need to. So where are you know, real solutions that are helping customers, you know, get over a little bit of the fear of Oh, my gosh, I'm losing a job. Or will this work or will this keep my business running and oh, my gosh, this will actually enabled me to be able to grow work on that security issue if I need to, rather than some of the other pieces and help really allow it agility to meet the requirements of what the business requires to help me move forward. So those are some of the things we kind of look across the shows. So, you know? Yeah. How much do we get? You know, buzzword, Bingo at the show. Where How much do we hear? You know, real customers with real solutions digging in and having, you know, new technologies that a couple of years ago would have had a saying, Wow, that's magic. >> But you say, Oh, my gosh. Yeah, and I don't want gosh right back with more. You're watching to serve the cube with the red had summit. We're in Boston, Massachusetts, that we'll be back with more coverage right after this

>> Voiceover: From Palo Alto, California, it's Cube Conversations with John Furrier. (bright music) >> Hello everyone, welcome to a special Cube Conversation here in Palo Alto, California. I'm John Furrier, the co-founder of Silicon Angle Media and also the co-host of the Cube. Our special guest here is Grant Fondo, who's with Goodwin. He's the legal expert in blockchain initial coin offerings, also known as ICOs. Experienced federal prosecutor and former assistant US attorney in the northern district of California, head of the blockchain group at Goodwin. A lot of legal action going on. Welcome to this Cube Conversation. >> Thank you, John, nice to be here. >> Thanks for coming in. Goodwin, you guys are a great firm, well known in the Valley, helping entrepreneurs, I mean the track record of Goodwin is pretty significant. Been familiar with Anthony McCusker and the team over there. You guys are doing a lot of work. I've been asking around all of Silicon Valley, because we're hot on the ICO trail ourselves, blockchain, we've been following, covering extensively, Bitcoin, going back to 2010, it's a hot market. It's very frothy. But in asking around, I'm like, who's doing the legal work? So a lot of people are kicking the tires now, are now getting their toe in the water, want to explore blockchain, want to explore the notion of cryptocurrencies. Take a minute to talk about Goodwin, what you guys are doing, because you guys have a lot going on. >> We do. >> And there's a lot of issues to talk about. We're going to get to that. What do you guys do? Take a minute to talk about Goodwin. >> Sure, so we've been involved in this space for three and a half years now, probably. I got involved, I was a former federal prosecutor, as you mentioned. So I got involved in the regulatory side, represented a company at a DOJ in FinCEN settlement, and prior to that, kind of that took off my interest in it. I thought this area was fascinating. And the amount of talent and energy in this area is tremendous. So that's what launched my initial interest. And then from there, we've represented a couple of other companies in significant regulatory matters. But we're also very actively involved in the startup, and that's kind of Goodwin's bread and butter. And so particularly in the fintech and blockchain space. We've been doing it for a while. And so now what we've really seen, probably over the last eight months, is just a tremendous growth in interest in the token sales. You refer to them as the ICOs. And so we're probably representing 20 to 30 companies at various stages from just initial concept to launches. >> Yeah, I want to just, personal observation, we were talking before we were on camera here, is that, you know, I've seen a lot of waves in my time. And you know, cloud computing, I thought that cloud intersecting with data and mobile was going to be a home run. But I see blockchain is really one of those disruptive, reminds me of the early days of the web where it truly was the wild west. And it is kind of happening. So you have involvement in the white collar litigation and area in the past. This is essentially a rush onto the marketplace because with cryptocurrencies, with decentralization, and people experiencing distributed computing, it's changing business models. So people are making a lot of cash, if you will, in the raising money side. So people are going there. So there's a lot of people migrating into the space, not without some uncertainties. What are the issues? I mean, because on one hand, it's a scam, people say, and some people say it's legit. Where is it, where is it, where's the difference between the two? >> So I think in many industries, especially new industries, there's uncertainty. And I know the attention goes to the scams, right, but I think that's really the minor, very minor component of it. What you're seeing is a lot of good companies with great ideas who have developed a new model to develop their platforms. And part of what you saw on digital currency that people loved early on, you're seeing it in blockchain and now you're seeing it in token sales, is the democratization of their industries and their platforms. And so they're allowing, you see all these marketplaces being created. And tokens is a way to facilitate that, not only in the context of obviously raising money, but also providing a platform for people to participate on that platform. And so it's been fascinating. And so- >> And a lot of smart people are getting involved, too. You're seeing a lot of big brains getting in, and also entrepreneurs that know how to hustle. That's why I kind of called the early days of the wild west of the blockchain. Is there any pattern that you're seeing? What is the, what is the catalyst in your opinion? What's driving all this, besides the new way to finance or a new way to provide value? >> I think there's a couple things. One is the interest in the blockchain and the greater understanding, even now more mainstream. You know, eight months ago it was really more crypto people doing the token sales. Now we're getting calls from all aspects of industry. And so, and some very conservative, historically conservative ones. And so what I think people are seeing is this blockchain technology is really here to stay. It's really a transformative technology. And it's technology that applies to so many different industries. It's not just a crypto technology. It's a technology for everybody. And it also allows so many different participants and transparency. And so people are really fascinated by it. And they're using the token sales in part to help build that industry. >> Grant, I got to ask you the number one question that I get and one thing that I think about a lot in our businesses. What's the playbook? Take us through a day in the life of what's going on at Goodwin as you guys are dealing with people knocking on the door saying, hey, help us. And now you've been kind of pivoted to blockchain from natural extension where you've come from. Great position to be in cause it's a natural place. But this is a first time market. These new things are emerging, new use cases. What is the playbook? What are people knocking the door saying, help me with, how do I get this implemented, blockchain or an ICO, is there a playbook that you're seeing that's working? And what are the pitfalls should be avoided? >> Sure, so I mean there's a couple initial decisions that you have to make. And one is, the question we often get is, people are trying to stay within the boundaries. The problem is the boundaries are still very uncertain. And so you try and work with a brand new technology and a brand new concept with regulatory regimes that are a little bit older and not quite built for it. And so part of that, part of what the initial questions are when people call us, is how do we fit what you want to do within the frameworks and try and minimize any risk? Because in any business there's risk, but the smart thing to do is try to minimize it. And nobody who calls us is trying to scam anyone. They're trying to do this, launch a fantastic business, one that will be truly disruptive in their industry. And so one of the things we first deal with is jurisdictional issues. Where do we set up companies? And so do we set up, people have this common perception if I just set up a corporation abroad, will I be fine? And that's not the answer. And so you set up corporations and entities that make sense for that business, where the people are located, the executive team is based here in the US, that changes the dynamic. We also get a lot of foreign companies that call. So there's a lot of decisions about where does this company get set up? >> So this is almost like going back to business school 101, where you domicile or where you start the corporation, what entity is it, and all the paperwork that goes on. But I want to step back and talk about some of the distinctions that are nuanced or actually specific, if you will. The notion of utility versus securities, concept that's well known in business, but as it applies to blockchain. Those are specific nuances, aren't they, in how the regulatory market looks at blockchain? >> Absolutely. >> Can you explain like what means, how people should think about utility versus a security? >> So I break it down in two kind of examples. The typical utility token would be, remember when there were arcades, and you would go to an arcade, and you'd stick the token into Space Invaders or whatever the game may be, and there's still arcades out there. So that's a utility token. Does that token have some utility on the platform, is it doing something on the platform? That's what the model is so that it's essentially, people avoid some of the regulatory hurdles with a security. Conversely, a security is as you think about it. Typically, Silicon Valley was built on companies selling parts of themselves for equity and people buying into the company and getting stock. And so you're trying, most token sales are trying to avoid being termed a security, where someone is getting an interest in the company, an interest in the profits, control over the company, and instead what the model is based is on this utility token. The test is called a Howey test, and it's basically, if you hit certain criteria, you end up being a security. If you don't, hopefully you stay in the token regime. And so it's really, and the way to best do that is you build a token that truly makes sense on your platform, that people can use it to build, to transact, to exchange goods, to build ideas. And they're not running the company. They're just using that token in a sense, much like an arcade token is used. >> So it's not like a security, like a stock, so there's no stock option plan, there's no token plan. You can't think about it that way, is that what you're saying? >> Yeah, well, so you raise a very interesting issue because there's, there have been some companies that have set up tokens like vesting over time that tend, or tokens for employees or tokens for advisors. And I think there's a risk that the FCC says, wait a minute, that looks a little bit like an option or a security. So one of things we advise is do not set up token plans or vesting token plans because that may be an indicia for the FCC to say, hey, listen, that's a security. >> Well I want to get to drill down on the whole government, cause it's still going to be some things are coming down the pipe, and this is also a global phenomenon. So it's interesting jurisdictional questions. I want to get to that in a second. But just to stay on the security piece, one you mentioned earlier that most of the blockchain activity around ICOs, around disruptive, or democratization, I think you used the word, but really it's disruption of markets. So one of the areas we're seeing is the Brave browser with the BAT token that's disrupting kind of the web browser kind of thing, or the user experience. Steam does like a bit of a Reddit kind of clone. And there's a variety of other ones. We've seen some all over the place in different verticals. And then there's one that's democratizing venture capital. So we've seen some activity around folks were using cryptocurrency to invest in companies. Talk about the dynamics between those two approaches and mainly the funding one. Is it still kind of wild west, undefined, or how does that work? >> So I think initially it was wild west. You had basically crypto people investing in companies and buying these tokens. Now what you're seeing is the VCs are smart people. We represent a bunch of them. They're successful for a reason. And they're aggressive, in the sense of they're not afraid to take risk, and they're constantly on the move for new ideas and- >> John: So VCs are investing in crypto? >> So now you're seeing, I think there's a lot of interest, I'm getting a lot of calls about, can we present, a VC fund will ask, will I come in and present and kind of walk through the token process, what are the risks. I get a lot of calls from investors, you know, more sophisticated, traditional investors, hedge funds, about what are the risks here, how do we invest, how do we minimize our risk? And it's a new paradigm, but it's a paradigm that I think the traditional financing vehicles are paying a lot of attention to now. >> So it's still an open book at this point, not truly defined but there is activity. What is the entrepreneur's perspective, what's that side of the table look like? Because they are looking at this, and certainly they're all in there, jumping in with the ICOs. How are the entrepreneurs looking at it, and how should they deal with these new, progressive investors? >> So the entrepreneurs are looking at it, quite frankly, as an alternative to VC and loans. And I think that they view it in part as, it's a quicker and easier way to raise money, in a sense, but also that there are potentially less strings attached. And I think there's some truth to that, but I think one of the key components is when you raise that money and you apply, you have to do it in a truthful, honest manner, and you can't mislead people. You need to be pretty, pretty forthcoming about your disclaimers and things like that. So it's not a, you know, unattached raise in a sense. You just have to be careful about that. But I think they're viewing it as, as any entrepreneur, you're always probing for what's new, how do I get, best get to what I need to do to achieve and have a chance with my business? And they're saying this is a great alternative. >> Alright, so I got to ask the tough question. And that is, from an entrepreneur perspective, this sounds like it's going to cost me a lot of dough to get this done. What are the fees like? I mean, you don't have to give specific numbers, but I mean, are we talking series A? Is it the financing kind of model? I mean, are we talking about hundreds of thousands, cause it sounds like there's a lot of work. It's getting first time work going on, the leverage and the economies of scale aren't there. You guys are doing a lot of work. So you're getting there, but I would imagine that the fees would be enormous. >> So I think it depends on what type of token sale you do. If you do an unaccredited token sale, which is the majority of them, fees are a lot less, or less. If you do accredited, it's a little bit more. But I think there's a couple different components. There's not only legal. And the legal can be, I mean, you can get sort of the Mercedes version of, we'll write you 10 memos about the following, but I don't think that's, most entrepreneurs don't take that approach. With some reason, because the memos are never going to say, whatever you do is perfect. So I don't typically recommend that. But so the fees are probably not as much as you would think. I think where the fees start to escalate is there's a lot of different components to this. One of the fascinating things about digital currency, blockchain, and now token sales, is there's so many components to it. And so for the entrepreneur, it's not only the legal, which I think they'll find is actually one of the least expensive parts of that process, but getting tax advice. So you're bringing in all these token sales. You really need good tax advice to make sure that you're maximizing your tax benefits when you do it. That can get expensive. >> And the tax issue could be significant because I'm sure even the government hasn't figured out, is it revenue or is it investment? So is it revenue or is it, I mean, how does the tax treatment? >> I think the IRS would look at it as revenue. >> Okay, so this frame, I kind of had a loaded question, I was kind of smiling there. But I want to go into the next question on that point because I think this brings up the next one, is how do I organize my company? Because you know, I'm scared to get sued, I don't want to get put out of business. I've already seen Robert Scobel say on Facebook, I'm doing an ICO. And then all of a sudden, almost like a legal, I'm not advising that company anymore. So someone must have coached him, like hey, if you get involved, you're promoting it. So people don't know where the lines are anymore on what was old kind of test standards, can't promote it, an offering, is it revenue, gray area. So people are organizing outside the US. >> Grant: Yes. >> What's the best practice of a company says, hey, I want to do an ICO. What do I do? >> So I don't think there's a best practice. I think you have, because every company is different. I think, but there are guideposts. And so I think the biggest guidepost is where are you located? If your team is in the US and you want to get, and or you want to get US dollars, you have to assume you're going to be regulated by the US regulatory regime. So you have to deal with that reality. And then so you structure things differently. So then the next question is, are you going after accredited or unaccredited token purchases? And so then, most people want to do unaccredited. So then the measure of protection is, okay, is our token truly utility. You and I talked about that a few minutes before. And so that's sort of the threshold issues. If you're going abroad, you really have to be completely abroad, meaning no US money, no US executive team, the company's abroad, the business is abroad, et cetera. Cause the US takes very, the US regulators, and I was a former prosecutor, they take a very broad view. >> John: So they'll see right through that mirage. >> They'll see right through it. If there's any impact in the US, they have jurisdiction over it. And they'll, if US people have been harmed, they will take notice. >> So there's no real kind of way you can get around that. How about the Cayman Islands, certainly the countries in Panama, been a lot of issues there. I mean what, is Cayman Islands an option, or? >> So the Cayman Islands, it's a great question. The Cayman Islands is a great option for tax purposes. So a lot of token sales are being run out of the Cayman Islands because of the tax benefits. It's not a regulatory protection in my view, unless you happen to be all abroad, and you're not seeking US money. But usually it's primarily sent there for the tax purposes. >> Alright, let's talk about the regulatory issue, cause this is still, we've heard, it's pretty much again the wild west. We said, there's been a rush, and there's been rumors that the FCC and the federal government's going to be putting things in place at the end of this year, maybe early next year. The timetable seems to be shifting, it's a moving train. What is the concern on regulatory, and how is that impacting people in the blockchain ICO market? Because it seems to be like a rush. Get out before you can be grandfathered, has there been any statements of grandfathered, that's a big area, what's going on there? >> So I think what you see is about two weeks, two, three weeks ago, the FCC came down and issued some guidance. And I say that with a little bit of a grain of salt because I don't think it was a tremendous amount of guidance, but there's a couple of takeaways. One is if you are, if act like a security, they're going to view you as a security. That's not news, but that's fine. The second component, which I thought in many ways was very interesting, was they said, they implied that some token sales are not securities, which we always believed, but it was a nice tacit concession. >> John: A utility. >> A utility, yes. So not all token sales are securities, and therefore they are utility. So I think, and that's where the battleground is. What was frustrating about, I mean one other aspect, too, was they mentioned the term participants. So if they believe that a token sale is a security, not only will they necessarily go after company, but they will go after participants of that token sale. >> Like, potentially VCs or investors, or? >> Well I think it's an open question, what participants mean. Historically, if you look at like securities, and I used to do securities litigation, and I do insider trading and things like that, participants would be like investment banks, for example. >> Got it. >> So if there's a pseudo-investment bank involved, and I think they would view that term broadly, cause it's typically not investment banks in token sales. But the FCC might say, listen, you're a participant. You benefited, you helped launch the sale, et cetera. So I think for participants there's potential risk as well. But they really did leave, they left the door open for the token. >> They're not hardcore, they're not, so it sounds like they're giving some guidance, like hey, we're watching you, but we're going to let this thing play out a little bit more. Let the professionals kind of deal with it. >> I think it's two things. One is I think they said, historically, those that launched earlier, we're probably going to let that pass, as long as you didn't commit fraud. That's sort of my read on it. And then the second component is that we are watching you, and you're on notice now. So don't cross that line. >> So you brought up the investment bankers, I mean, I just, I salivate when I see this whole, opportunities out there because you think about the traditional IPO process, not to compare ICOs to IPOs, but there is a serious bunch of cash coming in. I mean, a couple of these ICOs pulled in over 200 million dollars. That's some serious cabbage, as we would say back east. So this is significant. Is there like rules on market-making, what you can say, how you promote it? There's a Reg D and then there's like this A Plus stuff going on out there. I'm not an expert in that area. I'd love to get your thoughts on how should people watch the lines on how this gets done? Are there market-makers? There are certainly sites that promote ICOs. How is all that playing out? Is there, can you share some insight on that? >> Sure, so for if you're doing a utility sale, and your position is that you're not a security, general advice is you should not be marketing your token as an investment opportunity, that our token's going to go up in value, you don't want to be publicizing like, here's a great way to make money, buy our token. That's not, that looks like a security. You mentioned Reg D. So Reg D related to accredited investors in the US. And generally the rules are you can't publicize your token sale if you're targeting accredited investors. So likewise, you shouldn't be putting things on your website targeting all types of people. So that's where people will get in trouble. I think the area that for entrepreneurs, like Silicon Valley is so social media focused, right? Between Reddit, Twitter, et cetera. >> John: It's a lot of promotion going on. >> And the nice things about a lot of these token sales is they're building these communities. It's a fascinating area. But the downside of these communities and these constant communications is you have to be very careful with your language. So when you have these Reddit community hosts that are helping you with your launch, for example, be very careful what you say. You can't in any way imply that you're trying to, you know, raise, the tokens will go up in value, or trying to protect the value of the tokens. So you have to be very careful, and that's a tough thing. >> I better delete my Facebook post I just posted two days ago. (laughs) Let's get straight to that. So utility is the key. I think I would see and envision more utility deals going down because this is where the infrastructure change is happening, I think that's phenomenal. I think there'll be arbitrage on the security side, just from my personal experience and opinion. However, that is the key. If I'm a utility token, what is the language I should use? So avoid selling it as a security, so or using language. What's safe? What would be safe? If we're doing a utility token sale, what's safe language? Can I say, hey, get your coins, join our platform? Do I market it like software? Do I market it like a technology? >> I think you market like a token at an arcade, in a sense. It's a simplification, but I think the concept's the same. You're marketing that this token sale, this token has this great use on your platform. And people should be really excited about joining your platform. And they should be excited about buying those tokens so they can use them on the platform, whether it's to make money, whether it's to access games, whether it's to, you know, we're seeing in areas of artificial intelligence, life sciences, really the gamut. >> So show the utility use case more than money-making. (laughs) >> That's all you should be talking about is the utility case. Because you're selling your platform. And you're selling just a mechanism to get onto your platform. >> Okay, so what's the conversation like at the law firm these days? I'm sure that's, the firm's buzzing with the growth of the inbound. You have, I don't know if you can say the number of ICOs you've got in the pipeline. If you can, it'd be great if you can share. Greater than 10, less than 100? >> Yeah, no I, right now I'm actively advising probably 20 to 30 companies that are in the process or at some stage in the process. >> Where's the scar tissue? What have you learned? What's the big ah-ha takeaway for you that you could share, anecdotally from these ICO processes? >> That's a good question, really. So I think it's tempering people's expectations. I think you get, I mean we really, the reason I left the government and I got in with Goodwin and stayed in Silicon Valley was cause I loved the entrepreneurial aspect here. And so you get excited for your clients and you have these clients that approach you with these great ideas. And some of them are like mind-boggling. I should have thought of that, never did. And so you have to temper that a little bit, and temper their natural enthusiasm to say, okay, listen, there's a right way to do this, and there's a wrong way. Or there's not necessarily a wrong way, but a more gray area. And if you want to really be more in the right area, here's how we have to do it. It may not be quite as lucrative. It may not be as easy. But it's the right way to do it. And let us help you get there. >> Where's the operational bumps that you guys have hit, and where's it been similar to existing legal practices within the firm? >> I think the operational bumps is there's just not a lot of people that really know the space. I get calls a lot, and people will say, my god, you're a lawyer who actually understands what we're talking about. And so even in a firm like Goodwin, you know, there's a segment of us that, we have a team, and so we understand the language. But not everybody does, right? And so I get calls, even internally from the firm, can you help us out on this? I have a client who's talking a slightly different language. And so that's, but that's fun. I mean, that's the exciting part of the process. >> And you have a natural background in digital rights and securities and white collar crime, you mentioned some of the things you were involved in. Seems natural, that seems to be the profile, doesn't it, for a legal kind of pedigree? >> I think it is because what's another interesting aspect about this is it covers a lot of regulatory regimes. So obviously it's fraud, it's DOJ, where I used to work, US attorney's office, but also FinCEN and other- >> John: What's FinCEN? >> So FinCEN is basically the regulatory regimes that deals, federal level deals with money transfers. >> John: Oh, fintech or. >> Yeah, and so like Western Union, moving money back and forth. >> John: Got it. >> But there's a lot of issues with moving tokens as well. >> Wire fraud, right, it's like token frauds. We'll get a whole nother practice. You're going to be in business for a while. (laughs) Final question, your vision on how this plays out, just if you can shoot it forward five years, look at the trajectory. I mean, you must be sitting there pinching yourself, like man, this is pretty wild. I mean, is that where you're at? What's your vision of how this plays out? >> I think we're in the beginning stages. I think, you know, when I got involved with digital currency three and a half, four years ago, I didn't know where it was going, but I knew it was going somewhere. And I knew that no matter what we projected, it would go in a different direction. And it has. It's such a great technology. So I think the token sales will continue. I think as the regulatory regime becomes more certain, we'll continue to figure out how things go. But I think it's here to stay. The amount of interest outside the Valley now and other tech hotbeds is extraordinary. And so I think it's transformative, and I just think we're at the beginning of that wave. >> Great, great stuff, Grant Fondo. One final, final question cause it just popped in my head, is I get a lot of questions from some of my smart legal friends who are, you know, kind of in litigation, some are, you know, GCs and companies, some are at firms, CXOs at large enterprises. The number one question is get is, man, I got to pay attention to blockchain. What do I do? How do I find information? How should I attack learning and immersing myself into it? What advice would you give there? >> So a couple things. One is YouTube's got some great videos on just what is blockchain, what is digital currency? And I, you know, I sometimes check in on them, just to refresh my memory on them. So they're great. I also, we have a blog. So it's Digital Perspectives. So check out blogs that interest you. And those are great ways to do it. There's also meetups, like in Silicon Valley there's the Ethereum meetup. So there's a lot of opportunity to really get to know it. And those are the ways I recommend. You go to a couple of those Ethereum meetups, they're really interesting. >> Well we'll certainly have you back for checking in with us. And great to have you right down the street here from our Palo Alto office. Great firm, Goodwin, doing some great work. They have a whole department dedicated to blockchain and ICOs. This is the Cube's Conversation here in Palo Alto. I'm John Furrier. Thanks for watching. (bright music)

>>Fly from Houston, Texas. It's the cube covering Grace Hopper celebration of women in computing. >>Welcome back to the cubes coverage of the Grace Hopper conference here in Houston, Texas. I am your host, Rebecca Knight. We have a great panel today. Uh, three distinguished guests, Jeanette Epps, an aerospace astronaut. Uh, an engineer at NASA, Mimi Valdez, a executive producer on the film, hidden figures and Christina DOJ who is a, I want to call her a rocket scientist. She will not let me, she's an electrical engineer at, at, at NASA. Thank you so much for joining me. Hey Jeanette. I want to start with you. Um, recently president Obama has said we're gonna put men on Mars, men and women, men and women on Mars. How realistic is that? I mean, it's exciting for the, for the rest of us, non astronauts to hear this is, is it realistic? >>It is realistic. And one of the things I love that he, he did that was that it gives a national initiative to go back to Mars. And so that means that people will get more involved in STEM careers, especially girls will get more involved. And it's kinda like, you know what JFK did back in the 60s to give us that push a goal, an end goal to do something. Great. >>And do you think that, you know, he said by 2030, it's not very long from now. I mean, is it going to happen? I mean, what's, >>well right now a witness is working on is we have the NASA Orion program and it's a, uh, a power light capsule that will be launched off of one of the largest rockets bigger than the Saturn five or as big. And so that the mission of NASA, Orion is to take us beyond low earth orbit and go deeper into space. So we're looking at NASA, Orion, potentially maybe being the ship that will go to Mars and you know, maybe we have more work to do, but all of getting the nation onboard with going to Mars will inspire a new generation to do great things that will help us to get to Mars. Even >>Obama has said he loves science as a kid. That was his favorite subject in school. And do you think that it will have this galvanizing effect of, as you said, making sure more little boys and girls are studying STEM? >>Well, I've seen it already with some of the tweets and different things, questions that kids ask me nowadays. I think every kid has in their heart this goal to go to Mars now. And um, I can't go to a conference or anywhere without, uh, some young child asking about Mars and what, what are, how are we going to get there? When are we going to get there? And you know, I think one of my jobs is to inspire them to get involved in STEM and help us to get to Mars. There's a lot of technology that we need to develop and produce so that we can get astronauts to live longer away from the earth surface. We have the propulsion system that can get them there faster and bring them back home long. Will it take, well, it depends on the propulsion system that we developed. So there's a number of things that we're working on to make sure that what president Obama has said will get us to Mars in the 2030s if it's pushed out to a little later, that's fine. We're working on it and we're, we're going forward with them. >>Mimi, I want to talk to you now about the film hidden figures. Uh, we'll be out in some theaters and Christmas wide release in January. It is the story of black women mathematicians working in the 1960s at NASA. How did you find out about this story? Well, I give credits at Donna gelato, one of the producers on the film who optioned the book when it was a book proposal. So before the book was even written, she optioned this the story, and it's just this amazing story that the world doesn't even know about. We all know about John Glenn's mission. He came back a national hero. It was a moment in history that galvanized the world. You know, America winning the space race. But we don't know the story of all these brilliant mathematicians, all these women who actually will really responsible Katherine Johnson specifically who hand calculated those numbers for his cause. >>Everybody, I mean, I think this is such an amazing thing to do. And, and again, we just don't know her story. And as well as Dorothy Vaughn and Mary Jackson, I mean, so many women that worked at NASA that were just, um, they were hidden. You just don't know their stories. So, so the film tells their story, it tells their, um, it tells what they did, how they helped John Glenn. Did John Glenn appreciate that John Glenn actually would not go into space unless Katherine double checked the numbers. Like he wanted her to actually, you know, he, he, he trusted her because this is when the IBM computers were first coming into NASA. So they had started asserted use that and he was like, Hmm, I, I need Catherine to check the numbers before I go into say they were friends, professional colleagues. I mean he just knew who, you know, obviously she, she was really responsible and sort of that whole mission. >>And, and you know, for him it was just sort of like, eh, these computers thing, this was like a new thing at NASA. He's like, I need a human to make sure that these numbers are right. Right. Yeah. So we're excited about the film. Who's in it? Taraji P Henson plays captain Johnson. Octavia Spencer, please. I'm Dorothy Vaughan and Janell Monae. Um, she's a, uh, a musician. This is sort of her first really big role and she plays Mary Jackson. Kevin Costner is the head of the space station. Um, we have really great actors, but I think what was really important to everyone who participated in the film was everyone understood the importance of the story and wanting to make sure that we got it right. And also, you know, movies are supposed to be entertaining, but when they can be also inspirational and educate in some way, the fact that some young girls somewhere may see this movie and decide to pursue a career in math or science or any of the STEM careers is really gratifying to us because that's what we would love to accomplish. >>You know, Christina, you have been at NASA for nine years. Uh, tell me about your style, how you got, how you got to NASA in the first place. So I've always loved space since I was like a young child. I was in fifth grade when I told my parents that I wanted to work for NASA. So really since that point, like that was, you know, my dream. And so I, you know, pursued the math and science. Those were some of my favorite subjects. Um, luckily I had some supportive parents who really like saw that desire in me and kind of nurtured and encouraged me to, Hey, if that's what you want to do, then you go for it. We'll do whatever we can. Um, and then I came across some NASA opportunities in high school. Um, and one of the programs was the high school aerospace scholars program. >>And in that program I kinda got a glimpse into what it was like to be an engineer, to work at NASA. I got to speak with, you know, fight directors and um, flight controllers. And there's so many people who contribute to the space program. And that experience really solidified my desire to pursue STEM, STEM. Um, so I started to electrical engineering and then from there, um, you know, did the internship at NASA and I've enjoyed my career so far. It's been a, it's been a great experience. And so you work on the jet propulsion system of spaceships. Um, I work Lena. Um, I work on the power systems power systems. So you are, what do you do? So, um, as an electrical engineer on power systems, I work on the design of the power system testing. Um, basically everything on the spacecraft is going to need power. >>So I'm responsible for how I need to provide power, how much, um, when we talk about going to Mars, that's a, that's a long duration mission and power is something that, um, you have to budget for. So we need to advance that technology to support these missions that, um, our administration has said we want to go there. How are y'all going to accomplish this? So there's a lot of um, design hands on work and it's, you know, it's a challenge. But I mean, together as a team, we can, I believe that will, you know, meet that goal and be able to deliver a power system that will take us to Mars. So this is a question for rip for really all of you. You're an astronaut, you were working at NASA, you just made a movie to encourage young women to, to, to, to get into the STEM field. Why is it NASA recruiting here at, at, at Grace Hopper and, and should it be, do not, do you want to take this? >>Well, that's a good question. It's not that I'm mass and I don't, it's not that I don't think NASA has a desire to recruit here. I think there's recruiting times where people come out and do that. But I think I'm, one of the things that we do in the astronaut Corps, we try to go out and attend conferences like that and try to inspire students to be interested in NASA to understand what NASA is doing, to understand, you know, the shuttle retired. But we're still flying. In fact, when I fly to space and hopefully in 2018 I'll fly with the Russians. But in the meantime, NASA's building two shadows that would take astronauts to the international space station and NASA, Orion, that'll take us deeper into space. So we want to try to inspire with our stories and get people interested in science, technology, engineering, mathematics, and now even the arts, the arts play a big part of this. The arts play a big part of the well, yeah, I think I'm as a scientist and looking at patterns and things like that, there's a lot of um, people who, um, begin to work in the arts, even if it's building things with their hands and making, sculpting things, painting things. And so there's a lot of artwork that comes into play in science that is >>really refreshing, exciting, count, counterintuitive. I mean, what would you say are the ways we've talked about getting them, getting them interested through, through film. Um, talking about, uh, Obama making this, this grand announcement and Treme, what are some other ways that we can get the next generation into this field? Well, representation is obviously important. I think when people get to see images in the media of these different fields and all the possibilities, I mean every kid on this planet is obsessed with their phone, maybe not realizing like the importance of these STEM careers that are making these phones even possible or even exist. And I think the more that we can expose these careers and all these possibilities, I think it will just be just more beneficial just for humanity in general. I mean, as we know, nothing in this world can exist without math. >>Nothing. So the more that we can sort of encourage young people to see what an incredible career this is in all the possibilities that go into it, I just think we'll be better off as a nation and as a, you know, just globally as a world. Jeanette, I mean, do you have any thoughts about how, what you would advise someone? I mean you started at NASA nine years ago. So I mean, as an engineer I feel like, I mean I am making some contribution, but really the way I feel like I have more impact is through mentoring and you know, participating in those outreach type of activities for, uh, younger students like K through 12. And then also, um, you know, undergraduate like where they're really like trying to figure out what are the career options and STEM. And so that's how I feel I can have an impact there. >>And these movies help because there's a surge of like, like it's inspirational for young students to see this and be like, Oh, I never knew that that was an option. And so we get outreached to NASA, um, our request to, you know, interact with, uh, local schools and communities and kind of, um, you know, do all my lessons or just teaching with them, just talking about kind of like what the career is like. So, um, I mean I hoping that I can contribute in that way for younger, younger people. Janette are, you are an impressive astronaut, but you are also known as a black woman astronaut. Yeah. D do you do, do you bristle at that or do you embrace it? What, what do you, how, what's the responsibility? >>Oh, I totally embrace it. You know, I'm young ladies always ask me, did you have a problem being a black woman and engineering? And I always tell them that, um, I don't have a problem with being a black woman. And if other people do, then that's their problem. I totally embrace it because I'm, one of the things that I didn't realize was that, um, there's still a need to have positive role models and images of yourself. You know, growing up, my mom never taught my twin sister and I that you couldn't do something because you are a female or Brown. But there are a lot of young ladies that actually do experience that. And so having a positive roam out of it, show them that, Hey look, if I can do this, you can do this too. There's no reason you shouldn't be doing this right now yourself. >>So you are a role model. And how do you then also make sure that it's active role modeling and not just sort of standing on a pedestal of. >>One of the things I like to do is like Catherine Johnson and these great ladies that, you know, without them I, you know, I wouldn't be here is you have to do well and you have to perform well. You have to do the same work that your colleagues are doing and don't do less and don't accept less either. And when it comes to the hard work, put in the time, do the work, complete the tasks and make sure you're, you're representing yourself and your group well and you don't want to be accounted as well. You know, she's the one that we've got to help and we've got to do this, but you want to be a contributing member to every group that you're a part of and completing the tasks, doing the same work if not better. I like to say do better work, but you know, you want to be a part of the. >>Yeah. But that puts so much pressure too because it is, it's, it's be a contributor, but also don't mess up because you are under a microscope to some degree because those are, >>you know, messing up isn't, isn't. Um, failure is never, um, should never be. If it's unintentional, that's okay because you always learn from your mistakes and you have to forgive yourself and keep moving forward. If you stop right there because of a failure, um, you wouldn't go anywhere. We all fell. And it's how you respond to it. That matters. >>Yeah. Every failure is an opportunity to learn. And I think, um, you know, yeah. You can't be scared. I mean, the first and foremost is just doing a good job that, cause once, if you're just dedicated and focused on that, then I think great things can happen. And then failure is really a, a buzzword in Silicon Valley too. Right now. It's a fail fast. Um, and this idea, as you were talking about that it's your response to failure that makes a difference. Yeah. And NASA, I became familiar with this famous phrase of failing forward, meaning that yes, you're going to encounter problems, but if you are learning from the, if you're making improvements, you can design something better. So we call it failing forward. And that concept has, I've embraced that comset and it's, you know, I've encountered many failures. I mean, designing new hardware. It's not gonna, you know, work right off the box. And I'm kind of embracing that idea that it's a learning experience. As long as you don't give up as if you're applying what you learned, then that is not a failure. Christina, this is great. Christina DOJ, Mimi Valdez, Jeanette Epps. Thank you so much for joining us today. This has been such a having to be here. I'm not worthy. Thank you. This has been Rebecca Knight live coverage of the Grace Hopper conference here in Houston, Texas. We'll be back after this break.

>> live from Las Vegas, Nevada. It's the Cube covering E M C. World 2015. Brought to you by E. M. C Brocade and D. C. >> You're watching E m C World Live here on the Q. Looking Angles Flagship program. We go out to the event they start the season noise. I'm John Kerry of my coast Dude. Minutemen. Our next guest is a cube. Alumni have been on a cute many times before and back again. 2011 John Thompson is the CEO of Virtual Instruments and also the chairman of a company called Microsoft. Um, welcome back to the cubes. Nice to be about Great to see you in the A M World week didn't interview on Virtual Instruments with CEO, and we were really riffing on this whole idea of data instrumentation. And we it was really free Internet of things. So give us the update. What's going on with virtue Instruments here? I see Microsoft has a conference going on ignite. Even though you're chairman. The board. You're also the CEO of Virgin Instruments and you're gonna do some business here. What's going on? What business are you doing? Well, this is an important conference for virtual instruments. DMC is one of our strongest go to market partners, and candidly, many of their customers are virtual instruments customers. And so it's an opportunity for me to be here to spend time with our partners and our customers in one venue. Our business is doing quite well. We just had a very, very strong March quarter, which is always a little bit of a down quarter for most tech companies. But we were up 27 28% year over year for the calendar. Q. One so we feel pretty good about that. This is the most important quarter of the year, though, which is always the case in Texas. So we're hoping that we can knock the ball out of the park again this quarter. We launched our virtual wisdom for platform in the spring of last year, and it is gaining tremendous traction, certainly in the U. S. And around the globe. It is all about health utilization in performance of the infrastructure, and we've defined a model where you can look at an application inside that infrastructure, monitor its performance and its availability, and that idea is so critical in a world where everything will someday live in the cloud and will you will want to assure a level of performance and, quite frankly, a level of responsiveness to customers as they come on says it's a reset to share the folks out. This is not a new concept for you guys. We talked about this years ago. It's not like you woke up one boys. Hey, things is trendy. This data center in fermentation takes us quickly back. Where did it come from? Was an itch to scratch. What original product as you have and how does that morph into today's crazy, data driven world, where dash boring riel time is actually competitive advantage and now table stakes? Well, if you were to go back to the genesis of virtual instruments, we started as a small technology investment inside a larger company called Venice are that was trying to solve the inevitable performance problem in the fibre channel world. And as the market crashed in 7 4008 the team at Venice or had to decide, how are we gonna clean up our portfolio? And the result waas. They sold off the assets? Were we, in fact, created virtual instruments. So a small group of investors, led by Jim Davidson from Silver Lake and Michael Marks from Riverwood, helped to fund the original investment and virtual instruments. We've been at it now for about seven years. We have clearly evolved the product quite a bit since then, and we've captured a number of very, very strong venture capital investment so long away as we made the choice. That said, we need the shift from being a fiber channel company to be in an infrastructure performance management company because the inevitable movement to the cloud will drive an opportunity for us. Yeah, and you're a senior executive private equity. I mean, this is pretty much a big bet. There's a lot of money involved with private equity. So it wasn't like you're, like, throw in the Silicon Valley startup together. It was really like, Okay, there's big money behind it. Well, you guys, did you see it turning out this way? What? What was learning that have been magnified from that trajectory? Well, I think in the early days we thought the path was a little different than what we've actually followed. We thought the path waas that the fibre channel World was so big and it needed better visibility. This would in fact give the world better visibility in the fibre channel space. What we have observed, however, is that the entire infrastructure has become Maur and more opaque, and therefore you need to not just drive visibility in the storage layer, but across the entire converge staff. And so the platform that we have evolved is all about supporting this converged platform not just fibre Channel, but filed a storage not just VM where, but all virtualized server environments. And we believe that's, ah, multibillion dollar market. And that's why we were able to attract both private equity initially and venture capital later as we built out of product. It's interesting. You see some of these ideas come a come around full circle. I'm curious. Just in industry trend. Your your opinion on Veritas, you know, being spun out. It's it's It's both sad for me personally, but I think it speaks to how difficult the cultural integration might have been between the two companies. While I really had a vision back in the old four or five days of security and backup coming together, I think It was a really, really difficult thing to make happen in the context of what has evolved at Samantha, so the fact that they've chosen to spend it out, it's perhaps a little disappointing for me personally, but not a surprise. So what is your vision of security today? My understanding, You advise, even sit on the board of ah Lumia company. We've way we've talked to the company really, what's happening in security. So if you think about how security has evolved once upon a time, it was about protecting the device candidly and a cloud based world. It's going to be more about protecting the workloads as they move around. And that's one of the elements of what a lumia does, in fact, provide. Furthermore, I have believed for a very, very long time that as time goes on, security will have to get closer and closer to that which is deemed to be most critical. In other words, you can't protect all of the data. You can't protect all of the instances that air on the Web, but you can identify those that are most critical and therefore need a level of protection beyond what the standard would be. And so my belief is that companies like a Loom EO and others that will evolve will get closer to the workload, and we'll get closer to the data that's most critical. And so data classification and things of that nature will become much, much more important than they have. You're an investor in aluminum. You on the board are okay, so you're on the board of director and investor. We covered their launch. Great company. The cracking is low slides, as as Alan Cohen would say, they phenomenal funding round gone from stealth two years and now the big $100,000,000 really funding round massive guerrilla marketing. Still going on at the air say, was kind of clever. The perimeter lists cloud is a factor. And what tech enabled? Do you see the key thing? Alan Cohen described it as 1000 foot shoulds soldiers protecting assets because there's no more perimeter that no front door any more. What is the technology driver for that? Well, the whole idea behind the loom Eo, is to have a what I would call a portable policy enforcement engine that can move as the workload moves around the cloud. So policy management, security policy management has been a very, very difficult task for most large enterprises. So if I can define security policies for every server of where workloads can go to and from on that server and make sure that nothing violates that policy, hence I enforce it routinely. Oh, I can change. The dynamic of House security gets delivered in a cloud based world because no workload is gonna run in any single place on a cloud world. That workload is gonna move to where there is capacity to handle. I gotta ask you because we have a lot of people out there that follow tech business test tech athletes that you are. But also, you're a senior executive who has a lot of experience, and we could be presenting to Harvard Business School, Stanford Business School. I want to get your kind of business mind out to the audience. And that is, is that as an executive who's seen the big, big companies, the big battleships, the big aircraft carriers, from the IBM days to the M in a world of the nineties and the transformation of the Internet now in a complete shift, an inflection point with things like a Loom, Eo and Cloud and and Virtual instruments and the new Microsoft and the Silicon Angles and the crowd shots out there, What do you advise managers out there to operate from a management perspective. I mean, there's a classic business school numbers quarter on the challenges of going public, managing enormous dynamic technology change. So every theater is kind of exploding the technology theater, the business theater, the social theater as an executive. How would you advise someone as a CEO are rising growing startup how they should stitch themselves together? If you can draw in from previous experiences? Or is there a pattern recognition you can share? Well, it's It's never simply about the numbers, while the numbers air always important and the numbers will always be the underpinning of evaluation or whatever. In reality, it's about having a team that is able to rally around a leader with vision that says, Here's how we're gonna change the world. Here's how we're going to make an impact as this industry goes through, the natural inflection points that it always does. And if you look at what has occurred in this industry about every 8 to 10 years, something significant changes. And so a company that may have missed an opportunity six or eight years ago has another shot at it six or eight years later because of the inflection points that we go through. So it's important for the leader of a company toe. Believe that I can change the world based upon the industry that I'm a part of and have a compelling point of view about what changing the world means for that company and that team. And if you could get the team together around that idea, what about cloud and big data and mobile thes dynamics that you would? If someone just wants a roadmap for navigation or what decked me to go after, What would you say? What do you say? You know, get it all in the cloud or go poke at a duel are indeed new, agile management. Things were happening like, Well, I think it starts with what are the court confidence is that you have as a team or company, so you can't say g I'm gonna go and do cloud and oh, by the way, I have no confidence in the management infrastructure for large enterprises or I'm gonna go do mobile and I really have no experience in the mobile space whatsoever. So core competencies matter and leveraging the core strengths of the company matters now. Oftentimes, what companies will do its supplement their core strengths through M, and we'll go out and acquire something and bolted on the hard part of M and A, which is what we were referencing early around. Veritas is Can you integrate it? Can you really make it work after you bought it? Buying it is the easy part. Generating it and making it work is the really, really tough part. And arguably we didn't do is good a job as I would have liked with Samantha. And so basically you're saying is if you as an executive, you want to look at the winds of change for hand, get the sails up, if you will, to confuse the metaphor and get into that slipstream so you can actually drive and you can't. Being an amateur, you gotta actually have some competency. You have a leverage point. Look, one of the great things about this industry is it doesn't take some brilliant business leader to create a new idea. I mean, no one ever would have viewed Zucker Bird as a business leader or some of the young, really, really powerful CEO built phenomenal, phenomenal companies in this industry. But they had an idea, and they were able to create a team around that idea and go change the world. And that's what's so powerful about this industry that I've had the pleasure to be a part of for 40 some years. Yes. Speaking about CEOs that changed the industry, John Chambers announced that he's stepping aside from the CEO role this morning. So you know when you look back, you know John was one of the four horsemen of the Internet era and 20 years there. Chuck Robbins is coming in. He's been there since C. I think 97. What do you think of that move? And you know what's happening with Cisco in leadership for the big companies? Well, John's a really, really good friend, and I admire him for all of what he's done and Cisco and I wish him well as he makes this transition. Interestingly enough, the transition is to executive chairman, with the new CEO stepping in so What that says is that John plans that have a little more involvement, perhaps in what goes on in the company. Then I do it. Microsoft. My title is not executive chairman of Microsoft. Thank goodness I wouldn't want it to. But it also speaks to the fact that John spend the CEO. It just goes since 1995 like that. So he has an enormous amount of knowledge and insight about the company industry, its customers, partners, culture, all of those culture. And so all of those things will be valuable and important to the new CEO. And I think him stepping into that role is trying to leverage that. Cenedella came in and made his voice heard really instantly. And Microsoft has been a great company to watch, you know, since Auntie's came on board, you know, just Cisco need to make some bold moves or are they pretty stable where they are is kind of the dominant? That's a better question for John and CEO. I think what is clear is that all all companies, at some point after find a way to redefine and Sasha's role at Microsoft. He has redefined Microsoft as a cloud first mobile first, and that's all about recognizing. Were acts are gonna run on what devices and what kind of service is. And that redefinition, I think, is important for any industry leader, regardless of how long you just brought us to the tagline of this show, M C World is redefined. So any comments, How's the emcee doing it? Redefining themselves, I think the emcees a terrific company. Joe's a longtime friend of mine. I mean, I know Joe forever on. It's been amazing to see how it's gone from being a storage company to this federation of companies that have capabilities that are so broad and so diverse. I hope they don't get pushed to do something that isn't in the best interest of customers, but maybe enamored by some investors. The angel of the activist pressure. Yeah, that's always and that that's unfortunate, but I think they have a nice balance now. They have a huge installed base and this competitive pressure so they gotta push that. But I have to. I have to ask, is that? You know, I was getting some tweets earlier about Microsoft, and I know you, you know, you're only chairman of the board executive chairman. But you were involved in a very historic where you were on the executive search committee for the CEO replacement for Steve Balmer, of which they chose sake. Nutella Cube alumni We interviewed at the XL Partners Innovation Summit in Stanford that that's about culture. That's about transitions, about inflection points. And Sister used to mention Cisco. Not similar situation. But Microsoft is the legend company. I think the computer industry like an apple. Microsoft was their big part of the computer revolution. Big seismic changing. You were right there. Just share some color on what that whole experience like for you personally. And if you can share any insights to the audience, I know it's a sense might be sensitive topic. But what's that like? And, you know, the outcomes. Looking good. As he says, he's doing great. What? What can you share? Well, I think it would be fair to say that it was a more consuming process than I ever thought it would be. I went from being a new board member of Microsoft in the spring of 2012 to be in the lead independent director in the fall of 2012 to leading the search starting in the summer of 2013. I mean, I never could have imagine my involvement there changing that dramatically, Nor would I have imagined that searching for a CEO of a company would consume 80% of my time when I was also running a company. So for a period of about six months, it's like athlete right there. I had two full time jobs where I was on the phone all day, every day, trying to get something done for the eye and on the phone all day, every day, trying to get something done for Microsoft as well. It was, I would also have to say and incredibly incredibly exhilarating experience. I talked to some phenomenal leaders from around the world way had hard, long look anywhere we wanted at any CEO or candidate that we wanted, and we settled on someone who was a Tech athlete. We believe that the company was at a really, really important inflection point where over the course of the next 12 to 24 months, we're gonna have to make some really, really important technology decisions that would set the course from Microsoft for many, many years to come. And so, while there was much speculation in the press about this person or that person, and what a great business leader, that person waas What we, as a board concluded, was that what our company needed at that moment in time was a true technology visionary who could drive the strategy of the company because it had assets. I mean, they had a whole search thing that they quote missed on paper. But they had, like you said, they could come back at it again with being the subtle art of assets. Here, Cloud was built out. Everything was kind of like in place for that tech athlete on. And I think soccer has done an amazing job. I'm quite proud of them. I'm happy toe say I have some small part in that, but I'm or happy for the way he has executed in the job. I mean, he steps into the job with a level of humility but confidence that is so important for the CEO of a company of that size, and to maintain that cultural DNA because you have one of most competitive companies on the planet. A question to the point where they had to be almost broken up by the DOJ from the Bill Gates kind of DNA and bomber to continued, be competitive, live in this new era. Really tough challenge. Well, he's he's a bright guy. He, as I said, has great humility and has the respect of the team. And it's been interesting to see the internal shift behavior and attitude with a guy who I jokingly say he has two ears and one mouth and he uses them proportionately. And that's a very important lesson for someone trying to transform a company. You must listen more than you talk, and I think he does a great job. We try to do that. The Cuban we talk all day long way do interviews, but I gotta ask you back to virtual instruments. Okay, gets a good business going on with the emcee Goto partner about the anywhere in the federation of a partner with you as well, say, Is it all Federation? It's mostly through E M. C. And while the em wears of small V I customer, we don't do much with them on the go to market side on the go to market side. We rely more heavily, if you will. On AMC, that partnership has evolved. I mean, from the early days it was viewed as G. We're not sure who you are and what you do and whether or not you're competitive with us today, we have very, very common go to market processes around the globe. I'd love to see them stronger. I just left to cheese office in San GI Joe. We could doom. Or but when it's when it's all said and gone, this is one of the strongest go to market partners we have that's also shared the folks out there what they might not know about insurance, that you could share their hearing this now for the first time and working on the radar future of your business, your division product, extensive bility. Future of Internet of everything. Future Internet of things, whatever you want to put on a big data and the data center now, and the migration of cloud is all here. So at our core, we believe that every large enterprise will inevitably have some, if not all, of their work in the class. So the question is, how do you help them manage that inevitable migration to the cloud by de risking the migration and ensuring appropriate infrastructure performance management. Once you arrive there, we focus on the largest enterprises in the world. So unlike many tech startups, that will start with a midsize or small company and work their way up well, the largest banks in the universe, the largest insurance companies in the universe, the largest of every sector in the universe is a customer of the eye or will be someday. And that notion of solving very, very complex problems is something that our team has great pride in our ability to do that I want to get philosophical with you. You can for second kind of sit back and, you know, have a glass of wine and kind of talk to the younger generation out there with all your history on experience. How great of an opportunity for the young entrepreneurs and CEOs out there right now. Given the the confluence of the shift and inflection points, can you compare this to an error? We on the Cubes say It's like the PC revolution bundled in with the clients, terrorists and the Internet. All kind of at once do you agree? And would you say it? Guys, you have an amazing opportunity. Well, I think example of just how crazy it is. I I was driving to the airport this morning, and what I thought would be our long drive took two hours. Because there's so many people on the road in the Valley going to work. There's just so much going on in Silicon Valley right now. It is amazing. And for anyone who has a really, really great idea, the thing that's equally amazing is there's lots of capital out there to support those ideas. And so I would encourage any young entrepreneur who has a thought socialize your thought, Get it out so people can learn about it and then go get money to support and back that though. There's lots of money out there for good ideas. Lots of money. \ewelry officially taking the time coming out. Your busy schedule. CEO Virtual Instruments, chairman of Microsoft Here inside the Cube tech athletes is a big deal. You are one of the great great. Always have a conversation with you, sharing your thanks so much. Just the Cuban. Be right back with more insights and the signal from the noise at this short break