>> Announcer: Live from Las Vegas. It's the CUBE. Covering HPE Discover 2017. Brought to you by Hewitt Packard Enterprise. >> Welcome back everyone. We are live in Las Vegas for HPE Discover 2017. This is the CUBE's exclusive three days of coverage. Day three here on the floor in Las Vegas. I'm John Furrier. My co-host Dave Vellante with Silicon Angle the CUBE. Our next guest is Denzil Samuels. Who's the Global Chief Channel Officer for HPE. Welcome to the CUBE. >> John, thank you. Good to be here, thank you. >> So we... Dave and I like to talk about the channels. I have a history with HP. Everyone knows I've worked there for a good almost nine years. And a lot of that time in the channel business. A lot of people also know that HP has always been channel friendly. >> It has. >> Really for a long time. >> Absolutely, we were born in the channel. >> Now more that ever with the cloud here. And the cloud really being multi cloud and pervasive. The channel part is going to be a huge opportunity. And they're close to the customers. They're on the front lines. What is the mix of business? What is the strategy? How are you guys taking the transformation message? The digital transformation to the channel and what are they doing with it? >> Wow, there's a lot of questions thrown in there. (laughing) Let me start with the channel business. The channel business is 70% of Hewitt Packard's revenue. We have 87,000 channel partners around the world. Every region of the world. Many, many countries. And you're right John. We were born in the channel. Right, so we're channel centric. We're channel friendly. We've got the best partner program in the world. And it's not us saying that. It's the partners telling us and industry analysts telling us that as well. In terms of the opportunity right now. You know, the cloud wars are still going on between the cloud players. But I think that what that's done is it's changed the model with respect to the fact that we're now looking more to congeal model. Right, where customers want to buy on a consume basis. Pay as you go. Pay as you use it. And that represents an incredible opportunity for the channel. And the channel has really embraced that. They realize that they've got to be more than just valueated resellers. They've realized they've got to morph and evolve into being service providers as well. And we're seeing that transition occur at a fairly accelerated pace. >> I'm assuming the channel guys would... And you see the global systemic race. Clearly lining up. They see that opportunity and a lot of transformation conversations. But as you go into the long tail of the channel. You said a ton of partners. They've always been hungry for services because that's where their gross profits are. Right, so you know, they take in hardware. The solutions. Very solution centric. But as the business model shifts to the customers renting versus buying per say. They're kind of teed up for the services. How has that specific transition taken place? I'm sure that they've probably been eager for being more of a service provider. >> Yeah. >> With the sense of actually maybe having their own cloud service or a variety of other services. What's the makeup and how is that going? >> Well, what they love about our message is the fact that we know that the customers are not only going to go to pure cloud. We also know the customers want a choice. They want to know if they can actually have their processing. Their compute done. Not just in their data centers. Or maybe even on Prime but even at the edge. And so because we have really the only simple hybrid IT strategy out there. That's why the channel partners love us. Because they're giving their customers a choice. They're saying it doesn't matter where your processing this. Whether it's on a consumption basis. Whether it's on the edge. In the cloud. On Prime, off Prime. We can do that for you and we can do that with HP. So they're embracing that. They love the consumption model. They love our flex capacity offerings. And our HP financial services offerings as well. So it's exciting for them. >> So my simple mental model of the channel. You talked about transformation before. As you've got sort of box sellers. I know it's kind of a pejorative. But it's still probably the largest component of the business. You've got solution providers and then I guess cloud service providers. Maybe ISV's are sort of a separate channel. You could make that argument. Maybe the hoodies are becoming a new channel as well. But, thinking about box sellers and solution providers. The box sellers have to transform. We all know that. They got big boats. Big houses. A lot of them are happy. They're going to retire. But the up and comers, they better transform. Solution providers, it used to be okay was it SAP or Oracle. Now it's IoT Solutions and different solutions. My specific question is. What's happening with that transformation from box seller to solution provider? And how is HP sort of helping it's channel get there? >> Great question Dave. I think one of the things that I love about it is that it's been going on for a few years. So it's not new. I talked, for example, to a partner yesterday in New Zealand. And I said, hey how's your transition to service provider been going? Cause they were a traditional evaluated reseller or box seller as you say. And they said, "Oh yeah, we became a service provider nine years ago." (laughing) And I talked to a distributor in Germany yesterday. And they said, I said. How many resellers are you actually converting to or helping transform their business into becoming service providers. And they said, "About 20 a week." So the shift has been going on for a few years. And there's a lot of information out there. There's white papers, there's training. There's sales plans, compensation plans have been modified. A lot of that material is there. We've helped through a lot of it. We have a playbook for making that transition. We have a service offering that we offer them. To help them if they don't know. But for the most part, the distributors. And the big evaluated resellers, they know it. It's the smaller guys that are making that change. >> And if we're starting a business. The three of us starting a business tomorrow. We'd say okay, let's build a subscription business. And we'll have a monthly revenue steam. Okay which is great. But if you're already used to the heroin of the big heap up front. Transitioning that model. The same is true for Hewitt Packard Enterprise I would imagine. As you're customers shift to a ratable model. You've got to change your financial model. You see a number of cases on Wall Street where companies are trying to make that transformation. Particularly software companies. >> Yeah. >> What kind of discussions are you having with the channel with regard to that pay as you go model. And how that affects their cash flow and income statements. >> Yeah, I think that what we're doing is, to help that. In terms of leasing options with the HP financial solutions. But I'm also helping with our flex capacity offerings. Those are two great triggers for the channel. They love that. They also like the fact that we're trying to be one step ahead of them, right. So I think the power of this is really around what the customer's buying. And they know that if they don't sell the way the customer's buying. They're going to be irrelevant. >> Denzil, can you explain how a flex capacity is not just renting. >> Yeah, I think one of the big, see... When you're rent you're buying. You're buying a size. Right, and you may use to the full size of your needs. Or you may not. But you're buying that. Whatever your capacity is that you're buying. You're buying that up front. If you don't use it, you loose it. Flex capacity is the opposite. You're actually paying for what you use. And some months you may use more. And some months you may use less. But you're paying for what you need. That's a huge advantage to the end customer. >> And HPE has figured out how to make a profitable business out of accommodating that. Cause you have to put the capacity there. Whether it's used or not. If it doesn't get used. You take the margin hit. Right? But you've figured out how to sort of maximize your profitability in that model. >> Yeah, we haven't just figured out how to do it. We've actually got a consulting practice that allows other to forget how to do it. So we actually help our. We actually help our partners morph to that as well. >> Is that just experience or is it some kind of magic analytics. >> I think it's a combination of a bunch of things. But let me tell you one thing that's really important in this transition to service providers. We used to do when we were dealing with the box sellers. The traditional certifications, right. You get a certification on a product. A product type. And you measure it on that. As part of the partner program. We've changed and evolved that partner program to say. Hey, listen. It's not just certifications on product. It's competencies. Right, data central analytics would be a competency. Understanding SAP HANA. How to implement that is a competency. So, as you move a program to embrace service providers away from traditional resellers. Having those competencies is huge. Understanding verticals is huge. And that all plays in to the usage question that you asked. >> This is a really great opportunity I think for partners. And this is what we've been kind of talking about on the CUBE. And a variety of different events we go to is. The cloud is really a amazing enabler because it's horizontally scalable but you need specialism in those unique domains. >> That's exactly right. >> Whether it's SAP. And big data highlights this. So you got to have that scale. And then you can also be specialized. So this opens the door up for a huge opportunity for your partners. So I totally get that. So I want to ask you guys how HP's changed? How you engage with your partners with digital? Because now you have to then be more efficient. >> Yes. >> With these guys. It's going to be there's 1,000 flowers are blooming and all these ridicules and these industries. >> Right. >> How are you guys using digital specifically to make yourself more efficient to move the market forward? >> That's a great question. So first, let me answer that by saying in the world of digital transformation. There isn't a single partner category. We're not just talking about service providers. We're not just talking about valued resellers or distributors. We're talking about independent software vendors and developers. We're talking about systems integrators. Sentiment manufacturers, device manufacturers. >> IoT opens a huge door. >> IoT. And let me tell you something. There may be partner categories we don't even know about today. But they'll be partner categories tomorrow. So the program we've built encompasses all of that. It encompasses all of these partner categories. Every region, every vertical, everywhere around the world. In terms of the digital piece of it specifically. The transformation. There's some interesting things going on with companies like GE Digital. You know, they've got jet engines now that they can actually transmit information on the wear and tear of every single blade within that jet engine. We can connect. We can connect that and collect and connect that data. We can analyze it. We can run inserts on it. And we can feedback powerful information that makes then drive outcomes to the customer, right. And all of that is linked through the IRT technology. Our edge technology and our hybrid IT approach. >> So you guys have the ABB cloud like in the sense of. Standing up programs with automation so we see Tesla self driving cars. Are you going to have a self driving channel? I mean. (laughing) At the end of the day you need to have these agile capabilities. This is kind of what you have to kind of get on right? >> You know, I think everyone has to do that. And I think there's no company right now in my mind that's more positioned to do that better than we are. And let me tell you why. We have billions of dollars of cash in the bank. We have no debt. Meg, over the last few years, has trimmed us down to be nimble to take advantage of this. The last thing you want to be in a market that's moving at this speed is be slow. And what we're seeing with some of our competitors is that they're getting very, very big. Very, very fat. And a lot in their burden with debt. That is not where you want to be in a market that's moving at the pace that this is moving in. You want to have the ability and the cash to invest. And as you say, do things real time. Do things that are just at speed of light. >> Well, if you guys can. I mean, talk about Dell and MC obviously. They think bigger is better. But I think your point is if you can be nimble. And by the way, decentralize the way the organizational structure is. You can ride many waves. >> You can ride many waves. And we don't have the 50 billion dollars of debt that Dell and MC have. >> Right. >> Right. >> Denzil, thanks so much for coming on the CUBE. I really appreciate it. And you know the strategic nature of the channel. Again 70% of the business probably will grow. And again, that's always been the good mix. And a lot of leverage there. Cost of sales is lower. Everyone is making money. That's the key thing too, right? >> That is the key thing. That's the key thing. >> And the channel part is profitability. >> Yeah. I agree. It's 70% of our business that will continue to grow. What will change though, is the mix. Right, we'll move. We'll move from the 80% box sellers. And we'll move more and more. So that will be probably 60% of our business over the next two to three years. And we're going to see 40% of the channel businesses it's going to be the value at. >> We'll be watching you guys. And of course as Meg Whitman says the right mix. Is her message here. >> Yes. >> HPE Discover. We're going to check in and see how that evolves. Thanks for coming and sharing your insights here at the CUBE. >> Awesome. >> Really appreciate it. Live coverage here from HPE Discover. I'm John Furrier with David Vellante. You're watching the CUBE. Stay with us for day three as it continues. Our three days of wall to wall coverage. Thanks for watching. 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