>>Good morning live from Chicago. It's the cube on the floor at Ansible Fast 2022. This is day two of our wall to wall coverage. Lisa Martin here with John Furrier. John, we're gonna be talking next in the segment with two alumni about what Red Hat and IBM are doing to give Ansible users AI superpowers. As one of our alumni guests said, just off the keynote stage, we're nearing an inflection point in ai. >>The power of AI with Ansible is really gonna be an innovative, I think an inflection point for a long time because Ansible does such great things. This segment's gonna explore that innovation, bringing AI and making people more productive and more importantly, you know, this whole low code, no code, kind of right in the sweet spot of the skills gap. So should be a great segment. >>Great segment. Please welcome back two of our alumni. Perry is here, the Chief scientist, IBM Research and IBM Fellow. And Tom Anderson joins us once again, VP and general manager at Red Hat. Gentlemen, great to have you on the program. We're gonna have you back. >>Thank you for having >>Us and thanks for joining us. Fresh off the keynote stage. Really enjoyed your keynote this morning. Very exciting news. You have a project called Project Wisdom. We're talking about this inflection point in ai. Tell the audience, the viewers, what is Project Wisdom And Wisdom differs from intelligence. How >>I think Project Wisdom is really about, as I said, sort of combining two major forces that are in many ways disrupting and, and really constructing many a aspects of our society, which are software and AI together. Yeah. And I truly believe it's gonna result in a se shift on how not just enterprises, but society carries forefront. And as I said, intelligence is, is, I would argue at least artificial intelligence is more, in some ways mechanical, if I may say it, it's about algorithms, it's about data, it's about compute. Wisdom is all about what is truly important to bring out. It's not just about when you bring out a, a insight, when you bring out a decision to be able to explain that decision as well. It's almost like humans have wisdom. Machines have intelligence and, and it's about project wisdom. That's why we called it wisdom. >>Because it is about being a, a assistant augmenting humans. Just like be there with the humans and, and almost think of it as behave and interact with them as another colleague will versus intelligence, which is, you know, as I said, more mechanical is about data. Computer algorithms crunch together and, and we wanna bring the power of project wisdom and artificial intelligence to developers to, as you said, close the skills gap to be able to really make them more productive and have wisdom for Ansible be their assistant. Yeah. To be able to get things for them that they would find many ways mundane, many ways hard to find and again, be an assistant and augmented, >>You know, you know what's interesting, I want to get into the origin, how it all happened, but interesting IBM research, well known for the deep tech, big engineering. And you guys have been doing this for a long time, so congratulations. But it's interesting here at this event, even on stage here event, you're starting to see the automation come in. So the question comes up, scale. So what happens, IBM buys Red Hat, you go raid the, the raid, the ip, Trevor Treasure trove of ai. I mean this cuz this is kind of like bringing two killer apps together. The Ansible configuration automation layer with ai just kind of a, >>Yeah, it's an amazing relationship. I was gonna say marriage, but I don't wanna say marriage cause I may be >>Last. I didn't mean say raid the Treasure Trobe, but the kind of >>Like, oh my God. An amazing relationship where we bring all this expertise around automation, obviously around IP and application infrastructure automation and IBM research, Richie and his team bring this amazing capacity and experience around ai. Bring those two things together and applying AI to automation for our teams is so incredibly fantastic. I just can't contain my enthusiasm about it. And you could feel it in the keynote this morning that Richie was doing the energy in the room and when folks saw that, it's just amazing. >>The geeks are gonna love it for sure. But here I wanna get into the whole evolution. Computers on computers, remember the old days thinking machines was a company generations ago that I think they've sold or went outta business, but self-learning, learning machines, computers, programming, computers was actually on your slide you kind of piece out this next wave of AI and machine learning, starting with expert systems really kind of, I'm almost say static, but like okay programs. Yeah, yeah. And then now with machine learning and that big debate was unsupervised, supervised, which is not really perfect. Deep learning, which now explores some things, but now we're at another wave. Take, take us through the thought there explaining what this transition looks like and why. >>I think we are, as I said, we are really at an inflection point in the journey of ai. And if ai, I think it's fair to say data is the pain of ai without data, AI doesn't exist. But if I were to train AI with what is known as supervised learning or or data that is labeled, you are almost sort of limited because there are only so many people who have that expertise. And interestingly, they all have day jobs. So they're not just gonna sit around and label this for you. Some people may be available, but you know, this is not, again, as I as Tom said, we are really trying to apply it to some very sort of key domains which require subject matter expertise. This is not like labeling cats and dogs that everybody else in the board knows there are, the community's very large, but still the skills to go around are not that many. >>And I truly believe to apply AI to the, to the word of, you know, enterprises information technology automation, you have to have unsupervised learning and that's the only way to skate. Yeah. And these two trends really about, you know, information technology percolating across every enterprise and unsupervised learning, which is learning on this very large amount of data with of course know very large compute with some very powerful algorithms like transformer architectures and others which have been disrupting the, the domain of natural language as well are coming together with what I described as foundation models. Yeah. Which anybody who plays with it, you'll be blown away. That's literally blown away. >>And you call that self supervision at scale, which is kind of the foundation. So I have to ask you, cuz this comes up a lot with cloud, cloud scale, everyone tells horizontally scalable cloud, but vertically specialized applications where domain expertise and data plays. So the better the data, the better the self supervision, better the learning. But if it's horizontally scalable is a lot to learn. So how do you create that data ops where it's where the machines are gonna be peaked to maximize what's addressable, but what's also in the domain too, you gotta have that kind of diversity. Can you share your thoughts on that? >>Absolutely. So in, in the domain of foundation models, there are two main stages I would say. One is what I'll describe as pre-training, which is think of it as the, the machine in this particular case is knowledgeable about the domain of code in general. It knows syntax of Python, Java script know, go see Java and so, so on actually, and, and also Yammel as well, which is obviously one would argue is the domain of information technology. And once you get to that level, it's a, it's almost like having a developer who knows all of this but may not be an expert at Ansible just yet. He or she can be an expert at Ansible but is not there yet. That's what I'll call background knowledge. And also in the, in the case of foundation models, they are very adept at natural language as well. So they can connect natural language to code, but they are not yet expert at the domain of Ansible. >>Now there's something called, the second stage of learning is called fine tuning, which is about this data ops where I take data, which is sort of the SME data in this particular case. And it's curated. So this is not just generic data, you pick off GitHub, you don't know what exists out there. This is the data which is governed, which we know is of high quality as well. And you think of it as you specialize the generic AI with pre-trained AI with that data. And those two stages, including the governance of that data that goes into it results in this sort of really breakthrough technology that we've been calling Project Wisdom for. Our first application is Ansible, but just watch out that area. There are many more to come and, and we are gonna really, I'm really excited about this partnership with Red Hat because across IBM and research, I think where wherever we, if there is one place where we can find excited, open source, open developer community, it is Right. That's, >>Yeah. >>Tom, talk about the, the role of open source and Project Wisdom, the involvement of the community and maybe Richard, any feedback that you've gotten since coming off stage? I'm sure you were mobbed. >>Yeah, so for us this is, it's called Project Wisdom, not Product Wisdom. Right? Sorry. Right. And so, no, you didn't say that but I wanna just emphasize that it is a project and for us that is a key word in the upstream community that this is where we're inviting the community to jump on board with us and bring their expertise. All these people that are here will start to participate. They're excited in it. They'll bring their expertise and experience and that fine tuning of the model will just get better and better. So we're really excited about introducing this now and involving the community because it's super nuts. Everything that Red Hat does is around the community and this is no different. And so we're really excited about Project Wisdom. >>That's interesting. The project piece because if you see in today's world the innovation strategy before where we are now, go back to say 15 years ago it was of standard, it's gotta have standard bodies. You can still innovate and differentiate, but yet with open source and community, it's a blending of research and practitioners. I think that to me is a big story here is that what you guys are demonstrating is the combination of research and practitioners in the project. Yes. So how does this play out? Cuz this is kind of like how things are gonna get done in the cloud cuz Amazon's not gonna just standardize their stack at at higher level services, nor is Azure and they might get some plumbing commonalities below, but for Project Project Wisdom to be successful, they can, it doesn't need to have standards. If I get this right, if I can my on point here, what do you guys think about that? React to that? Yeah, >>So I definitely, I think standardization in terms of what we will call ML ops pipeline for models to be deployed and managed and operated. It's like models, like any other code, there's standardization on DevOps ops pipeline, there's standardization on machine learning pipeline. And these models will be deployed in the cloud because they need to scale. The only way to scale to, you know, thousands of users is through cloud. And there is, there are standard pipelines that we are working and architecting together with the Red Hat community leveraging open source packages. Yeah. Is really to, to help scale out the AI models of wisdom together. And another point I wanted to pick up on just what Tom said, I've been sort of in the area of productizing AI for for long now having experience with Watson as well. The only scenario where I've seen AI being successful is in this scenario where, what I describe as it meets the criteria of flywheel of ai. >>What do I mean by flywheel of ai? It cannot be some research people build a model. It may be wowing, but you roll it out and there's no feedback. Yeah, exactly. Okay. We are duh. So what actually, the only way the more people use these models, the more they give you feedback, the better it gets because it knows what is right and what is not right. It will never be right the first time. Actually, you know, the data it is trained on is a depiction of reality. Yeah. It is not a reality in itself. Yeah. The reality is a constantly moving target and the only way to make AI successful is to close that loop with the community. And that's why I just wanted to reemphasize the point on why community is that important >>Actually. And what's interesting Tom is this is a difference between standards bodies, old school and communities. Because developers are very efficient in their feedback. Yes. They jump to patterns that serve their needs, whether it's self-service or whatever. You can kind of see what's going on. Yeah. It's either working or not. Yeah, yeah, >>Yeah. We get immediate feedback from the community and we know real fast when something isn't working, when something is working, there are no problems with the flow of data between the members of the community and, and the developers themselves. So yeah, it's, I'm it's great. It's gonna be fantastic. The energy around Project Wisdom already. I bet. We're gonna go down to the Project Wisdom session, the breakout session, and I bet you the room will be overflowed. >>How do people get involved real quick? Get, get a take a minute to explain how I would get involved. I'm a community member. Yep. I'm watching this video, I'm intrigued. This has got me enthusiastic. How do I get more confident with this opportunity? >>So you go to, first of all, you go to red hat.com/project Wisdom and you register your interests and you wanna participate. We're gonna start growing this process, bringing people in, getting ready to make the service available to people to start using and to experiment with. Start getting their feedback. So this is the beginning of, of a journey. This isn't the, you know, this isn't the midpoint of a journey, this is the begin. You know, even though the work has been going on for a year, this is the beginning of the community journey now. And so we're gonna start working together through channels like Discord and whatnot to be able to exchange information and bring people in. >>What are some of the key use cases, maybe Richie are starting with you that, that you think maybe dream use cases that you think the community will help to really uncover as we're looking at Project Wisdom really helping in this transformation of ai. >>So if I focus on let's say Ansible itself, there are much wider use cases, but Ansible itself and you know, I, I would say I had not realized, I've been working on AI for Good for long, but I had not realized the excitement and the power of Ansible community itself. It's very large, it's very bottom sum, which I love actually. But as I went to lot of like CTOs and CIOs of lot of our customers as well, it was becoming clear the use cases of, you know, I've got thousand Ansible developers or IT or automation experts. They write code all the time. I don't know what all of this code is about. So the, the system administrators, managers, they're trying to figure out sort of how to organize all of this together and think of it as Google for finding all of these automation code automation content. >>And I'm very excited about not just the use cases that we demonstrated today, that is beginning of the journey, but to be able to help enterprises in finding the right code through natural language interfaces, generating the code, helping Del us debug their code as well. Giving them predictive insights into this may happen. Just watch out for it when you deploy this. Something like that happened before, just watch out for it as well. So I'm, I'm excited about the entire life cycle of IT automation, Not just about at the build time, but also at the time of deployment. At the time of management. This is just a start of a journey, but there are many exciting use cases abound for Ansible and beyond. >>It's gonna be great to watch this as it unfolds. Obviously just announcing this today. We thank you both so much for joining us on the program, talking about Project wisdom and, and sharing how the community can get involved. So you're gonna have to come back next year. We're gonna have to talk about what's going on. Cause I imagine with the excitement of the community and the volume of the community, this is just the tip of the iceberg. Absolutely. >>This is absolutely exactly. You're excited about. >>Excellent. And you should be. Congratulations. Thank, thanks again for joining us. We really appreciate your insights. Thank you. Thank >>You for having >>Us. For our guests and John Furrier, I'm Lisa Barton and you're watching The Cube Lie from Chicago at Ansible Fest 22. This is day two of wall to wall coverage on the cube. Stick around. Our next guest joins us in just a minute.

>>from around the globe. It's the cube with coverage of Kublai >>Khan and Cloud Native Con, Europe 2021 >>virtual brought to you by red hat. The cloud Native >>computing foundation >>and ecosystem partners. >>Welcome back to the cubes coverage everyone of Coop Con 2021 Cloud Native Con 21 virtual europe. I'm john for your host of the cube. We've got two great guests here, James Labaki, senior Director of Product management, Red Hat and Richer Puree. IBM fellow and chief scientist at IBM Gentlemen, thanks for coming on the cube, appreciate it. >>Thank you for having us. >>So, um, got an IBM fellow and Chief scientist, Senior Director Product management. You guys have the keys to the kingdom on cloud Native. All right, it's gonna be fun. So let's just jump into it. So I want to ask you before we get into some of the questions around the projects, what you guys take of cube con this year, in terms of the vibe, I know it's virtual in europe north America, we looked like we might be in person but this year with the pandemic cloud native just seems to have a spring to its step, it's got more traction. I've seen the cloud native piece even more than kubernetes in a way. So scott cooper diseases continues to have traction, but it's always about kubernetes now. It's more cloud native. I what do you guys think about that? >>Yeah, I'm sure you have thoughts and I could add on >>Yes, I I think well I would really think of it as almost sequential in some ways. Community is too cold now there's a layer which comes above it which is where all our, you know, clients and enterprises realize the value, which is when the applications really move. It's about the applications and what they can deliver to their end customers. And the game now is really about moving those applications and making them cloud native. That's when the value of that software infrastructure will get realized and that's why you are seeing that vibe in the, in the clients and enterprises and at two corners. Well, >>yeah, I mean, I think it's exciting. I've been covering this community since the beginning as you guys know the cube. This is the enablement moment where the fruit is coming off the tree is starting to see that first wave of you mentioned that enablement, it's happening and you can see it in the project. So I want to get into the news here, the conveyor community. What is this about? Can you take a minute to explain what is the conveyor community? >>Yeah, yeah. I think uh, you know, uh, what, what we discovered is we were starting to work with a lot of end users and practitioners. Is that what we're finding is that they kind of get tired of hearing about digital transformation and from multiple vendors and and from sales folks and these sorts of things. And when you speak to the practitioners, they just want to know what are the practical implications of moving towards a more collaborative architecture. And so, um, you know, when you start talking to them at levels beyond, uh, just generic kind of, you know, I would say marketing speak and even the business cases, the developers and sys admins need to know what it is they need to do to their application architecture is the ways they're working for to successfully modernize their applications. And so the idea behind the conveyor community was really kind of two fold. One was to help with knowledge sharing. So we started running meetups where people can come and share their knowledge of what they've done around specific topics like strangling monoliths or carving offside containers or things that sidecar containers are things that they've done successfully uh to help uh kind of move things forward. So it's really about knowledge sharing. And then the second piece we discovered was that there's really no place where you can find open source tools to help you re host re platform and re factor your applications to kubernetes. And so that's really where we're trying to fill that void is provide open source options in that space and kind of inviting everybody else to collaborate with us on that. >>Can you give an example of something uh some use cases of people doing this, why the need the drivers? It makes sense. Right. As a growing, you've got, you have to move applications. People want to have um applications moved to communities. I get that. But what are some of the use cases that were forcing this? >>Yeah, absolutely, for sure. I don't know if you have any you want to touch on um specifically I could add on as well. >>Yeah, I think some of the key use cases, I would really say it will be. So let let me just, I think James just talked about re host, re hosting, re platform ng and re factoring, I'm gonna put some numbers on it and then they talk about the use case a little bit as well. I would really say 30 virtual machines movement. That's it. That's the first one to happen. Easy, easier one, relatively speaking. But that's the first one to happen. The re platform in one where you are now really sort of changing the stack as well but not changing the application in any major way yet. And the hardest one happened around re factoring, which is, you are, you know, this is when we start talking about cloud native, you take a monolithic application which you know legacy applications which have been running for a long time and try to re factor them so that you can build microservices out of them. The very first, I would say set of clients that we are seeing at the leading edge around this will be around banking and insurance. Legacy applications, banking is obviously finances a large industry and that's the first movement you start seeing which is where the complexity of the application in terms of some of the legacy code that you are seeing more onto the, into the cloud. That for a cloud native implementation as well as their as well as a diversity of scenarios from a re hosting and re platform ng point of view. And we'll talk about some of the tools that we are putting in the community uh to help the users and uh and the developer community in many of these enterprises uh move into a cloud native implementation lot of their applications. And also from the point of view of helping them in terms of practice, is what I describe as best practices. It is not just about tools, it's about the community coming together. How do I do this? How do I do that? Actually, there are best practices that we as a community have gathered. It's about that sharing as well, James. >>Yeah, I think you hit the nail on the head. Right. So you re hosting like for example, you might have uh an application that was delivered, you buy an SV that is not available containerized yet. You need to bring that over as a VM. So you can bring that into Q Bert, you know, and actually bring that and just re hosted. You can, you might have some things that you've already containerized but they're sitting on a container orchestration layer that is no longer growing, right? So the innovation has kind of left that platform and kind of kubernetes has become kind of that standard one, the container orchestration layer, if you want become the de facto standard. And so you want to re platform that that takes massaging and transforming metadata to do that to create the right objects and so on and so forth. So there's a bunch of different use cases around that that kind of fall into that re host tree platform all the way up to re factoring >>So just explain for the audience and I know I love I love the three things re hosting re platform in and re factoring what's the difference between re platform NG and re factoring specifically, what's the nuance there? >>Yeah, yeah, so so a lot of times I think people have a lot of people, you know, I think obviously amazon kind of popularized the six hours framework years ago, you know, with, with, with, with that. And so if you look at what they kind of what they popularize it was replied corn is really kind of like a lift tinker and shift. So maybe it's, I, I'm not just taking my VM and putting it on new infrastructure, I'm gonna take my VM, maybe put on new infrastructure, but I'm gonna switch my observer until like a lighter weight observer or something like that at the same time. So that would fall into like a re platform or in the case, you know, one of the things we're seeing pretty heavily right now is the move from cloud foundry to kubernetes for example, where people are looking to take their application and actually transform it and run it on kubernetes, which requires you to really kind of re platform as well. And re factoring >>is what specific I get the >>report re factoring is, I think just following on to what James said re factoring is really about um the complexity of the application, which was mainly a monolithic large application, many of these legacy applications which have so many times, actually hundreds of millions of dollars of assets for these uh these enterprises, it's about taking the code and re factoring it in terms of dividing it into uh huh different pieces of court which can themselves be spun as microservices. So then it becomes true, it takes starting advantage of agility or development in a cloud native environment as well. It's not just about either lift and shift of the VM or or lift tinker and shift from a, from a staff point of view. It's really about not taking applications and dividing them so that we can spin microservices and it has the identity of the development of a cloud. >>I totally got a great clarification, really want to get that out there because re platform ng is really a good thing to go to the cloud. Hey, I got reticent open source, I'll use that, I can do this over here and then if we use that vendor over there, use open source over there. Really good way to look at it. I like the factory, it's like a complete re architecture or re factoring if you will. So thank you for the clarification. Great, great topic. Uh, this is what practitioners think about. So I gotta ask the next question, what projects are involved in in the community that you guys are working? It seems like a really valuable service uh and group. Um can you give an overview and what's going on in the community specifically? >>Yeah, so there's really right now, there's kind of five projects that are in the community and they're all in different, I would say different stages of maturity as well. So, um there's uh when you look at re hosting, there's two kind of primary projects focused on that. One is called forklift, which is about migrating your virtual machines into cuba. So covert is a way that you can run virtual machines orchestrated by kubernetes. We're seeing kind of a growth in demand there where people want to have a common orchestration for both their VMS and containers running on bare metal. And so forklift helps you actually mass migrate VMS into that environment. Um The second one on the re hosting side is called Crane. So Crane is really a tool that helps you migrate applications between kubernetes clusters. So you imagine you have all your you know, you might have persistent data and one kubernetes cluster and you want to migrate a name space from one cluster to another. Um That's where Crane comes in and actually helps you migrate between those um on the re platforms that we have moved to cube, which actually came from the IBM research team. So they actually open source that uh you sure you want to speak about uh moved to >>cube. Yeah, so so moved to cuba is really as we discuss the re platform scenario already, it is about, you know, if you are in a docker environment or hungry environment uh and you know, kubernetes has become a de facto standard now you are containerized already, but you really are actually moving into the communities based environment as the name implies, It's about moved to cuba back to me and this is one of the things we were looking at and as we were looking, talking to a lot of, a lot of users, it became evident to us that they are adapting now the de facto standard. Uh and it's a tool that helps you enable your applications in that new environment and and move to the new stuff. >>Yeah. And then the the the only other to our tackle which is uh probably like the one of the newest projects which is focused on kind of assessment and analysis of applications for container reservation. So actually looking at and understanding what the suitability is of an application for being containerized and start to be like being re factored into containers. Um and that's that's uh, you know, we have kind of engineers across both uh Red hat IBM research as well as uh some folks externally that are starting to become interested in that project as well. Um and the last, the last project is called Polaris, which is a tool to help you measure your software delivery performance. So this might seem a little odd to have in the community. But when you think about re hosting re platform and re factoring, the idea is that you want to measure your software delivery performance on top of kubernetes and that's what this does. It kind of measures the door metrics. If you're familiar with devops realization metrics. Um so things like, you know, uh you know, your change failure rate and other things on top of their to see are you actually improving as you're making these changes? >>Great. Let me ask the question for the folks watching or anyone interested, how do they get involved? Who can contribute, explain how people get involved? Is our site, is there up location slack channel? What's out there? >>Yeah, yeah, all of the above. So we have a, we have, we have a slack channel, we're on slack dot kubernetes dot io on town conveyor, but if you go to www dot conveyor dot io conveyor with a K. Uh, not like the cube with a C. Uh, but like cube with a K. Uh, they can go to a conveyor to Ohio and um, there they can find everything they need. So, um, we have a, you know, a governance model that's getting put in place, contributor ladder, all the things you'd expect. We're kind of talking into the C N C F around the gap delivery groups to kind of understand if we can um, how we can align ourselves so that in the future of these projects take off, they can become kind of sandbox projects. Um and uh yeah, we would welcome any and all kind of contribution and collaboration >>for sure. I don't know if you have >>anything to add on that, I >>think you covered it at the point has already um, just to put a plug in for uh we have already been having meetups, so on the best practices you will find the community, um, not just on convert or die. Oh, but as you start joining the community and those of meet ups and the help you can get whether on the slack channel, very helpful on the day to day problems that you are encountering as you are taking your applications to a cloud native environment. >>So, and I can see this being a big interest enterprises as they have a mix and match environment and with container as you can bring and integrate old legacy. And that's the beautiful thing about hybrid cloud that I find fascinating right now is that with all the goodness of stade Coubertin and cloud native, if you've got a legacy environments, great fit now. So you don't have to kill the old to bring in the news. So this is gonna be everything a real popular project for, you know, the class, what I call the classic enterprise, So what you guys both have your companies participated in. So with that is that the goal is that the gulf of this community is to reach out to the classic enterprise or open source because certainly and users are coming in like, like, like you read about, I mean they're coming in fast into the community. >>What's the goal for the community really is to provide assistant and help and guidance to the users from a community point of view. It's not just from us whether it is red hat or are ideal research, but it's really enterprises start participating and we're already seeing that interest from the enterprises because there was a big gap in this area, a lot of vendor. Exactly when you start on this journey, there will be 100 people who will be telling you all you have to do is this Yeah, that's easy. All you have to do. I know there is a red flag goes up, >>it's easy just go cloud native all the way everything is a service. It's just so easy. Just you know, just now I was going to brian gracefully, you get right on that. I want to just quickly town tangent here, brian grazer whose product strategist at red hat, you're gonna like this because he's like, look at the cloud native pieces expanding because um, the enterprises now are, are in there and they're doing good work before you saw projects like envoy come from the hyper scales like lift and you know, the big companies who are building their own stuff, so you start to see that transition, it's no longer the debate on open source and kubernetes and cloud native. It's the discussion is integration legacy. So this is the big discussion this week. Do you guys agree with that? And what would, what would be your reaction? >>Yeah, no, I, I agree with you. Right. I mean, I think, you know, I think that the stat you always here is that the 1st 20 of kind of cloud happened and now there's all the rest of it. Right? And, and modernization is going to be the big piece right? You have to be able to modernize those applications and those workloads and you know, they're, I think they're gonna fall in three key buckets, right? Re host free platform re factor and dependent on your business justification and you know, your needs, you're going to choose one of those paths and we just want to be able to provide open tools and a community based approach to those folks too to help that certainly will have and just, you know, just like it always does, you know, upstream first and then we'll have enterprise versions of these migration tool kits based on these projects, but you know, we really do want to kind of build them, you know, and make sure we have the best solution to the problem, which we believe community is the way to do that. >>And I think just to add to what James said, typically we are talking about enterprises, these enterprises will have thousands of applications, so we're not talking about 10 40 number. We're talking thousands or 20% is not a small number is still 233 400. But man, the work is remaining and that's why they are getting excited about cloud negative now, okay, now we have seen the benefit but this little bit here, but now, let's get, you know serious about about that transformation and this is about helping them in a cloud native uh in an open source way, which is what red hat. XL Sad. Let's bring the community together. >>I'm actually doing a story on that. You brought that up with thousands of applications because I think it's, it's under underestimate, I think it's going to be 1000s and thousands more because businesses now, software driven everywhere and observe ability has pointed this out. And I was talking to the founder of uh Ravana project and it's like, how many thousands of dashboards you're gonna need? Roads are So so this is again, this is the problems and the opportunities are coming together, the abstraction will get you to move up the stack in terms of automation. So it's kind of fascinating when you start thinking about the impact as this goes the next level. And so I have to ask your roaches since you're an IBM fellow and chief scientist, which by the way, is a huge distinction. Congratulations. Being an IBM fellow is is a big deal. Uh IBM takes that very seriously. Only a few of them. You've seen many waves and cycles of innovation. How would you categorize this one now? Because maybe I'm getting old and and loving this right now. But this seems like everything kind of coming together in one flash 10.1 major inflection point. All the other waves combined seemed to be like in this one movement very fast. What's your what's your take on this wave that we're in? >>Yes, I would really say there is a lot of technology has been developed but that technology needs to have its value unleashed and that's exactly where the intersection of those applications and that technology occurs. Um I'm gonna put in yet another. You talked about everything becoming software. This was Anderson I think uh Jack Lee said the software is eating the world another you know, another wave that has started as a i eating software as well. And I do believe these two will go inside uh to uh like let me just give you a brief example re factoring how you take your application and smart ways of using ai to be able to recommend the right microservices for you is another one that we've been working towards and some of those capabilities will actually come in this community as well. So when we talk about innovations in this area, We are we are bringing together the best of IBM research as well. As we are hoping the community actually uh joints as well and enterprises are already starting to join to bring together the latest of the innovations bringing their applications and the best practices together to unleash that value of the technology in moving the rest of that 80%. And to be able to seamlessly bridge from my legacy environment to the cloud native environment. >>Yeah. And hybrid cloud is gonna be multi cloud really is the backbone and operating system of business and life society. So as these apps start to come on a P i is an integration, all of these things are coming together. So um yeah, this conveyor project and conveyor community looks like a really strong approach. Congratulations. Good >>job bob. >>Yeah, great stuff. Kubernetes, enabling companies is enabling all kinds of value here in the cube. We're bringing it to you with two experts. Uh, James Richard, thanks for coming on the Cuban sharing. Thank you. >>Thank you. >>Okay, cube con and cloud native coverage. I'm john furry with the cube. Thanks for watching. Yeah.

>>Mhm Yes. Hello and welcome back to the cubes coverage of red hat summit 2021 virtual. I'm john for your host of the cube we're here with Hillary Hunter, the VP and CTO and IBM fellow of IBM cloud at IBM. Hillary, Great to see you welcome back, You're no stranger to us in the cube your dentist few times. Thanks for coming on. >>Thanks so much for having me back. Great to talk more today >>I believe I B M is the premier sponsor for red hat summit this year. No, I mean I think they're somewhat interested in what's happening. >>Yeah, you know, somebody is such a great event for us because it brings together clients that, you know, we work together with red head on and gives us a chance to really talk about that overall journey to cloud and everything that we offer around cloud and cloud adoption um, and around redheads capabilities as well. So we look forward to the summit every year for sure. >>You know, the new IBM red hat relationship obviously pretty tight and successful seeing the early formations and customer attraction and just kind of the momentum, I'll never forget that Red hat something was in SAN Francisco. I sat down with Arvin at that time, uh, Red hat was not part of IBM and it was interesting. He was so tied into cloud native. It was almost as if he was dry running the acquisition, which he announced just moments later after that. But you can see the balance. The Ceo at IBM really totally sees the cloud. He sees that experience. He sees the customer impact. This has been an interesting year, especially with Covid and with the combination of red hat and IBM, this cloud priority for IT leaders is more important than ever before. What's your, what's your take on this? Because clearly you guys are all in on cloud, but not what people think, what's your, what's your view on this? >>Yeah. You know, from, from the perspective of those that are kind of data oriented IBM Institute for Business Value, did lots of studies over the last year, you know, saying that over 60% of leaders feel, you know, increased urgency to get to the cloud, um they're intending to accelerate their program to the cloud, but I think, you know, just even as consumers where each very conscious that our digital behaviors have changed a lot in the last year and we see that in our enterprise client base where um everything from, you know, a bank, we work that that that had to stand up their countries equivalent of the payroll protection program in a matter of weeks, which is just kind of unheard of to do something that robust that quickly or um, you know, retail obviously dealing with major changes, manufacturing, dealing with major changes and all consumers wanting to consume things on an app basis and such, not going into brick and mortar stores and such. And so everything has changed and months, I would say have sort of timeframes of months have been the norm instead of years for um, taking applications forward and modernizing them. And so this journey to cloud has compressed, It's accelerated. And as one client I spoke with said, uh, in the midst of last year, you know, it is existential that I get to cloud with urgency and I think That's been that has been the theme of 2020 and now also 2021. And so it is, it is the core technology for moving faster and dealing with all the change that we're all experiencing. >>That's just so right on point. But I got I want to ask you because this is the key trend enterprises are now realizing that cloud native architecture is based on open source specifically is a key architectural first principle now. >>Yeah. >>What's your, what, what would you say to the folks out there who were listening to this and watching this video, Who were out in the enterprise going, hey, that's a good call. I'm glad I did it. So I don't have any cognitive dissidence or I better get there faster. >>Yeah. You know, open source is such an important part of this conversation because I always say that open source moves at the rate and pays a global innovation, which is kind of a cute phrase that I really don't mean it in anyways, cute. It really is the case that the purpose of open sources for people globally to be contributing. And there's been innovation on everything from climate change to you know, musical applications to um things that are the fundamentals of major enterprise mission critical workloads that have happened is everyone is adopting cloud and open source faster. And so I think that, you know this choice to be on open source is a choice really, you know, to move at the pace of global innovation. It's a choice too um leverage capabilities that are portable and it's a choice to have flexibility in deployment because where everyone's I. T is deployed has also changed. And the balance of sort of where people need the cloud to kind of come to life and be has also changed as everyone's going through this period of significant change. >>That's awesome. IBM like Red has been a long supporter and has a history of supporting open source projects from Lenox to kubernetes. You guys, I think put a billion dollars in Lenox way back when it first started. Really power that movement. That's going back into the history books there. So how are you guys all collaborating today to advance the open source solutions for clients? >>Yeah, we remain very heavily invested in open source communities and invested in work jointly with Red Hat. Um you know, we enabled the technology known as um uh Rackham the short name for the Red Hat advanced cluster management software, um you know, in this last year, um and so, you know, provided that capability um to to become the basis of that that product. So we continue to, you know, move major projects into open source and we continue to encourage external innovators as well to create new capabilities. And open source are called for code initiatives for developers as an example, um have had specific programs around um uh social justice and racial issues. Um we have a new call for code out encouraging open source projects around climate change and sustainable agriculture and all those kind of topics and so everything from you know, topics with developers to core product portfolio for us. Um We have a very uh very firm commitment in an ongoing sustained contribution on an open source basis. >>I think that's important. Just to call out just to kind of take a little sidebar here. Um you guys really have a strong mission driven culture at IBM want to give you props for that. Just take a minute to say, Congratulations call for code incredible initiative. You guys do a great job. So congratulations on that. Appreciate. >>Thank you. Thank you. >>Um as a sponsor of Red Hat Summit this year, I am sponsoring the zone Read at um you have you have two sessions that you're hosting, Could you talk about what's going on? >>Yeah, the the two sessions, so one that I'm hosting is around um getting what we call 2.5 x value out of your cloud journey. Um and really looking at kind of how we're working with clients from the start of the journey of considering cloud through to actually deploying and managing environments and operating model on the cloud um and where we can extract greater value and then another session um that I'm doing with Roger Primo, our senior vice President for strategy at IBM We're talking about lessons and clouded option from the Fortune 500, so we're talking there about coca cola european bottling partners, about lumen technologies um and um also about wonderman Thompson, um and what they're doing with us with clouds, so kind of two sessions, kind of one talking a sort of a chalkboard style um A little bit of an informal conversation about what is value meaning cloud or what are we trying to get out of it together? Um And then a session with roger really kind of focused on enterprise use cases and real stories of cloud adoption. >>Alright so bottom line what's going to be in the sessions, why should I attend? What's the yeah >>so you know honest honestly I think that there's kind of this um there's this great hunger I would say in the industry right now to ascertain value um and in all I. T. Decision making, that's the key question right? Um not just go to the cloud because everyone's going to the cloud or not just adopt you know open source technologies because it's you know something that someone said to do, but what value are we going to get out of it? And then how do we have an intentional conversation about cloud architecture? How do we think about managing across environments in a consistent way? Um how do we think about extracting value in that journey of application, modernization, um and how do we structure and plan that in a way? Um that results in value to the business at the end of the day, because this notion of digital transformation is really what's underlying it. You want a different business outcome at the end of the day and the decisions that you take in your cloud journey picking. Um and open hybrid, multi cloud architecture leveraging technologies like IBM cloud satellite to have a consistent control plan across your environments, um leveraging particular programs that we have around security and compliance to accelerate the journey for regulated industries etcetera. Taking intentional decisions that are relevant to your industry that enable future flexibility and then enable a broad ecosystem of content, for example, through red hat marketplace, all the capabilities and content that deploy onto open shift, et cetera. Those are core foundational decisions that then unlock that value in the cloud journey and really result in a successful cloud experience and not just I kind of tried it and I did or didn't get out of it what I was expecting. So that's really what, you know, we talk about in these in these two sessions, um and walk through um in the second session than, you know, some client use cases of, of different levels and stages in that cloud journey, some really core enterprise capabilities and then Greenfield whitespace completely new capabilities and cloud can address that full spectrum. >>That's exciting not to get all nerdy for a second here, But you know, you bring up cloud architecture, hybrid cloud architecture and correct me if I'm wrong if you're going to address it because I think this is what I'm reporting and hearing in the industry against the killer problem everyone's trying to solve is you mentioned, um, data, you mentioned control playing for data, you mentioned security. These are like horizontally scalable operating model concepts. So if you think about an operating system, this is this is the architecture that becomes the cloud model hybrid model because it's not just public cloud cloud native or being born in the cloud. Like a startup. The integration of operating at scale is a distributed computing model. So you have an operating system concept with some systems engineering. Yeah, it sounds like a computer to me, right. It sounds like a mainframe. Sounds like something like that where you're thinking about not just software but operating model is, am I getting that right? Because this is like fundamental. >>Yeah, it's so fundamental. And I think it's a great analogy, right? I think it's um you know, everyone has kind of, their different description of what cloud is, what constitutes cloud and all that kind of thing, but I think it's great to think of it as a system, it's a system for computing and what we're trying to do with cloud, what we're trying to do with kubernetes is to orchestrate a bunch of, you know, computing in a consistent way, as, you know, other functions within a single server do. Um What we're trying to do with open shift is, you know, to enable um clients to consume things in a consistent way across many different environments. Again, that's the same sort of function um conceptually as, you know, an operating system or something like that is supposed to provide is to have a platform fundamentally, I think the word platform is important, right? Have a platform that's consistent across many environments and enables people to be productive in all those environments where they need to be doing their computing. >>We were talking before we came on camera about cloud history and we were kind of riffing back and forth around, oh yeah, five years ago or six years ago was all the conversations go to the cloud now, it's like serious conscience around the maturity of cloud and how to operate that scale in the cloud, which is complex, it's complex system and you have complexity around system complexity and novelty complexity, so you have kind of all these new things happening. So I want to ask you because you're an IBM fellow and you're on the cloud side at IBM with all this red hat goodness you've got going on, Can you give us a preview of the maturity model that you see the IBM season, that red hats doing so that these architectures can be consistent across the platforms, because you've got def sec ops, you've got all these new things, you've got security and data at scale, it's not that obviously it's not easy, but it has to be easier. What's what's the preview of the maturity model? >>Yeah, you know, it really is about kind of a one plus one equals three conversation because red hats approach to provide a consistent platform across different environments in terms of Lennox and Kubernetes and the open shift platform um enables that first conversation about consistency and maturity um in many cases comes from consistency, being able to have standards and consistency and deployment across different environments leads to efficiency. Um But then IBM odds on that, you know, a set of conversations also around data governance, um consistency of data, cataloguing data management across environments, machine learning and ai right bringing in A. I. For I. T. Operations, helping you be more efficient to diagnose problems in the IT environment, other things like that. And then, you know, in addition, you know, automation ultimately right when we're talking about F. R. I. T. Ops, but also automation which begins down at the open shift level, you know with use of answerable and other things like that and extends them up into automation and monitoring of the environment and the workloads and other things like that. And so it really is a set of unlocking value through increasing amounts of insight, consistency across environments, layering that up into the data layer. Um And then overall being able to do that, you know efficiently um and and in a consistent way across the different environments, you know, where cloud needs to be deployed in order to be most effective, >>You know, David Hunt and I always talk about IBM and all the years we've been covering with the Cube, I mean we've pretty much been to every IBM events since the Cube was founded and we're on our 11th year now watching the progression, you guys have so much expertise in so many different verticals, just a history and the expertise and the knowledge and the people. They're so smart. Um I have to ask you how you evolved your portfolio with the cloud now um as it's gone through, as we are in the 2021 having these mature conversations around, you know, full integration, large scale enterprise deployments, Critical Mission Mission Critical Applications, critical infrastructure, data, cybersecurity, global scale. How are you evolve your portfolio to better support your clients in this new environment? >>Yeah, there's a lot in there and you hit a lot of the keywords already. Thank you. But but I think that you know um we have oriented our portfolio is such that all of our systems support Red hat um and open shift, um our cloud, we have redhead open shift as a managed service and kubernetes is at the core of what we're doing as a cloud provider and achieving our own operational efficiencies um from the perspective of our software portfolio, our core products are delivered in the form of what we refer to as cloud packs on open shift and therefore deploy across all these different environments where open shift is supported, um products available through Red hat marketplace, you know, which facilitates the billing and purchasing an acquisition and installation of anything within the red hat ecosystem. And I think, you know, for us this is also then become also a journey about operational efficiency. We're working with many of our clients is we're kind of chatting about before about their cloud operating model, about their transformation um and ultimately in many cases about consumption of cloud as a service. Um and so um as we, you know, extend our own cloud capabilities, you know, out into other environment through distributed cloud program, what we refer to as as IBM cloud satellite, you know, that enables consistent and secure deployment of cloud um into any environment um where someone needs, you know, cloud to be operated. Um And that operating model conversation with our clients, you know, has to do with their own open shift environments that has to do with their software from IBM, it has to do their cloud services. And we're really ultimately looking to partner with clients to find efficiency in each stage of that journey and application modernization in deployment and then in getting consistency across all their environments, leveraging everything from uh the red hat, you know, ACM capabilities for cluster management up through a i for beauty shops and automation and use of a common console across services. And so it's an exciting time because we've been able to align our portfolio, get consistency and delivery of the red half capabilities across our full portfolio and then enable clients to progress to really efficient consumption of cloud. >>That's awesome. Great stuff there. I got to ask you the question that's on probably your customers minds. They say, okay, Hillary, you got me sold me on this. I get what's going on, I just gotta go faster. How do I advance my hybrid cloud model faster? What are you gonna do for me? What do you have within the red hat world and IBM world? How are you gonna make me go faster? That's in high quality way? >>Yeah. You know, we often like to start with an assessment of the application landscape because you move faster by moving strategically, right? So assessing applications and the opportunity to move most quickly into a cloud model, um, what to containerized first, what to invest in lift and shift perspective, etcetera. So we we help people look at um what is strategic to move and where the return on investment will be the greatest. We help them also with migrations, Right? So we can help jump in with additional skills and establish a cloud center of competency and other things like that. That can help them move faster as well as move faster with us. And I think ultimately choosing the right portfolio for what is defined as cloud is so important, having uh, an open based architecture and cloud deployment choice is so important so that you don't get stuck in where you made some of your initial decisions. And so I think those are kind of the three core components to how we're helping our clients move as quickly as possible and at the rate and pace that the current climate frankly demands of everyone. >>You know, I was joking with a friend the other night about databases and how generations you have an argument about what is it database, what's it used for. And then when you kind of get to that argument, all agree. Then a new database comes along and then it's for different functions. Just the growth in the internet and computing. Same with cloud, you kind of see a parallel thing where it's like debate, what is cloud? Why does he even exist? People have different definitions. That was, you know, I mean a decade or so ago. And then now we're at almost another point where it's again another read definition of, okay, what's next for cloud? It's almost like an inflection point here again. So with that I got to ask you as a fellow and IBM VP and Cto, what is the IBM cloud because if I'm going to have a discussion with IBM at the center of it, what does it mean to me? That's what people would like to know. How do you respond to that? >>Yeah. You know, I think two things I think number one to the, to the question of accelerating people's journeys to the cloud, we are very focused within the IBM cloud business um on our industry specific programs on our work with our traditional enterprise client base and regulated industries, things like what we're doing in cloud for financial services, where we're taking cloud, um and not just doing some sort of marketing but doing technology, which contextualize is cloud to tackle the difficult problems of those industries. So financial services, telco uh et cetera. And so I think that's really about next generation cloud, right? Not cloud, just for oh, I'm consuming some sauce, and so it's going to be in the cloud. Um but SAS and I SV capabilities and an organization's own capabilities delivered in a way appropriate to their industry in in a way that enables them to consume cloud faster. And I think along those lines then kind of second thing of, you know, whereas cloud headed the conversation in the industry around confidential computing, I think is increasingly important. Um It's an area that we've invested now for several generations of technology capability, confidential computing means being able to operate even in a cloud environment where there are others around um but still have complete privacy and authority over what you're doing. And that extra degree of protection is so important right now. It's such a critical conversation um with all of our clients. Obviously those in things like, you know, digital assets, custody or healthcare records or other things like that are very concerned and focused about data privacy and protection. And these technologies are obvious to them in many cases that yes, they should take that extra step and leverage confidential computing and additional data protection. But really confidential computing we're seeing growing as a topic zero trust other models like that because everyone wants to know that not only are they moving faster because they're moving to cloud, but they're doing so in a way that is without any compromise in their total security, um and their data protection on behalf of their clients. So it's exciting times. >>So it's so exciting just to think about the possibilities because trust more than ever now, we're on a global society, whether it's cyber security or personal interactions to data signing off on code, what's the mutability of it? I mean, it's a complete interplay of all the fun things of uh of the technology kind of coming together. >>Absolutely, yeah. There is so much coming together and confidential computing and realizing it has been a decade long journey for us. Right? We brought our first products actually into cloud in 2019, but its hardware, it's software, it services. It's a lot of different things coming together. Um but we've been able to bring them together, bring them together at enterprise scale able to run entire databases and large workloads and you know um pharmaceutical record system for Germany and customer records for daimler and um you know what we're doing with banks globally etcetera and so you know it's it's wonderful to see all of that work from our research division and our developers and our cloud teams kind of come together and come to fruition and and really be real and be product sizable. So it's it's very exciting times and it's it's a conversation that I think I encourage everyone to learn a little bit more about confidential computing. >>Hillary hunter. Thank you for coming on the cube. Vice President CTO and IBM fellow which is a big distinction at IBM. Congratulations and thanks for coming on the Cuban sharing your insight. Always a pleasure to have you on an expert always. Great conversation. Thanks for coming on. >>Thanks so much for having me. It was a pleasure. >>Okay, so cubes coverage of red Hat Summit 21 of course, IBM think is right around the corner as well. So that's gonna be another great event as well. I'm john Feehery, a host of the cube bringing all the action. Thanks for watching. Yeah.

>>from around the globe. It's the Cube with coverage of Yukon and Cloud. Native Con North America. 2020. Virtual Brought to You by Red Hat, The Cloud, Native Computing Foundation and Ecosystem Partners. Hey, welcome back, everybody. Jeffrey here with the Cube coming to you from our Palo Alto studios with our ongoing coverage of Q. Khan Cloud, Native Con 2020 North America. Of course, it's virtual like everything else is in 2020 but we're excited to be back. It's a terrific show, and we're excited our next guest. So let's introduce him. And we've got Sam Warner, the VP of offering manager and business line executive for storage for IBM. Sam. Great to see you. >>Great to be here. >>And also joining us is Brent Compton. He's a senior director of data services for Redhead. Great. See you, Brent. >>Thank you. >>So let's let's jump into it. Cloud Native. Everything's about cloud native. Everything's about containers. Everything is about kind of container ization and flexibility. But then there's this thing in the back and called storage. We actually have toe keep this stuff and record this stuff and have data protection for this stuff in business resiliency love to jump into it, so lets you know where does storage fit within a container world? And how is the growth of containers and the adoption containers really had you rethink the way that you think about storage and how clients you think about stories saying, Let's start with you >>e mean, it's a great question. And first off, I'm really excited about another cube con. Uh, we did Europe now, uh, doing North America so very excited to be, you know, seeing all the you know, all the news and all the people talking about the advancements around kubernetes. And we're very excited about it now. You asked a very good question. Important question. We're seeing an acceleration of digital transformation, and the people that are going through this digital transformation are using containers to now modernize the rest of their infrastructure. The interesting thing about it, though, is those initiatives are being driven out of the application teams. The business lines in an organization, and a lot of them don't understand that there's a lot of complexity to this storage piece here. So the storage teams I talked to are all of a sudden getting these initiatives thrown on them or a kind of halfway their strategy. And they're scratching their heads, trying to figure out now how they can support these applications with persistent storage. Because that's not where containers started. They started with micro services, and now now they're in a quandary. They have to deliver a certain S L. A to their customers, and they're trying to figure out how they do it in this new environment, which in a lot of cases, has been designed outside of their scope. So they're seeing issues with data protection. Some of the kind of core things that they've been dealing with for years are now. They're now having to solve all over again. So that's what we're working on helping them with reinventing how storage is deployed to help them deliver the same level of security, availability and everything they have in the past. Uh, in these new environments, >>right? So, yeah, e say you've been involved in this for a long time. You know, you've worked in hyper converge. You've worked in big data. You know, the evolution of big data continues to change, as ultimately we want to get people the information to make good decisions, but we've gone through a lot of integrations over the years. So how is it different? You know? Now how is it different with containers? What can we finally do you as a as an architect that we couldn't do before? >>Infrastructure is code. That's, I think, one of the fundamental differences of the storage admin of yesteryear versus storage admin of today today, Azaz Sam mentioned As people are developing and deploying applications, those applications need to dynamically provisioned the infrastructure dynamically provisioned what they need from compute dynamically provisioned what they need from storage dynamically provisioned network paths and so that that that element of infrastructure is code. A dynamically provisioned infrastructure is very different from well from yesterday, when applications or teams needed to. Well, when they needed storage, they would you know, they would file a ticket and typically wait. Now they make an a p A. Now they make an A p. I call and storage is dynamically provisioned and provided to their application. >>But what what I think hard to understand for the layman. And maybe it's just me, right? I It's very easy to understand dynamic infrastructure around, um compute right, I'm Pepsi. I'm running it out for the Super Bowl. I need I know how much people are gonna hit by hit my site and it's kind of easy to understand. Dynamic provisioning around networking again for the same example. What's less easy to understand its dynamic provisioning for storage? It's one thing to say, you know, there's a there's a pool of storage resource is that I'm going to dynamically provisioned for this particular after this particular moment. But one of the whole things about the dynamic is not only is it available when you need it, but I could make it big, and conversely, I could make it smaller go away. I get that for servers, and I kind of get that for networking, supporting an application and that example I just talked about. But we can't It doesn't go away a lot of the time for storage, right? That's important data that's maybe feeding another process. There's all kinds of rules and regulations, So when you talk about dynamic infrastructure for storage, it makes a lot of sense for grabbing some to provision for some new application. But it's >>hard to >>understand in terms of true dynamics in terms of either scaling down or scaling up or turning off when I don't particularly need that much capacity or even that application right now, how does it work within storage versus No, just servers or I'm grabbing them and then I'm putting it back in the pool. >>Let me start on this one, and then I'm gonna hand it off to Brent. Um, you know, let's not forget, by the way, that enterprises have very significant investments in infrastructure and they're able to deliver six nines of availability on their storage. And they have d are worked out in all of their security, encryption, everything. It's already in place, and they're sure that they can deliver on their SLS. So they want to start with that. You have to leverage that investment. So first of all, you have to figure out how to automate that into the environment, that existing sand, and that's where things like uh, a P I s the container storage interface CS I drivers come in. IBM provides that across your entire portfolio, allowing you to integrate your storage into a kubernetes environment into an open shipped environment so that it can be automated, but you have to go beyond that and be able to extend that environment, then into other infrastructure, for example, into a public cloud. So with the IBM flash system, family with our spectrum virtualized software were actually able to deploy that storage layer not only on Prem on our award winning a race, but we can also do it in the cloud. So we allow you to take your existing infrastructure investments and integrate that into your communities environment and using things like danceable, fully automated environment. I'll get into data protection before we're done talking. But I do want Brent to talk a bit about how container native storage comes into that next as well. On how you can start building out new environments for, uh, for your applications. >>Yeah, What the two of you are alluding to is effectively kubernetes services layer, which is not storage. It consumes storage from the infrastructure, Assam said. Just because people deploy Kubernetes cluster doesn't mean that they go out and get an entirely new infrastructure for that. If they're deploying their kubernetes cluster on premises, they have servers. If they're deploying their kubernetes cluster on AWS or an azure on G C P. They have infrastructure there. Uh, what the two of you are alluding to is that services layer, which is independent of storage that can dynamically provisioned, provide data protection services. As I mentioned, we have good stuff to talk about their relative to data protection services for kubernetes clusters. But that's it's the abstraction layer or data services layer that sits on top of storage, which is different. So the basics of storage underneath in the infrastructure, you know, remain the same, Jeff. But the how that storage is provisioned and this abstraction layer of services which sits on top of the storage storage might be IBM flash system array storage, maybe E m c sand storage, maybe a W S E B s. That's the storage infrastructure. But this abstraction layer that sits on top this data services layer is what allows for the dynamic interaction of applications with the underlying storage infrastructure. >>And then again, just for people that aren't completely tuned in, Then what's the benefit to the application developer provider distributor with that type of an infrastructure behind And what can they do that they just couldn't do before? >>Well, I mean Look, we're, uh, e I mean, we're trying to solve the same problem over and over again, right? It's always about helping application developers build applications more quickly helps them be more agile. I t is always trying to keep up with the application developer and always struggles to. In fact, that's where the emergency cloud really came from. Just trying to keep up with the developer eso by giving them that automation. It gives them the ability to provision storage in real time, of course, without having open a ticket like friends said. But really, the Holy Grail here is getting to a developed once and deploy anywhere model. That's what they're trying to get to. So having an automated storage layer allows them to do that and ensure that they have access to storage and data, no matter where their application gets it >>right, Right, that pesky little detail. When I have to develop that up, it does have to sit somewhere and and I don't think storage really has gotten enough of of the bright light, really in kind of this app centric, developer centric world, we talk all the time about having compute available and and software defined networking. But you know, having this software defined storage that lives comfortably in this container world is pretty is pretty interesting. In a great development, I want to shift gears a >>little bit. Just one thing. Go >>ahead, >>plus one to Sam's comments. There all the application developer wants, they want an A P I and they want the same a p I to provision the storage regardless of where their app is running. The rest of the details they usually don't care about. Sure. They wanted to perform what not give him an A p I and make it the same regardless of where they're running the app. >>Because not only do they want to perform, they probably just presume performance, right? I mean, that's the other thing is that the best in class quickly becomes presumed baseline in a very short short period of time. So you've got to just you just got to just deliver the goods, right? They're gonna get frustrated and not be productive. But I wanted to shift gears up a little bit and talk about some of the macro trends. Right? We're here towards the end of 2020. Obviously, Cove It had a huge impact on business and a lot of different ways. And it's really evolved from March, this light switch moment. Everybody work from home, too. Now, this kind of extended time, that's probably gonna go on for a while. I'm just curious some of the things that you've seen with your customers not so much at the beginning, because that was that was a special and short period of time. But mawr, as we've extended and and are looking to, um, probably extended this for a while, you know, What is the impact of this increased work from home increase attack surface? You know, some of these macro things that we're seeing that cove it has caused and any other kind of macro trends beyond just this container ization that you guys were seeing impacting your world. Start with you, Sam. >>You know, I don't think it's actually changed what people were going to do or the strategy. What I've seen it do is accelerate things and maybe changed the way they're getting their, uh and so they're actually a lot of enterprises were running into challenges more quickly than they thought they would. And so they're coming to us and asking us to help them. Saw them, for example, backing up their data and these container environments as you move mission critical applications that maybe we're gonna move more slowly. They're realizing that as they've moved them, they can't get the level of data protection they need. And that's why actually we just announced it at the end of October. Updates to our modern data protection portfolio. It now is containerized. It could be deployed very easily in an automated fashion, but on top of that, it integrates down into the A P. I layer down into CSE drivers and allows you to do container where snapshots of your applications so you could do operational recovery. If there's some sort of an event you can recover from that you can do D R. And you can even use it for data migration. So we're helping them accelerate. So the biggest I think requests I'm getting from our customers, and how can you help us accelerate? And how can you help us fix these problems that we went running into as we tried to accelerate our digital transformation? >>Brent, Anyone that you wanna highlight? >>Mm. Okay. Ironically, one of my team was just speaking with one of the cruise lines, um, two days ago. We all know what's happened them. So if we just use them as an example, I'm clearly our customers need to do things differently now. So plus one to Sam's statement about acceleration on I would add another word to that which is agility, you know, frankly, they're having to do things in ways they never envisioned 10 months ago. So there need to cut cycle times to deploy effectively new ways of how they transact business has resulted in accelerated poll for these types of infrastructure is code technologies. >>That's great. The one that jumped in my mind. Sam, is you were talking. We've we've had a lot of conversations. Obvious security always comes up on baking security and is is a theme. But ransomware as a specific type of security threat and the fact that these guys not only wanna lock up your data, but they want to go in and find the backup copies and and you know and really mess you up so it sounds like that's even more important to have the safe. And we're hearing, you know, all these conversations about air gaps and dynamic air gaps and, you know, can we get air gaps and some of these infrastructure set up so that we can, you know, put put those backups? Um, and recovery data sets in a safe place so that if we have a ransomware issue, getting back online is a really, really important thing, and it seems to just be increasing every day. We're seeing things, you know, if you can actually break the law sometimes if you if you pay the ransom because where these people operate, there's all kind of weird stuff that's coming out of. Ransomware is a very specific, you know, kind of type of security threat that even elevates, you know, kind of business continuity and resiliency on a whole nother level for this one particular risk factor. When if you're seeing some of that as well, >>it's a great point. In fact, it's clearly an industry that was resilient to a pandemic because we've seen it increase things. Is organized crime at this point, right? This isn't the old days of hackers, you know, playing around this is organized crime and it is accelerating. And that's one thing. I'm really glad you brought up. It's an area we've been really focused on across our whole portfolio. Of course, IBM tape offers the best most of the actual riel air gapping, physical air gapping We could take a cartridge offline. But beyond that we offer you the ability to dio you know, different types of logical air gaps, whether it's to a cloud we support. In fact, we just announced Now the spectrum protect. We have support for Google Cloud. We already supported AWS Azure IBM Cloud. So we give you the ability to do logical air gapping off to those different cloud environments. We give you the ability to use worm capability so you can put your backups in a vault that can't be changed. So we give you lots of different ways to do it. In our high end enterprise storage, we offer something called Safeguarded copy where we'll actually take data off line that could be recovered almost instantly. Something very unique to our storage that gives you, for the most mission critical applications. The fastest path recovery. One of things we've seen is some of our customers have done a great job creating a copy. But when the event actually happens, they find is gonna take too long to recover the data and they end up having to pay the ransom anyway. So you really have to think through an Indian strategy on we're able to help customers do a kind of health checks of their environment and figure out the right strategy. We have some offerings to help come in and do that for our customers. >>Shift gears a little bit, uh, were unanswerable fest earlier this year and a lot of talk about automation. Obviously, answer was part of the Red Hat family, which is part of the IBM family. But, you know, we're seeing Mawr and Mawr conversations about automation about, you know, moving the mundane and the air prone and all the things that we shouldn't be doing as people and letting people doom or high value stuff. When if you could talk a little bit about the role of automation, that the kind of development of automation and how you're seeing that, you know, impact your deployments, >>right? You want to take that one first? >>Yeah, sure. Um, s o the first is, um when you think about individual kubernetes clusters. There's a level of automation that's required there. I mean, that's the fundamental. I mean, back to the infrastructure is code that's inherently. That's automation. To effectively declare the state of what you want your application, your cluster to be, and that's the essence of kubernetes. You declare what the state is, and then you pass that declaration to kubernetes, and it makes it so. So there's the kubernetes level automation. But then there's, You know what happens for larger enterprises when you have, you know, tens or hundreds of kubernetes clusters. Eso That's an area of Jeff you mentioned answerable. Now that's an area of with, you know, the work, the red hats doing the community for multi cluster management, actually in the community and together with IBM for automating the management of multiple clusters. And last thing I'll touch on here is that's particularly important as you go to the edge. I mean, this is all well and good when you're talking about, you know, safe raised floor data center environments. But what happens when you're tens or hundreds or even thousands of kubernetes clusters are running in an oil field somewhere? Automation becomes not only nice to have, but it's fundamental to the operation. >>Yeah, but let me just add onto that real quick. You know, it's funny, because actually, in this cove it era, you're starting to see that same requirement in the data center in the core data center. In fact, I would say that because there's less bodies now in the data center, more people working remotely. The automation in need for automation is actually actually accelerating as well. So I think what you said is actually true for the core data center now as well, >>right? So I wanna give you guys the last word before before we close the segment. Um, I'm gonna start with you, Brent. Really, From a perspective of big data and you've been involved again in big data for a long time. As you look back, it kind of the data warehouse era. And then we had kind of this whole rage with the Hadoop era, and, you know, we just continue to get more and more sophisticated with big data processes and applications. But at the end of the day, still about getting the right data to the right person at the right time to do something about it. I wonder if if you can, you know, kind of reflect over that journey and where we are now in terms of this mission of getting, you know, the right data to the right person at the right time so they could make the right decision. >>I think I'll close with accessibility. Um, that Z these days, we you know, the data scientists and data engineers that we work with. The key problem that they have is is accessibility and sharing of data. I mean, this has been wonderfully manifest. In fact, we did some work with the province of Ontario. You could look that stop hashtag house my flattening eso the work with them to get a pool of data. Scientists in the community in the province of Ontario, Canada, toe work together toe understand how to track co vid cases s such so that government could make intelligent responses and policy based on based on the fax so that that need highlights the accessibility that's required from today's, you know, yesteryear. It was maybe, uh, smaller groups of individual data scientists working in silos. Now it's people across industry as manifest by that That need accessibility as well as agility. They need to be able to spin up an environment that will allow them to in this case, um, to develop and deploy inference models using shared data sets without going through years of design. So accessibility on back to the back to the the acceleration and agility that Sam talked about. So I'll close with those words >>That's great. And the consistent with the democratization of two is another word that we're here, you know, over and over again in terms of, you know, getting it out of the hands of the data scientists and getting it into the hands of the people who are making frontline business decisions every day. And Sam for you, for your clothes. I love for you Thio reflect on kind of the changing environment in terms of your requirements for the types of workloads that you now are, you know, looking to support. So it's not just taking care of the data center and relatively straightforward stuff. But you've got hybrid. You've got multi cloud, not to mention all the media, the developments in the media between tape and obviously flash, um, spinning, spinning drives. But you know, really, We've seen this huge thing with flash. But now, with cloud and the increased kind of autumn autonomy ization of of units to be able to apply big batches in small batches to particular workloads across all these different requirements. When if you could just share a little bit about how you guys are thinking about, you know, modernizing storage and moving storage forward. What are some of your what are some of your your priorities? What are you looking forward to, uh, to be able to deliver, You know, basically the stuff underneath all these other applications. I mean, applications basically is data whether you I and some in some computer on top. You guys something underneath the whole package? >>Yeah. Yeah. You know, first of all, you know, back toe what Brent was saying, Uh, data could be the most valuable asset of an enterprise. You could give an enterprising, incredible, uh, competitive advantage as an incumbent if you could take advantage of that data using modern analytics and a I. So it could be your greatest asset. And it can also be the biggest inhibitor to digital transformation. If you don't figure out how to build a new type of modern infrastructure to support access to that data and support these new deployment models of your application. So you have to think that through. And that's not just for your big data, which the big data, of course, is extremely important and growing at incredible pace. All this unstructured data, You also have to think about your mission critical applications. We see a lot of people going through their transformation and modernization of S a p with move toe s four Hana. They have to think about how that fits into a multi cloud environment. They need to think about the life cycle of their data is they go into these new modern environments. And, yes, tape is still a very vibrant part of that deployment. So what we're working on an IBM has always been a leader in software defined storage. We have an incredible portfolio of capabilities. We're working on modernizing that software to help you automate your infrastructure. And sure, you can deliver enterprise class sls. There's no nobody's going to alleviate the requirements of having, you know, near perfect availability. You don't because you're moving into a kubernetes environment. Get a break on your downtime. So we're able to give that riel enterprise class support for doing that. One of the things we just announced that the end of October was we've containerized our spectrum scale client, allowing you now toe automate the deployment of your cluster file system through communities. So you'll see more and more of that. We're offering you leading modern native protection for kubernetes will be the first to integrate with OCP and open ship container storage for data protection. And our flashes from family will continue to be on the leading edge of the curve around answerable automation and C s I integration with who are already so we'll continue to focus on that and ensure that you could take advantage of our world class storage products in your new modern environment. And, of course, giving you that portability between on from in any cloud that you choose to run in >>exciting times. No, no shortage of job security for you, gentlemen, that's for sure. All right, Well, Brent, Sam, thanks for taking a few minutes and, uh, is great to catch up. And again. Congratulations on the success. Thank you. Thank you. Thank you. Alrighty, Sammy's Brent. I'm Jeff, You're watching the cubes. Continuing coverage of Q. Khan Cloud, Native Con North America 2020. Thanks for watching. We'll see you next time.

>>from around the globe. It's the Cube with coverage of Coop Con and Cloud, Native Con Europe 2020 Virtual brought to You by Red Hat, The Cloud Native Computing Foundation and its Ecosystem Partners. >>And welcome back to the Cube's coverage of Cube Con Cloud, Native Con Europe 20 twenties Virtual event. I'm Stew Minimum and and happy to Welcome back to the program, two of our Cube alumni. We're gonna be talking about storage in this kubernetes and container world. First of all, we have Sam Warner. He is the vice president of storage, offering management at IBM, and joining him is Brent Compton, senior director of storage and data architecture at Red Hat and Brent. Thank you for joining us, and we get to really dig in. It's the combined IBM and red hat activity in this space, of course, both companies very active in the space of the acquisition, and so we're excited to hear about what's going going. Ford. Sam. Maybe if we could start with you as the tee up, you know, Both Red Hat and IBM have had their conferences this year. We've heard quite a bit about how you know, Red Hat the solutions they've offered. The open source activity is really a foundational layer for much of what IBM is doing when it comes to storage, you know, What does that mean today? >>First of all, I'm really excited to be virtually at Cube Con this year, and I'm also really excited to be with my colleague Brent from Red Hat. This is, I think, the first time that IBM storage and Red Hat Storage have been able to get together and really articulate what we're doing to help our customers in the context of kubernetes and and also with open shift, the things we're doing there. So I think you'll find, ah, you know, as we talked today, that there's a lot of work we're doing to bring together the core capabilities of IBM storage that been helping enterprises with there core applications for years alongside, Ah, the incredible open source capabilities being developed, you know, by red Hat and how we can bring those together to help customers, uh, continue moving forward with their initiatives around kubernetes and rebuilding their applications to be develop once, deploy anywhere, which runs into quite a few challenges for storage. So, Brennan, I'm excited to talk about all the great things we're doing. Excited about getting to share it with everybody else. A cube con? >>Yes. So of course, containers When they first came out well, for stateless environments and we knew that, you know, we've seen this before. You know, those of us that live through that wave of virtualization, you kind of have a first generation solution. You know what application, What environment and be used. But if you know, as we've seen the huge explosion of containers and kubernetes, there's gonna be a maturation of the stack. Storage is a critical component of that. So maybe upfront if you could bring us up to speed you're steeped in, you know, a long history in this space. You know, the challenges that you're hearing from customers. Uhm And where are we today in 2020 for this? >>Thanks to do the most basic caps out there, I think are just traditional. I'm databases. APS that have databases like a post press, a longstanding APS out there that have databases like DB two so traditional APs that are moving towards a more agile environment. That's where we've seen in fact, our collaboration with IBM and particularly the DB two team. And that's where we've seen is they've gone to a micro services container based architecture we've seen pull from the market place. Say, you know, in addition to inventing new Cloud native APS, we want our tried true and tested perhaps I mean such as DB two, such as MQ. We want those to have the benefits of a red hat, open shift, agile environment. And that's where the collaboration between our group and Sam's group comes in together is providing the storage and data services for those state labs. >>Great, Sam, you know I IBM. You've been working with the storage administrator for a long time. What challenges are they facing when we go to the new architectures is it's still the same people it might There be a different part of the organization where you need to start in delivering these solutions. >>It's a really, really good question, and it's interesting cause I do spend a lot of time with storage administrators and the people who are operating the I T infrastructure. And what you'll find is that the decision maker isn't the i t operations or storage operations. People These decisions about implementing kubernetes and moving applications to these new environments are actually being driven by the business lines, which is, I guess, not so different from any other major technology shift. And the storage administrators now are struggling to keep up. So the business lines would like to accelerate development. They want to move to a developed, once deploy anywhere model, and so they start moving down the path of kubernetes. In order to do that, they start, you know, leveraging middleware components that are containerized and easy to deploy. And then they're turning to the I T infrastructure teams and asking them to be able to support it. And when you talk to the storage administrators, they're trying to figure out how to do some of the basic things that are absolutely core to what they do, which is protecting the data in the event of a disaster or some kind of a cyber attack, being able to recover the data, being able to keep the data safe, ensuring governance and privacy of the data. These things are difficult in any environment, but now you're moving to a completely new world and the storage administrators have ah tough challenge out of them. And I think that's where IBM and Red Hat can really come together with all of our experience and are very broad portfolio with incredibly enterprise hardened storage capabilities to help them move from their more traditional infrastructure to a kubernetes environment. >>Maybe if you could bring us up to date when we look back, it, like open stack of red hat, had a few projects from an open source standpoint to help bolster the open source or storage world in the container world. We saw some of those get boarded over. There's new projects. There's been a little bit of argument as to the various different ways to do storage. And of course, we know storage has never been a single solution. There's lots of different ways to do things, but, you know, where are we with the options out there? What's that? What's what's the recommendation from Red Hat and IBM as to how we should look at that? >>I wanna Bridget question to Sam's earlier comments about the challenges facing the storage admin. So if we start with the word agility, I mean, what is agility mean for it in the data world. We're conscious for agility from an application development standpoint. But if you use the term, of course, we've been used to the term Dev ops. But if we use the term data ops, what does that mean? What does that mean to you in the past? For decades, when a developer or someone deploying production wanted to create new storage or data, resource is typically typically filed a ticket and waited. So in the agile world of open shift in kubernetes, it's everything is self service and on demand or what? What kind of constraints and demands that place on the storage and data infrastructure. So now I'll come back to your questions. Do so yes. At the time, that red hat was, um, very heavily into open stack, Red Hat acquired SEF well acquired think tank and and a majority of the SEF developers who are most active in the community. And now so and that became the de facto software defying storage for open stack. But actually for the last time that we spoke at Coop Con and the Rook project has become very popular there in the CN CF as away effectively to make software defined storage systems like SEF. Simple so effectively. The power of SEF, made simple by rook inside of the open shift operator frame where people want that power that SEF brings. But they want the simplicity of self service on demand. And that's kind of the diffusion. The coming together of traditional software defined storage with agility in a kubernetes world. So rook SEF, open shift container storage. >>Wonderful. And I wonder if we could take that a little bit further. A lot of the discussion these days and I hear it every time I talk to IBM and Red Hat is customers air using hybrid clouds. So obviously that has to have an impact on storage. You know, moving data is not easy. There's a little bit of nuance there. So, you know, how do we go from what you were just talking about into a hybrid environ? >>I guess I'll take that one to start and Brent, please feel free to chime in on it. So, um, first of all, from an IBM perspective, you really have to start at a little bit higher level and at the middleware layer. So IBM is bringing together all of our capabilities everything from analytics and AI. So application, development and, uh, in all of our middleware on and packaging them up in something that we call cloud packs, which are pre built. Catalogs have containerized capabilities that can be easily deployed. Ah, in any open shift environment, which allows customers to build applications that could be deployed both on premises and then within public cloud. So in a hybrid multi cloud environment, of course, when you build that sort of environment, you need a storage and data layer, which allows you to move those applications around freely. And that's where the IBM storage suite for cloud packs was. And we've actually taken the core capabilities of the IBM storage software to find storage portfolio. Um, which give you everything you need for high performance block storage, scale out, um, file storage and object storage. And then we've combined that with the capabilities, uh, that we were just discussing from Red Hat, which including a CS on SEF, which allow you, ah, customer to create a common, agile and automated storage environment both on premises and the cloud giving consistent deployment and the ability to orchestrate the data to where it's needed >>I'll just add on to that. I mean that, as Sam noted and is probably most of you are aware. Hybrid Cloud is at the heart of the IBM acquisition of Red Hat with red hat open shift. The stated intent of red hat open shift is to be to become the default operating environment for the hybrid cloud, so effectively bring your own cloud wherever you run. So that that is at the very heart of the synergy between our companies and made manifest by the very large portfolios of software, which would be at which have been, um, moved to many of which to run in containers and embodied inside of IBM cloud packs. So IBM cloud packs backed by red hat open shift on wherever you're running on premises and in a public cloud. And no, with this storage suite for cloud packs that Sam referred to also having a deterministic experience. That's one of the things as we work, for instance, deeply with the IBM DB two team. One of the things that was critical for them, as they couldn't have they couldn't have their customers when they run on AWS have a completely different experience than when they ran on premises, say, on VM, where our on premises on bare metal critical to the DB two team t give their customers deterministic behavior wherever they can. >>Right? So, Sam, I I think any of our audience that it followed this space have heard Red House story about open shift in how it lives across multiple cloud environments. I'm not sure that everybody is familiar with how much of IBM storage solutions today are really this software driven. So ah, And therefore, you know, if I think about IBM, it's like, okay, and by storage or yes, it can live in the IBM Cloud. But from what I'm hearing from Brent in you and from what I know from previous discussion, this is independent and can live in multiple clouds, leveraging this underlying technology and can leverage the capabilities from those public cloud offers. That right, Sam? >>Yeah, that's right. And you know, we have the most comprehensive portfolio of software defined storage in the industry. Maybe to some, it's ah, it's a well kept secret, but those that use it No, the breadth of the portfolio. We have everything from the highest performing scale out file System Teoh Object store that can scale into the exabytes. We have our block storage as well, which runs within the public clouds and can extend back to your private cloud environment. When we talk to customers about deploying storage for hybrid multi cloud in a container environment, we give them a lot of houses to get there. We give them the ability to leverage their existing san infrastructure through the CS I drivers container storage interface. So our whole, uh, you know, physical on Prem infrastructure supports CS I today and then all the software that runs on our arrays also supports running on top of the public clouds, giving customers then the ability to extend that existing san infrastructure into a cloud environment. And now, with storage suite for cloud packs a sprint described earlier, we give you the ability to build a really agile infrastructure, leveraging the capabilities from Red Hat to give you a fully extensible environment and a common way of managing and deploying both on Prem and in the cloud. So we give you a journey with our portfolio to get from your existing infrastructure. Today, you don't have to throw it out it started with that and build out an environment that goes both on Prem and in the cloud. >>Yeah, Brent, I'm glad that you started with database, cause it's not something that I think most people would think about. You know, in a kubernetes environment, you Do you have any customer examples you might be able to give? Maybe Anonymous? Of course. Just talking about how those mission critical applications can fit into the new modern architect. The >>big banks. I mean, just full stop the big banks. But what I'd add to that So that's kind of frequently they start because applications based on structured data remain at the heart of a lot of enterprises. But I would say workload, category number two, our is all things machine Learning Analytics ai and we're seeing an explosion of adoption within the open shift. And, of course, cloud pack. IBM Cloud private for data, is a key market participant in that machine learning analytic space. So an explosion of the usage of of open shift for those types of workloads I was gonna touch just briefly on an example, going back to our kind of data data pipeline and how it started with databases, but it just it explodes. For instance, data pipeline automation, where you have data coming into your APS that are kubernetes based that our open shift based well, maybe we'll end up inside of Watson Studio inside of IBM ah, cloud pack for data. But along the way, there are a variety of transformations that need to occur. Let's say that you're a big bank. You need Teoh effectively as it comes in. You need to be able to run a CRC to ensure to a test that when when you modify the data, for instance, in a real time processing pipeline that when you pass it on to the next stage that you can guarantee well that you can attest that there's been no tampering of the data. So that's an illustration where it began, very with the basics of basic applications running with structured data with databases. Where we're seeing the state of the industry today is tremendous use of these kubernetes and open shift based architectures for machine learning. Analytics made more simple by data pay data pipeline automation through things like open shift container storage through things like open shift server lis or you have scale double functions and what not? So yeah, it began there. But boy, I tell you what. It's exploded since then. >>Yeah, great to hear not only traditional applications, but as you said so, so much interest. And the need for those new analytics use cases s so it's absolutely that's where it's going. Someone. One other piece of the storage story, of course, is not just that we have state full usage, but talk about data protection, if you could, on how you know things that I think of traditionally my backup restore and like, how does that fit into the whole discussion we've been having? >>You know, when you talk to customers, it's one of the biggest challenges they have honestly. And moving to containers is how do I get the same level of data protection that I use today? Ah, the environments are in many cases, more complex from a data and storage perspective. You want Teoh be able to take application consistent copies of your data that could be recovered quickly, Uh, and in some cases even reused. You can reuse the copies, for they have task for application migration. There's there's lots of or for actually AI or analytics. There's lots of use cases for the data, but a lot of the tools and AP eyes are still still very new in this space. IBM has made, uh, prior, uh, doing data protection for containers. Ah, top priority for our spectrum protect suite. And we provide the capabilities to do application aware snapshots of your storage environment so that a kubernetes developer can actually build in the resiliency they need. As they build applications in a storage administrator can get a pane of glass Ah, and visibility into all of the data and ensure that it's all being protected appropriately and provide things like S L A. So I think it's about, you know, the fact that the early days of communities tended to be stateless. Now that people are moving some of the more mission critical workloads, the data protection becomes just just critical as anything else you do in the environment. So the tools have to catch up. So that's a top priority of ours. And we provide a lot of those capabilities today and you'll see if you watch what we do with our spectrum. Protect suite will continue to provide the capabilities that our customers need to move their mission. Critical applications to a kubernetes environment. >>Alright And Brent? One other question. Looking forward a little bit. We've been talking for the last couple of years about how server lists can plug into this. Ah, higher kubernetes ecosystem. The K Native project is one that I, IBM and Red Hat has been involved with. So for open shift and server lis with I'm sure you're leveraging k native. What is the update? That >>the update is effectively adoption inside of a lot of cases like the big banks, but also other in the talk, uh, the largest companies in other industries as well. So if you take the words event driven architecture, many of them are coming to us with that's kind of top of mind of them is the need to say, you know, I need to ensure that when data first hits my environment, I can't wait. I can't wait for a scheduled batch job to come along and process that data and maybe run an inference. I mean, the classic cases you're ingesting a chest X ray, and you need to immediately run that against an inference model to determine if the patient has pneumonia or code 19 and then kick off another serverless function to anonymous data. Just send back in to retrain your model. So the need. And so you mentioned serverless. And of course, people say, Well, I could I could handle that just by really smart batch jobs, but kind of one of the other parts of server less that sometimes people forget but smart companies are aware of is that server lists is inherently scalable, so zero to end scalability. So as data is coming in, hitting your Kafka bus, hitting your object store, hitting your database and that if you picked up the the community project to be easy, Um, where something hits your relational database and I can automatically trigger an event onto the Kafka bus so that your entire our architecture becomes event >>driven. All right. Well, Sam, let me give you the funding. Let me let you have the final word. Excuse me on the IBM in this space and what you want them to have his takeaways from Cube con 2020 Europe. >>I'm actually gonna talk to I think, the storage administrators, if that's OK, because if you're not involved right now in the kubernetes projects that are happening within your enterprise, uh, they are happening and there will be new challenges. You've got a lot of investments you've made in your existing storage infrastructure. We had IBM and Red Hat can help you take advantage of the value of your existing infrastructure. Uh, the capabilities, the resiliency, the security of built into it with the years. And we can help you move forward into a hybrid, multi cloud environment built on containers. We've got the experience and the capabilities between Red Hat and IBM to help you be successful because it's still a lot of challenges there. But But our experience can help you implement that with the greatest success. Appreciate it. >>Alright, Sam and Brent, Thank you so much for joining. It's been excellent to be able to watch the maturation in this space of the last couple of years. >>Thank you. >>Alright, we'll be back with lots more coverage from Cube Con Cloud, native con Europe 2020 the virtual event. I'm stew Minimum And thank you for watching the Cube. Yeah, yeah, yeah, yeah

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

>> From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE! (upbeat electronic music) Now, here's your host, Dave Vellante. >> Hi, everybody, this is Dave Vellante, and I want to share with you some recent survey data that talks to the IBM acquisition of Red Hat, which closed today. It's always really valuable to go out, talk to practitioners, see what they're doing, and it's a hard thing to do. It's very expensive to get this type of survey data. A lot of times, it's very much out of date. You might remember. Some of you might remember a company called the InfoPro. Its founder and CEO was Ken Male, and he raised some money from Gideon Gartner, and he had this awesome survey panel. Well, somehow it failed. Well, friends of mine at ETR, Enterprise Technology Research, have basically created a modern version of the InfoPro. It's the InfoPro on steroids with a modern interface and data science behind it. They've now been at this for 10 years. They built a panel of 4,500 users, practitioners that they can go to, a lot of C level folks, a lot of VP level and then some doers down at the engineering level, and they go out and periodically survey these folks, and one of the surveys they did back in October was what do you think of the IBM-Red Hat acquisition? And then they've periodically gone out and talked to customers of both Red Hat and IBM or both to get a sense of the sentiment. So given that the acquisition closed today, we wanted to share some of that data with you, and our friends at ETR shared with us some of their drill down data with us, and we're going to share it with you. So first of all, I want to summarize something that they said. Back in October, they said, "We view this acquisition as less of an attempt "by IBM to climb into the cloud game, cloud relevance, "but rather a strategic opportunity "to reboot IBM's early 1990s IT services business strategy." I couldn't agree with that more. I've said all along this is a services play connecting OpenShift from Red Hat into the what Ginni Rometty talks about as the 80% of the install base that is still on prem with the workloads at the backend of mission critical systems that need to be modernized. That's IBM's opportunity. That's why this is a front end loaded cashflow deal 'cause IBM can immediately start doing business through it services organization and generate cash. They went on to say, ETR said, "Here, IBM could position itself "as the de facto IT services partner "for Fortune 100 to Global 2000 organizations "and their digital transformations. "Therefore, in theory, this could reinvigorate "the global services business for IBM "and their overlapping customer bases "could alow IBM to recapture and accelerate a great deal "of service revenues that they have lost "over the past few years." Again, I couldn't agree more. It's less about a cloud play. It is definitely about a multi-cloud play, which is how IBM's positioning this, but services de-risks this entire acquisition in my opinion even though it's very large, 34 billion. Okay, I'm show you some data. So pull up this slide. So what ETR does is they'll go out. So this is a survey of right after the acquisition of about 132 Global 2000 practitioners across a bunch of different industries, energy, utilities, financial services, government, healthcare, IT, telco, retail consumers, so a nice cross section of industries and largely in North America but a healthy cross section of AMIA and APAC. And again, these are large enterprises. So what this slide shows is conditioned responses, which I love conditioned responses. It sort of forces people to answer which of the following best describes. But this says, "Given IBM's intent to acquire Red Hat, "do you believe your organization will be more likely "to use this new combination "or less likely in your digital transformation?" You can see here on the left hand side, the green, 23% positive, on the right hand side, 13% negative. So, the data doesn't necessarily support ETR's original conclusions and my belief that this all about services momentum because most IT people are going to wait and see. So you can see the fat middle there is 64%. Basically you're saying, "Yeah, we're going to wait and see. "This really doesn't change anything." But nonetheless, you see a meaningfully more positive sentiment than negative sentiment. The bottom half of this slide shows, the question is, "Do you believe that this acquisition "makes or will make IBM a legitimate competitor "in the cloud wars between AWS and Microsoft Azure?" You can see on the left hand side, it says 45% positive. Very few say, all the way on the left hand side, a very legitimate player in the cloud on par with AWS and Azure. I don't believe that's the case. But a majority said, "IBM is surely better off "with Red Hat than without Red Hat in the context of cloud." Again, I would agree with that. While I think this is largely a services play, it's also, as Stu Miniman pointed out in an earlier video with me, a cloud play. And you can see it's still 38% is negative on the right hand side. 15% absolutely not, IBM is far behind AWS and Azure in cloud. I would tend to agree with that, but IBM is different. They're trying to bring together its entire software portfolio so it has a competitive approach. It's not trying to take Azure and AWS head on. So you see 38% negative, 45% positive. Now, what the survey didn't do is really didn't talk to multi-cloud. This, to me, puts IBM at the forefront of multi-cloud, right in there with VMware. You got IBM-Red Hat, Google with Anthos, Cisco coming at it from a network perspective and, of course, Microsoft leveraging its large estate of software. So, maybe next time we can poke at the multi-cloud. Now, that survey was done of about over 150, about 157 in the Global 2000. Sorry, I apologize. That was was 137. The next chart that I'm going to show you is a sentiment chart that took a pulse periodically, which was 157 IT practitioners, C level executives, VPs and IT practitioners. And what this chart shows essentially is the spending intentions for Red Hat over time. Now, the green bars are really about the adoption rates, and you can see they fluctuate, and it's kind of the percentage on left hand side and time is on the horizontal axis. The red is the replacement. We're going to replace. We're not going to buy. We're going to replace. In the middle is that fat middle, we're going to stay flat. So the yellow line is essentially what ETR calls market share. It's really an indication of mind share in my opinion. And then the blue line is spending intentions net score. So what does that mean? What that means is they basically take the gray, which is staying the same, they subtract out the red, which is we're doing less, and they add in the we're going to do more. So what does this data show? Let's focus on the blue line. So you can see, you know, slightly declining, and then pretty significantly declining last summer, maybe that's 'cause people spend less in the summer, and then really dropping coming into the announcement of the acquisition in October of 2018, IBM announced the $34 billion acquisition of Red Hat. Look at the spike post announcement. The sentiment went way up. You have a meaningful jump. Now, you see a little dip in the April survey, and again, that might've been just an attenuation of the enthusiasm. Now, July is going on right now, so that's why it's phased out, but we'll come back and check that data later. So, and then you can see this sort of similar trend with what they call market share, which, to me, is, again, really mind share and kind of sentiment. You can see the significant uptick in momentum coming out of the announcement. So people are generally pretty enthusiastic. Again, remember, these are customers of IBM, customers of Red Hat and customer of both. Now, let's see what the practitioners said. Let's go to some of the open endeds. What I love about ETR is they actually don't just do the hardcore data, they actually ask people open ended questions. So let's put this slide up and share with you some of the drill down statements that I thought were quite relevant. The first one is right on. "Assuming IBM does not try to increase subscription costs "for RHEL," Red Hat Enterprise Linux, "then its organizational issues over sales "and support should go away. "This should fix an issue where enterprises "were moving away from RHEL to lower cost alternatives "with significant movement to other vendors. "This plus IBM's purchase of SoftLayer and deployment "of CloudFoundry will make it harder "for Fortune 1000 companies to move away from IBM." So a lot implied things in there. The first thing I want to mention is IBM has a nasty habit when it buys companies, particularly software companies, to raise prices. You certainly saw this with SPSS. You saw this with other smaller acquisitions like Ustream. Cognos customers complained about that. IBM buys software companies with large install bases. It's got a lock in spec. It'll raise prices. It works because financially it's clearly worked for IBM, but it sometimes ticks off customers. So IBM has said it's going to keep Red Hat separate. Let's see what it does from a pricing standpoint. The next comment here is kind of interesting. "IBM has been trying hard to "transition to cloud-service model. "However, its transition has not been successful "even in the private-cloud domain." So basically these guys are saying something that I've just said is that IBM's cloud strategy essentially failed to meet its expectations. That's why it has to go out and spend $34 billion with Red Hat. While it's certainly transformed IBM in some respects, IBM's still largely a services company, not as competitive as cloud as it would've liked. So this guys says, "let alone in this fiercely competitive "public cloud domain." They're not number one. "One of the reasons, probably the most important one, "is IBM itself does not have a cloudOS product. "So, acquiring Red Hat will give IBM "some competitive advantage going forward." Interesting comments. Let's take a look at some of the other ones here. I think this is right on, too. "I don't think IBM's goal is to challenge AWS "or Azure directly." 100% agree. That's why they got rid of the low end intel business because it's not trying to be in the commodity businesses. They cannot compete with AWS and Azure in terms of the cost structure of cloud infrastructure. No way. "It's more to go after hybrid multi-cloud." Ginni Rometty said today at the announcement, "We're the only hybrid multi-cloud, opensource vendor out there. Now, the third piece of that opensource I think is less important than competing in hybrid and multi-cloud. Clearly Red hat gives IMB a better position to do this with CoreOS, CentOS. And so is it worth 34 billion? This individual thinks it is. So it's a vice president of a financial insurance organization, again, IBM's strong house. So you can here some of the other comments here. "For customers doing significant business "with IBM Global Services teams." Again, outsourcing, it's a 10-plus billion dollar opportunity for IBM to monetize over the next five years, in my opinion. "This acquisition could help IBM "drive some of those customers "toward a multi-cloud strategy "that also includes IBM's cloud." Yes, it's a very much of a play that will integrate services, Red Hat, Linux, OpenShift, and of course, IBM's cloud, sprinkle in a little Watson, throw in some hardware that IBM has a captive channel so the storage guys and the server guys can sell their hardware in there if the customer doesn't care. So it's a big integrated services play. "Positioning Red Hat, and empowering them "across legacy IBM silos, will determine if this works." Again, couldn't agree more. These are very insightful comments. This is a largely a services and an integration play. Hybrid cloud, multi-cloud is complex. IBM loves complexity. IBM's services organization is number one in the industry. Red Hat gives it an ingredient that it didn't have before other than as a partner. IBM now owns that intellectual property and can really go hard and lean in to that services opportunity. Okay, so thanks to our friends at Enterprise Technology Research for sharing that data, and thank you for watching theCUBE. This is Dave Vellante signing off for now. Talk to you soon. (upbeat electronic 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

>> Announcer: Live from Boston, Massachusetts. It's theCUBE, covering Red Hat Summit 2019. Brought to you by Red Hat. >> And welcome back to Boston. Here on theCUBE we continue our coverage of Red Hat Summit 2019. We just had Jim Whitehurst on, President and CEO, along with Stu Miniman, I'm John Walls. And now, we turn to the IBM side of the equation. Arvind Krishna is with us, the SVP of Cloud and Cognitive Software at IBM. Arvind, good to see you this morning. >> My pleasure to be here, what a great show. >> Yeah, absolutely, it has been. I was telling Jim he couldn't have a better week, right? Monday had good news, Tuesday great kick off, today again following through great key notes. We were talking briefly, a year ago you were with us on theCUBE and talking about IBM and its forward plans, so on and so forth. What a difference a year makes, right? (laughs) >> We couldn't predict that you'd be in the position that you are in now, so just if you can summarize the last year and maybe the last six months for you. >> Sure, and I think it's more building on what I talked to you about a year ago, I remember last May, May of 2018, in San Francisco. So I was exposing very heavily, look the world's going to move towards containers, the world has already embraced Linux, this is the time to have a new architecture that enables hybrid, much along the lines that Jim and all of the clients as well as Ginni and Satya were talking about on stage yesterday. So you put all that together and you say that is what we mentioned last year and we were clear, that is where the world is gonna go. Now you step forward a few months from there into October of 2018 and on the 29th October we announced that IBM intends to acquire Red Hat, so then you say wow, we put actually our money where our mouth was. We were talking about the strategy, we were talking about Linux containers, OpenShift, the partnership we announced last May was IBM software products together with OpenShift. We already believed in that. But now this allows us coming together, it's more like a marriage than sort of loose partners passing each other in the middle of the night. >> Right. >> And that then goes forward, you mention the news on Monday so for our viewers that don't know it, that's the news that the United States Department of Justice approved merger with no conditions. So now we've got to wait on a few other jurisdictions and then hopefully we can get together really soon. >> John: Right, right. >> So, I think back to looking at IBM over my career. I think the first time I heard the word coopetition it was related to IBM because IBM, big ego system, lots of innovation over its long history but as we know the bigger you get, the more chance that your partners are also going to overlap with you. Seeing Ginni up on stage and a little bit later seeing Satya up on stage is really interesting. You look at the public, multicloud environment, everybody doesn't need to work together, you talk to your customers, and I'm sure you find today it's not the future is hybrid and multicloud, that's where they are today even if they're trying to get their arms around all of it. So I'd love to hear your, with the mega trend of Cloud, what you're seeing that competitive but partnering dynamic. >> Look, I want to step back to just give it a little bit of context. So when you talk about companies, let's go back to the beginning of computing, of PC. The PC came from IBM operating system, DOS came from Microsoft. Then you had Windows setting up the IBM PC. So that's coopetition or is that pure partnership? Right, I mean you can take your pick of those words. Our value has always been that we, IBM, come to clients and we try to service problems that actually help them in their business outcomes. Then whoever they have inside their IT shops, that they depend upon, has to be a part of that answer. You cannot say oh, so and so is bad, they're out. So it always had to be coopetition from the lengths that we came to with our clients. We always build originally computers, other people's software are on those computers, other people provided services around it. As we went into certain software space, ISVs and so on came together. So now that you come to the world of Cloud, we hold a very fundamental belief and I think we heard a number of the clients talk about this. They are going to be on multiple public Clouds. If they are going to be on multiple public Clouds, they are also going to have traditional IT and they are also going to have private Clouds. That's the world to live in if I look at it from the viewpoint of that infrastructure. To now come to your direct question, so if that's the world they're going to live in hopefully one of those public Clouds is ours but the others are from other people. The private Cloud, we believe the standard for that should be OpenShift and should be containers. So as we go down that path, then you say if you want to take that environment and also run it on the other publics. That's good for the client, that's good for the publics, that's good for us. It's really a win, win, win. And so I think the ability to go do this and to make that play out, it really goes back to my thesis from more than a year ago where we talk about this is a new set of standards and a new set of technical protocols emerging. >> I want you to take us inside the conversations you're having with CIOs when you talk about Cloud because when Cloud first came out, it was well, the sins of IT is this heterogeneous mess and it's complex and expensive. Cloud's going to be simple, homogeneous and cheap. I look at Cloud of 2019 and I don't think I would use any of those adjectives to define what most people have for Cloud. Where are they today? Where do we need to go as an industry? >> Glass house computing, all centralized, all homogeneous, not all at heterogeneous. Oops, 15 flavors of Unix, all different, none of them really talk to each other. Oops let's go to desktop computing, we begin with a pure architecture, maybe Novell which doesn't exist, maybe it does, I don't even know. Oops, back to this complete sprawl of client server. Okay let's go to Cloud back to centralized glass house. >> You're making me dizzy. >> Oops, let's go to-- (laughing) >> Let's go to lots of public, lots of SaaS, lots of private, back to this thing. So, in each of these a different answer came on how to unite them. I think when we look at that Unix and client server sprawl, I think TCP/IP and the internet came together so that you could have all these islands talk to each other and be able to communicate. All right, great, we've got 20 years of victory on that. Now you're getting these things, how do you begin to workload across because that becomes the next level of values. Not enough to communicate. Can I really take a workload? A workload is not just a VM or just one container, it's a collection of these things integrated together in a pretty tight and complex way. And can we take it from one place and move it to the other? Because that goes to the write once, run anywhere mantra which by the way also we come to about every 20 years. I think that's the magic of this moment and if we succeed in making that happen, which I have complete conviction we will, especially together, then I think we give a huge value back and we give freedom to every CTO and every CIO. >> You paint this really interesting whoops picture, I love that, it's really a back and forth, right, we're swinging and almost there's a cyclical nature to this is what you're I think implying. What's to say in your mind that this isn't just another whoops as opposed to this being a permanent shift in the paradigm? >> I think it's, the reason I think that it's going to be cyclical is we tend to, you know whether you go to construction and real estate, you talk about capacity and factories. You see an opportunity and people tend to go one way. The only way to correct culture if you're sitting in one place is to sort of over-correct the other way, now you're over-corrected. Now you have to come back. And always when you over-correct one way, then suddenly all those other benefits you've lost, so then you've got to come back to get those benefits. After about 10 years, probably, you can debate 10 or 15, you're done. You've exploited all those benefits, now you need to go get those benefits. Because the technologies have changed, it's not just that you're going back to what was. We're going very conceptually from centralized to distributed, to centralized to distributed. And by the way, another one that's getting out from pure centralized is also Edge. Edge in effect is another distributed, so you put those together and you say I went there, but then I lost all this stuff, now I need to get back to that stuff. If you've got too much there, you'll say, no, no, no, I need to get some of this back. So it's going to go that way I think for every, if you look at it, the big arcs are back, the pendulum, what do you call it, the pendulum swing, is I think about 20 years it looks like, right? 1960, centralized, 1980, PC, 2000, you could say was the peak of the internet. Hey, 2020, we're in Cloud. So looks like about 20 years, looks like. >> All right, so, I like what you were saying when you talk about that multicloud environment, the application is really central there. IBM, of course, has a strong history, not just in middleware but in applications. What do you think will differentiate this kind of next wave of multicloud, how will the leaders emerge? >> Right, so if you look at it today, you run infrastructure. I think OpenShift has done a great job of how you help run their infrastructure. The value in our eyes in putting the services on top, both coming from open source as well as other companies that are running like an integrated package. This is all about taking the cost out of how do you deploy and develop. And if we can take the cost out of that, you're not talking about that five to 10 X as we heard a couple of the clients up on stage yesterday with Jim talk about. If we give that to everybody, you can sort of say that 70% which goes into managing your current and only 30% on innovation. Can you shift that paradigm completely? That's the big business outcome that you get. As you begin to deliver these towers of function on top of the base. You need to start at base, without one base, you don't know how to say, I can't deal with these towers of function on thirty different things underneath. That engineering answer is a terrible one. >> In terms of the infrastructure market, things keep changing, right? Consolidating, EMC doing what they're, you know what happened there. How do you see your play in that market? First off, how do you see infrastructure evolving? And then how do you see your play in that going forward? >> Infrastructure has always been big, in the end all the stuff you talk about has to run on infrastructure. I'd say the consumption model of how you get infrastructure is changing. So it used to be that many years ago, people bought all their own infrastructures. They bought boxes, they put in boxes, they did all the integration. And what came from the vendor was just a box. Then you went to, all right you can get it as a managed service or you can get it in Cloud which is also a pay by the drink but you can now turn it up and down also. So it's not a either or, people want all of these models. And so our role in infrastructure, certain things we will provide. When it comes to running really high mission critical workloads, think mainframe, think big Unix, think storage, of that ilk; we'll keep providing that. We believe there's a lot of value in that. We see the value, our clients appreciate that value. That workload turns up, but it's the mission critical part of the workload. Then in turn we also provide the more commodity infrastructure but as a service. We supply a large amount of it to our clients. It comes sometimes wrapped in a managed service, it sometimes comes wrapped as a Cloud. And we will also consume infrastructure from other Cloud providers because if people are providing base computer, network and storage, there is no reason to presume that our capabilities wouldn't run on top. If I go back to just February, we announced that Watson will now run. We said we used the moniker Watson Anywhere to make the assertion that we will run Watson anywhere that we can run the correct containerized infrastructure. >> So, Arvind, what's the single most pressing issue that you hear from organizations with respect to their technology strategy and how's IBM helping there? >> I think modernizing applications is the biggest one. So people have, typically a large enterprise will have anywhere from 3,000 to 15,000 applications. That's what runs the enterprise. We talk about everyone's becoming a software company, right, I mean that was one of the quotes and everybody is becoming a tech company that was I think what one of the clients said, hey, we think you're a bank, you're actually a tech company. What that says is that you're capturing the essence of all the business processes. You're capturing the essence of the experiences. The essence of what regulators need, the essence of how you maintain customer and customer of our clients, trust, back to them. It's maintained through this collection of applications. Now if you say I want to go change, I want to become even more client centric, I want to insert AI into the middle of my business process, I want to become more digital. All of that is modernizing applications. The big pinpoint they all have is how do I modernize them? What becomes that fabric in which I modernize? How do I know I'm not locked into yet another spaghetti mess if I go down this path? Because we've seen that movie also. So they're interested in, hey, I want to be clean at the end of this. I want freedom to be able to move it. And that is why I'm so passionate about, the fabric is based on open source, the fabric's got to be based on open standards. If you go there, there is no lock-in, and it's not a spaghetti mess, it is actually clean. Much cleaner than any other option that we can dream of is going to be. And so if we go down this path, now you can open yourself up to a much faster velocity of how you deliver innovation and value back to the business. >> Okay, so, I'd agree first of all when you talk about modernization, the applications that they have, that's the long pole in the tent. We understand compared to all the other digitization, modernization, this is the toughest challenge here. I'm a little surprised though that I didn't hear the word data because they don't necessarily articulate it but the biggest opportunity that they have has to be tied to data. >> Well to me, when I use the word application here, and you heard me use the word AI, can I insert AI in the context of an application? Now, why is it not being done today? To get the value out of AI, the data that powers the AI is stuck in all the silos, all over the place. So you've got to have, as you do this modernization, it's imperative to put the correct data architecture so that now you can do the governance, so that you can choose to unlock the appropriate parts of the data. It's really important to say the appropriate parts because neither do you want data sort of free floating around the globe, because that is the value of a company at the end of the day. And so that unlocking of that value is a huge part of this. So you're absolutely right to ask me to express it more strongly when I use the word application, I'm inclusive of not just runtime but always of the data that powers that application. >> Arvind, it was again a year ago that we were talking to you out in San Francisco and you made some rather strong thematic predictions that turned out well. I'm not going to put you on the spot here, but I can't wait to see next year. And see how this turns out. >> I can't let him go before, we had the CIO of Delta who we had on our program. >> Oh, right, right. >> In the key note, made a question about licensing, of course Jim Whitehurst said we don't have licensing but what's your answer? >> I'm willing to offer a deal to Samant. So I think that both IBM and Red Hat do a fair amount of air travel. We'll give him a common license if he can just include Red Hat for whatever IBM pays, just include all the Red Hat travel that is needed on Delta. (laughing) You know just so that the business models become clear and we can go have a robust discussion. >> Out of Raleigh that's a good deal. >> For us. >> That's what I'm saying. That is a good deal. All right, the ball is in your court, or on your runway. Whatever the case may be. Arvind, thanks for being with us. >> My pleasure. >> We appreciate it. And we'll let you know if we hear back from Rahul on that good deal. TheCUBE continues live from Boston right after this. (upbeat music)

>> Live from San Francisco. It's the cube covering IBM thing twenty nineteen brought to you by IBM. >> Welcome back to Mosconi North here in San Francisco. I'm student like co host David Dante. You're watching four days of live wall to wall coverage here at IBM. Think twenty nineteen. Happy to welcome back to the program first time in her new role. And she's also moved back to David, my home area of the Boston Massachusetts F area. Stephanie Sherice, who's now the vice president and general manager of Red Hat Enterprise. Lennox Business Unit. That red hat Stephanie. Thanks so much for joining. >> What's my pleasures to It's great to be back with you both. >> All right, Stephanie, be back. You know, I happen to notice quite a few IBM. Er's obviously know you. We've had you on our program and many of the IBM shows in the past. So tell us, what's it like being back at one of the Big Blue shows? >> No, it's great. It's great. As you know, I somewhat grew up at IBM might. I had seventeen years. I know so many people in the thing you miss most is in the network. So it's been it's a great opportunity to be here. Catch up with old friends, Talked to new colleagues. Great. What brought >> you to Red hat? I mean, like, you say, long career at IBM, and it was obviously prior to the acquisition, so you didn't know that was coming? What was the lore? >> So I'd say a couple of things clearly, as you know, I became a student of the Lenox Space while I was in while I was at I B M in the Power Systems unit. So fascinated for what Lennox has taught the industry about. I always say Lennox Lennox taught the world how development is meant to be done through open source in the innovation of a community. So that was a thrilling aspect for me to join. Also, I think I truly believe in the open hybrid, multi cloud strategy that Red Hat has had actually for years. Now. I think open source is all about choice and flexibility. It's what Lennox provides and moving forward their strategy around having a management portfolio, having a Cooper Netease platform all built upon being able to consume Lennox wherever and however you want it, I believe in the strategy. So it's been really exciting, and having the rail aspect is fantastic. >> So, Stephanie, you're right. You own that. Really? The core of red hats business. You know, Red Hat Enterprise Lennox, You know, we've been covering this space heavily for years, and everything that redheads doing comes back to, you know, that Lennox Colonel and there Ah, lot of people don't really understand that. The business model say it's like, Oh, well, you know, red hat cells free and, oh, that's a service model and things like that bring us inside your business and what's exciting and dynamic and happening in that space. >> It's It's such an incredible time. I couldn't ask for a better job, but I love the linen space for a couple of things. As you look at all the things that are changing in the industry today, I always say to customers, you may not know the applications. You'll run next year in three years, in five years, you may not know where you'll want to run them. What you do know it's they'll run on Lennox, right? It's the fastest growing operating system in the industry today. It's number one choice of developers. So, as you look to see, what can you do to prepare for the innovation Its pick your Lennox and Red hat has done an incredible job of making a consumable. If you look at the hundreds of thousands of packages out there, an open source, you take that you pull it into. Really, I feel what well delivers bread had. Enterprise Lennox delivers is an ecosystem. It's a trusted ecosystem. We test the team does an incredible job of testing a breadth of hardware, everything from, you know, X eighty six systems to power systems. Dizzy, too, you know, in video G, D G X. So way test all of that and then all the way up to the applications. We pull that ecosystem with us now, our goal is to be able to provide that anywhere. So you take that capability whether you do it. Bare metal, virtual machine, public cloud, private cloud. Now you move into containers. You know, everything we do in rail translates overto open shift. Whether you consume it as a private cloud and open stack or containerized in open shift, all of that ecosystem follows through. So it really is. When I look at is the bedrock of the of the entire portfolio for red hat, and we really are at Enterprise software company Today we pull in management with things like answerable and satellite. You pull all that together. Automation of the storage portfolio. It's just such an exciting time. It's a real transition from going from a no s company and building >> upon that. >> I mean truly an enterprise software company from multiple clouds. >> So I was talking about more about that because open shift gets all the buzz. Ostensibly, it was a key linchpin of the acquisition that I being made. Well, What's the connection between between rail and the rest of red hats? Portfolio. Maybe you could connect those dogs. >> That would be so, as you look at, and I'm an infrastructure person for a long time, as you know, and coming from the infrastructure up space, most was purchased from an infrastructure of you for many years. Now. It's all about how you consume the applications and the infrastructure comes in and feeds it from an application. Space containers are amazing, right? They bring that incredible flexibility started. Stop it, move it lifted, shifted Everything. Thing is, from an application perspective, it's simple. From a Lennox perspective, it's actually much more complicated, you know, in the days of bare metal or even V EMS. Quite clean cut between your systems, your operating system. You're hyper visor in your application. Once you move into containerized worlds, you've split up your Lennox. You have user space in your container. You have Cooper netease making ten times the number of calls to the colonel space that the hyper visor ever did. Much more complicated. So as you move into that space of Kou Burnett ease and containers and orchestration, you know, you really want someone who knows Lennox because the clinic space is more complicated, bringing simplicity from a container and application >> performance management, security changes >> Absolutely automation. So really is as we look at the portfolio, we have a You know, we believe strongly in the customer experience, we deploy with rail that trusted ecosystem. In order to be able to take that into a container world, we need to be able to get access into the user space into the coup. Burnett ease and into the colonel because they're so intimately twine entwined. So as we transition that open shift is the way we delivered, we build upon the same rail. Colonel, we used the user space. >> So, Stephanie, like you, I'm an infrastructure person. And, you know, my background is in, you know, the OS. And, you know, down that environment, there's been a wave of, you know, just enough operating system. How do we slice these up? I look of Cora West, which read, Had acquired was originally a We're going to slim down, you know, the colonel and make things easily. Where's the innovation still happening? Lenox And, well, you know why is still Lin It's going to be relevant going forward. You talked about, you know, containers, things like server list all threatened to say, Oh, well, you know, my application development person shouldn't have to think about it. But why is it still important? >> Yeah. So you know whether things I love about my role is with the position that red hat has in the industry with rail. And, you know, we have Ah, we have a approximately fifty thousand set of that fifty thousand customers who use rail and trust us. So as we look at how we drive innovation, I love the ability to kind of help redefine what an operating system is. And you know, certainly we bring added value did in real seven and now we have the relic beta out. So we're continuously adding things. We added in a few things about consumption base. We added app streams which separates out the ability to update your user space at a different rate in pace than your core. A court sort of based level which allows you to do faster updates in your user space. Continue on your core. Run multiple versions of your user space. It's a fantastic way to pull an innovation faster. We've also done a number of things with our capabilities around taking that first step into container ization, including tools like Build a pod man scope EOE so that within the operating system itself you conduced those based kind of capabilities for container ization. That first step. And then when you need orchestration, you can move over to open ship. So there's a ton of innovation left in the operating system. Security is core to everything we do. S o the innovation around security remains a constant were in the typical open source fashion. We've released the Beta here in November. We're gathering great feedback. We have about one hundred and forty high touch beta customers who were working hand in hand with to get feedback. And we're looking forward to bringing rally to market >> What? One of the big pieces of feedback you're getting a lot of people excited about in terms of Really. >> Certainly everyone looks to us for their security. So that's been that's been a great place for us. We had work to do on making it easier to consume as we continue to drive things with developers. And we have a new portal that's allowing sort of a single user space view those kinds of consumption. Things are very important today because, as you said, you want skills to be easily transferrable. Easily updated s o A lot of the consumption based things we've been >> working on, >> um, as well as thie tooling? >> Yeah. You talk about that skill set that's one of the biggest challenges in a multi cloud world is if I'm going to live in all these iron mint, what's the same and what's different communities is only a small piece. But Lennox is, you know something that's transferrable. What are you seeing? What are you hearing from customers in that regard? >> Yeah, I think, and that's one thing. We're working hard to try and make sure that you know, I think like when you when you buy a house, right, you can buy a house. You could buy an apartment building in Pine Office building. What doesn't change is the land underneath. You need that land to be stable, and you know you can build whatever you want on it. And that's how we view our lennox consuming anywhere you want. It's always secure. It's always stable in multiple public clouds. I think really it's the flexibility when I look at that pull open hybrid cloud space, customers aren't looking to buy a product. They're looking to establish a relationship with someone who's going to provide them what they need to do today on their mission critical applications but have the flexibility going forward to take them where they want to go. They may pick Ascent one public cloud today. They want to move it in two years and three years to a different public cloud. It's establishing that relationship to be able to consume that Lennox, preserve those skills but have the flexibility. And tomorrow >> Red has made a number of storage acquisitions recently. Obviously, the tight relationship between the operating system and the I O how do you look at that space? The opportunity, You know, the TAM talk a little bit about the storage moments >> we have so clearly we have our storage division. We've been working very closely with them to build up capabilities. Largely, you'll see it with open shift. The container ization and storage management within containers is tricky business. So as we pulled together the collaboration between our storage unit as well as our container unit, that's providing real capabilities for that ease of consumption. How do you bring the storage with the container deploys. My team has worked very closely with the management team as you pull in the management aspect with things like automation and management satellite capabilities, answerable is an amazing tool. Amazing tool. In fact, we've pulled in things like system rolls directly into the operating system so that you can set up things like networking. You. Khun, set up storage with answerable playbooks in a much simpler way. That's allowing us to get that ease of consumption. It is about, you know, David's fully about being able for us Tow leverage the portfolio. How do we allow clients to take the journey using Lennox from everything from bare metal and VM out to container ization, Pull in multiple clouds, get the storage features and functions and get the automation and management. >> So, Stephanie, you would looked at and partnered with Red had quite a bit before you had joined the company. What surprised you coming inside the company? Is there anything but being on the inside now that you look back here like, Wow, I didn't expect that or was different than what I had seen from the outside. >> You know, I think what I think, what I love and surprise me a bit was the passion of open source. You know, you look at any company from the outside and and certainly as a student from the outside, you look at the business and how the business is doing and how it's growing in his study. All of that, Well, you don't get to see from the outside is the open source passion of the developers who I get to work with every day. I mean, they just they understand the market. They do it as a hobby on the weekends. It's it's It's just unbelievable, right? I love being I'm up in Westford is, you know, with all the developers, it's great. >> So I'm gonna ask you a lot of talk about the culture, you know, between Red Hat and IBM. You you've been in both camps. Now what do you thoughts in the culture >> s O? You know, I think when I look at the culture, I love the culture at Red Hat. As you know, I've been in many places at IBM and multiple divisions and multiple units. There's a lot of autonomy between the business units at IBM from my own experience. And there's so many people I miss working with colleagues at IBM that, you know I worked in and head with, and WeII brought amazing things to mark it. So I look forward to working with them again. You know, I always look for those groups that are passionate, and there's a lot of passionate IBM is I miss working with. So I look forward to bringing that back >> seventy one to give you the final word. We know. You know Jim Whitehurst has got a president and he's doing later today. I believe Red Hat has a has a good presence there, tells Red Hat here it think. What should be people be looking >> for? Yeah, I think so. Clearly, there's a lot of buzz and excitement about what both Red Hat and IBM Khun do together for the open hybrid cloud. I come at it now from a full Lennox perspective, and I couldn't be more excited about what Lennox is going to deliver for innovation and for customers to consume an innovation as we pull in and look, look to all these discussion that will happen with Jim and Jeannie on stage today, it's it's great. We'll be able to take what Red Hat has done and scale it now with the help of IBM, so very excited about the future. All right, >> Well, Stephanie, we really appreciate your sharing. Congratulations. You're going >> to see about thanks for the time. >> So we still have, you know, about three more days left here at IBM Thinking, of course, the Cube will be at Red Hat Summit twenty nineteen, which is back in Boston, Massachusetts, for Dave A lotta arms to minimum. Thanks for watching the cue

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

>> [Announcer] 18, brought to you by Red Hat >> Well, welcome back everyone. This is theCUBE's exclusive coverage here in San Francisco, California, for Red Hat Summit 2018. I am John Furrier, co-host of theCUBE with my analyst co-host this week, John Troyer, co-founder of the TechReckoning advisory services. And our next guest is Arvind Krishna, who is the Senior Vice President of Hybrid Cloud at IBM and Director of IBM Research. Welcome back to theCUBE, good to see you. >> Thanks John and John great to meet you guys here. >> You can't get confused here you've got two John's here. Great to have you on because, you guys have been doing some deals with Red Hat, obviously the leader at open storage. You guys are one of them as well contributing to Linuxes well documented in the IBM history books on your role and relationship to Linux so check, check. But you guys are doing a lot of work with cloud, in a way that, frankly, is very specific to IBM but also has a large industry impact, not like the classic cloud. So I want to tie the knot here and put that together. So first I got to ask you, take a minute to talk about why you're here with Red Hat, what's the update with IBM with Red Hat? >> Great John, thanks for giving me the time. I'm going to talk about it in two steps: One, I'm going to talk about a few common tenets between IBM and Red Hat. Then I'll go from there to the specific news. So for the context, we both believe in Linux, I think that easy to state. We both believe in containers, I think that is the next thing to state. We'll come back talk about containers because this is a world, containers are linked to Linux containers are linked to these technologies called Kubernetes. Containers are linked to how you make workloads portable across many different environments, both private and public. Then I go on from there to say, that we both believe in hybrid. Hybrid meaning that people want the ability to run their workload, where ever they want. Be it on a private cloud, be it on a public cloud. And do it without having to rewrite everything as you go across. Okay, so let's establish, those are the market needs. So then you come back and say. And IBM has a great portfolio of Middleware, names like WebSphere and DB2 and I can go on and on. And Red Hat has a great footprint of Linux, in the Enterprise. So now you say, we've got the market need of hybrid. We've got these two thing, which between them are tens of millions, maybe hundreds of millions of end points. How do you make that need get fulfilled by this? And that's what we just announced here. So we announced that IBM Middleware will run containerized on Red Hat containers, on Red Hat Enterprise Linux. In addition, we said IBM Cloud Private, which is the ability to bring all of the IBM Middleware in a sort of a cloud-friendly form. Right you click and you install it, it keep it self up, it doesn't go down, it's elastic in a set of technologies we call IBM Cloud Private, running in turn on Red Hat OpenShift Container service on Red Hat Linux. So now for the first time, if you say I want private, I want public, I want to go here, I want to go there. You have a complete certified stack, that is complete. I think I can say, we're a unique in the industry, in giving you this. >> And this is where, kind of where, the fruit comes off the tree, for you guys. Because, we've been following you guys for years, and everyone's: Where's the cloud strategy? And first of all, it's not, you don't have a cloud strategy you have cloud products. Right, so you have delivered the goods. You got the, so just to replay. The market need we all know is the hybrid cloud, multi-cloud, choice et cetera, et cetera. >> You take Red Hat's footprint, your capabilities, your combined install base, is foundational. >> [Arvind] Right >> So, nothing needs to change. There's no lift and shift, there's no rip and replace, >> you can, it's out there it's foundational. Now on top of it, is where the action is. That where you're kind of getting at, right? >> That's correct, so we can go into somebody running, let's say, a massive online banking application or they're running a reservation system. It's using technologies from us, it's using Linux underneath and today it's all a bunch of piece pods, you have a huge complex stuff it's all hard-wired and rigidly nailed down to the floor in a few places and now you can say: Hey, I'll take the application. I don't have to rewrite the application. I can containerize it, I can put it here. And that same app now begins to work but in a way that's a lot more fluid and elastic. Or my other way: I want to do a bit more work. I want to expose a bit of it up as microservices. I want to insert some IA. You can go do that. You want to fully make it microservices enabled to be able to make it into little components >> and ultimately you can do that. >> So you can take it in sort of bite size chunks and go from one to other, at the pace that you want. >> [John F.] Now that's game changing. >> Yeah, that's what I really like about this announcement. It really brings best of breed together. You know, there is a lot of talk about containers. Legacy and we've been talking about what goes where? And do you have to break everything up? Like you were just saying. But the announcement today, WebSphere, the battle tested huge enterprise scale component, DB2, those things containerized and also in a frame work like with IBM, either with IBM microservices and application development things or others right, that's a huge endorsement for OpenShift as a platform. >> Absolutely, it is and look, we would be remiss if we didn't talk a little bit. I mean we use the word containers and containerized a lot. Yes, you're right. Containers are a really, really important technology but what containers enable is much more than prior attempts such as VM's and all have done. Containers really allow you to say: Hey, I solved the security problem, I solved the patching problem, the restart problem, all those problems that lie around the operations of a typical enterprise, can get solved with containers. VM's solved a lot about isolating the infrastructure but it didn't solve, as John was saying, the top half of the stack. And that's I think the huge power here. >> Yeah, I want to just double click on that because I think the containers thing is instrumental. Because it, first of all, being in the media and loving what we do. We're kind of a new kind of media company but traditional media is been throwing IBM under the bus since saying: Wow old guard and all these things. Here's the thing, you don't have to change anything. You got containers you can essentially wrap it up and then bring a microservice architecture into it. So you can actually leverage at cloud scale. So what interests me is that you can move instantly, >> value proposition wise, pre-existing market, cloudify it, if you will, with operational capabilities. >> Right. >> This is where I like the Cloud Private. So I want to kind of go there for a second. If I have a need to take what I have at IBM, whether it is WebSphere. Now I got developers, I got installed base. I don't have to put a migration plan away. I containerize it. Thank you very much. I do some cloud native stuff but I want to make it private. My use case is very specific, maybe it's confidential, maybe it's like a government region, Whatever. I can create a cloud operations, is that right? I can cloudify it, and run it? >> Absolutely correct, so when you look at Cloud Private, to go down that path, we said Cloud Private allows you to run on your private infrastructure but I want all these abilities you just described John. I want to be able to do microservices. I want to be able to scale up and down. I want to be able to say operations happen automatically. But it gives you all that but in the private without it having to go all the way to the public. If you cared a lot about, your in a regulated industry, you went down government or confidential data. Or you say this data is so sensitive, I don't really, I am not going to take the risk of it being anywhere else. It absolutely gives you that ability to go do that and that is what brought Cloud Private to the market for and then you combine that with OpenShift and now you get the powers of both together. >> See you guys essentially have brought to the table the years of effort with Bluemix, all that good stuff going on, you can bring it in and actually run this in any industry vertical. Pretty much, right? >> Absolutely, so if you look at part what the past has been for the entire industry. It has been a lot about constructing a public cloud. Not just us, but us and our competition. And a public cloud has certain capabilities and it has certain elasticity, it has a global footprint. But it doesn't have a footprint that is in every zip code or in every town or in every city. That's not what happens to a public cloud. So we say. It's a hybrid world meaning that you're going to run some workloads on a public cloud, I'd like to run some workloads on a private and I'd like to have the ability that I don't have to pre decide which is where. And that is what the containers and microservices, the OpenShift that combination all give you to say you don't need to pre decide. You rewrite the workload onto this and then you can decide where it runs. >> Well I was having this conversation with some folks at a recent Amazon Web services conference. Well, if you go to cloud operations, then the on premise is essentially the edge. It's not necessarily. Then the definition of on premise, really doesn't even exist. >> So if you have cloud operations, in a way, what is the data center then? It's just a connected issue. >> That's right, it's the infrastructure which is set up and then, at that point, the Software Manger, at the data center, as opposed to anything else. And that's kind of been the goal that we're all been wanting. >> Sounds like this is visibly at IBM's essentially execution plan from day one. We've been seeing it and connecting the dots. Having the ability to take either pre-existing resources, foundational things like Red Hat or what not in the enterprise. Not throwing it away. Building on top of it and having a new operating model, with software, with elastic scale, horizontally scalable, Synchronous, all these good things. Enabling microservices, with Kubernetes and containers. Now for the first time, >> I can roll out new software development life cycles in a cloud native environment without forgoing legacy infrastructure and investment. >> Absolutely, and one more element. And if you want to insert some cloud service into the environment, be it in private or in public, you can go do that. For example, you want to insert a couple of AI services >> into the middle of your application you could go do that. So the environment allows you to, do what you described and these additionals. >> I want to talk about people for a second. The titles that we haven't mentioned CIO, Business Leader, Business Unit Leaders, how are they looking at >> digital transformation and business transformation in your client bases you go out and talk to them. >> Let's take a hypothetical bank. And every bank today is looking about simple questions. How do I improve my customer experience? And everybody want, when they say customer experience, really do mean digital customer experience to make it very tangible. And what they mean by that is how do I get my end customer engaged with me through an app. The app is probably in a device like this. Some smart phone, we won't say what it is, and so how do you do that? And so they say: Well, all obviously to check your balance. You obviously want to check your credit card. You want to do all those things. The same things we do today. So that application exists, there is not much point in rewriting it. You might do the UI up but it's an app that exists. Then you say but I also want to give you information that's useful to you in the context to what you're doing. I want say, you can get a 10 second loan, not a 30 day loan, but a 10 second loan. I want to make a offer to you in the middle of you browsing credit card. All those are new customergistics, where do you construct those apps? How do you mix and match it? How do you use all the capabilities along with the data you've got to go do that? And what we're trying to now say, here is a platform that you can go, do all that on. Right, that complete lifecycle you mentioned, the development lifecycle but I got to add to it >> the data lifecycle, as well as, here is the versioning, here are my AI models, all those things, built in, into one platform. >> And scales are huge, the new competitive advantage. You guys are enabling that. So I got to ask you a question on multi cloud. Obviously, as people start building out the cloud on PRIM and with Public Cloud and the things you're laying out. I can see that going on for a while, a lot of work being done there. We're seeing that Wikibon had a true Private Cloud report what I thought was truly telling. A lot of growth there, still not going away. Public Cloud's certainly grown in numbers are clear. However, the word multicloud's being kicked around I think it's more of a future stay obviously but people have multiple clouds Will have relationships with multiple clouds. No one's going to have one cloud. It's not a winner take all game. Winner take most but you know you're have multiple clouds. What does multi cloud mean to you guys in your architecture? Is that moving workloads in real time based upon spot pricing indexes or is that just co-locating on clouds and saying I got this app on this cloud, that app on that cloud, control plane it. These are architectural questions. What the hell is multicloud? >> So there's a today, then there is a tomorrow, then there is a long future state, right? So let's take today, let's take IBM. We're on Salesforce, we're on ServiceNow, we're on Workday, we're on SuccessFactors, well all of there are different clouds. We run our own public cloud, we run our own private cloud and we have Judicial Data Center. And we might have some of the other clouds also through apps that we barter we don't even know. Okay, so that's just us. I think everyone of our clients are like this. The multicloud is here today. I begin with that first, simple statement. And I need to connect the data and can connect when thing go where. The next step, I think people, nobody's going to have even one public cloud. Even amongst the big public clouds, most people are going to have two if not more That's today and tomorrow. >> Your channel partners have clouds, by the way, your Global SI's all have clouds, theCUBE is a cloud for crying out load. >> Right, so then you go into the aspirational state and that may be the one you said, where people just spot pricing. But even if I stay back from spot pricing and completely (mumbles) I make. And I'm worrying about network and I'm worrying about radio reach. If I just backup around to but I may decide I have this app, I run it on private, well, but I don't have all the infrastructures I want to burst it today and I, where do I burst it? I got to decide which public and how do I go there? >> And that's a problem of today and we're doing that and that is why I think multicloud is here now. >> Not some point in the future. >> The prime statement there is latency, managing, service level agreements between clouds and so on and so forth. >> Access control on governance, Where does my data go? Because there may be regulatory reasons to decide where the data can flow and all those things. >> Great point about the cloud. I never thought about it that way. It is a good illustration. I would also say that, I see the same arguments in the data base world. Not everyone has DB2, not everyone has Oracle, not everyone has, databases are everywhere, you have databases part of IoT devices now. So like no one makes a decision on the database. Similar with clouds, you see a similar dynamic. It's the glue layer that, interest me. As you, how do you bring them together? So holistically looking at the 20 miles stare in the future, what is the integration strategy long-term? If you look at distributed system or an operating system there has to be an architectural guiding principle for integration, your thoughts. >> This has been a world 30 years in the making. We can say networking, everyone had their own networking standard and the, let's say the '80s probably goes back to the '70s right? You had SNA, you had TCP/IP, you had NetBIO's-- >> DECnet. DECnet. You can on and on and in the end it's TCP/IP that won out as the glue. Others by the way, survived but in packets and then TCP/IP was the glue. Then you can fast forward 15 years beyond that and HTTP became the glue, we call that the internet. Then you can fast forward and you can say, now how do I make applications portable? And I will turn round and tell you that containers on Linux with Kubernetes as orchestration is that glue layer. Now in order to make it so, just like TCP/IP, it wasn't enough to say TCP/IP you needed routing tables, you needed DNS, you needed name repository, you needed all those things. Similarly, you need all those here are called the scatlog and automation, so that's the glue layer that makes all of this work >> This is important, I love this conversation because I have been ranting on theCUBE for years. You nailed it. A new stack is developing and DNS's are old and internet infrastructure, cloud infrastructure at the global scale is seeing things like network effect, okay we see blockchain in token economics, databases, multiple databases, on structure day >> a new plethora of new things are happening that are building on top of say HTTP >> [Arvind] Correct! >> And this is the new opportunity. >> This is the new platform which is emerging and it is going to enable business to operate, as you said, >> at scale, to be very digital, to be very nimble. Application life cycles aren't always going to be months, they're going to come down to days and this is what gets enabled >> So I what you to give your opinion, personal or IBM or whatever perspective because I think you nailed the glue layer on Kubernetes, Docker, this new glue layer that and you made references to, things like HTTP and TCP, which changed the industry landscape, wealth creation, new brands emerged, companies we never heard of emerged out of this and we're all using them today. We expect a new set of brands are going to emerge, new technologies are going to emerge. In your expert opinion, how gigantic is this swarm of new innovation going to be? Just, 'cause you've seen many ways before. In you view, your minds eye, what are you expecting? >> Share your insight into how big of a shift and wave is this going to be and add some color to that. >> I think that if I take a shorter and then a longer term view. in the short term, I think that we said, that this is in the order of $100 billion, that's not just our estimate, I think even Gartner has estimated about the same number. That will be the amount of opportunity for new technologies in what we've been describing. And that is I think short term. If I go longer term, I think as much as a half but at least a fourth of the complete IT market is going to shift round to these technologies. So then the winners of those that make the shift and then by conclusion, the losers are those who don't make the shift fast enough. If half the market moves, that's huge. >> It's interesting we used to look at certain segments going back years just company, oh this company's replatformizing, >> replatforming their op lift and shift and all this stuff. What you're talking about here is so game changing because the industry is replatforming >> That's correct. It's not a company. >>It's an industry! That's right. And I think the internet era of 1995, to put that point, is perhaps the easiest analogy to what is happening. >> Not the emergence of cloud, not the emergence of all that I think that was small steps. >> What we are talking about now is back to the 1995 statement >> [John] Every vertical is upgrading their stack across what from e-commerce to whatever. >> That's right. >> It's completely modernizing. >> Correct. Around cloud. >> What we call digital transformation in a sense, yes >> I'm not a big fan of the word but I understand what you mean. Great insight Arvind, thanks for coming on theCUBE and sharing. We didn't even get to some of the other good stuff. But IBM and Red Hat doing some great stuff obviously foundational, I mean, Red Hat, Tier one, first class citizen in every single enterprise and software environment you know, now OpenSource runs the world. You guys are no stranger to Linux being the first billion dollar investment going back >> so you guys have a heritage there so congratulations on the relationship. >> I mean 18 years ago, if I remember 1999. >> I love the strategy, hybrid cloud here at IBM and Red Hat. This is theCUBE, bringing all the action here in San Francisco. I am John Furrier, John Troyer. More live coverage. Stay with us, here in theCUBE. We'll be right back. (upbeat music)

>> Live from San Francisco, it's theCUBE! Covering, Red Hat Summit 2018. Brought to you by Red Hat. >> Hey, welcome back everyone. We're here live in San Francisco for Red Hat Summit 2018, I'm John Furrier, my co-host John Troyer. Next guest is CUBE alumni, been on so many times. I can't remember. I think you're a VIP CUBE alumni, Doug Balog, general manager, IBM Storage Client Success and IBM's partners executive leading the Red Hat relationship. Welcome back to theCUBE, great to see you. >> It's always great to be on it again. I think that's a new category you just invented, a VIP alumni, as to something. >> On theCUBE.net site we actually have badges for CUBE VIPs that says VIP. Great to see you. Again, we have a little history. Your role at IBM, you've been there for a lot of time. You've seen their history. Power's been your wheelhouse, you built that from scratch. An open community with the Power Systems at IBM, but you launched OpenPOWER, an open consortium, very much open source model. And you know that's very successful, congratulations on that. >> Thank you. >> Now your role with Red Hat, you're the lead executive. You're the guy to call with any problems, or anything, opportunities. What's going on? Give us the update. >> Yeah, so I think it was mentioned by Matt on stage today where we're actually celebrating 20 years of partnering together with Red Hat. I think a lot of folks take pause at that not realizing how far back this relationship goes. Hate to say I was there in 1998 when we struck this agreement. I think at that time a lot of folks inside IBM were scratching their heads saying, who's Red Hat, and what is Linux, and why are we doing this? At the end of the day, we have had a longstanding belief in open collaboration, drives innovation, drives value to clients. That was the fundamental reason we jumped in when it was just an operating system discussion back in the early 2000s. We brought that across at that time. Our Intel server base, then our mainframe, and then in 2013 our Power platform. We brought our software along as well back then too. Running on that operating system. Then it became a virtualization discussion and brought Rev onto the platforms, our software supported that. Now here with some exciting announcements today around the partnership around cloud with a common container strategy. Which I think for enterprise clients will help build a larger ecosystem, give clients choice of how they want to bring that value to clients. So it's been a long, deep relationship and one that I think the two companies are more aligned than not in many ways. >> And you guys are humble, I'll say. And you guys were a catalyst moment. Linux, the Linux coming together at that time became an industry standard literally overnight, because the industry rallied around it. You guys supported it with a big contribution and since then. But that was back in the day, that was when it was tier two citizen in the world. Now open source is tier one, it's powering everything you see and open source software and storage and networking, software-defined data center, now CloudScale, this is a big deal. >> It's a big deal. >> For the world. Now, the cloud story's interesting to me. So you got the Red Hat powering a lot of the enterprise. Hybrid cloud's number one thing on the agenda, multi-cloud's kind of being discussed, but that's with the end in mind. Hybrid cloud is a number one work area, which essentially cloudifying, creating cloud operations for the enterprise. How is this partnership with Red Hat impact IBM's customers and what's in it for the Red Hat customers? >> I think as, and I know you just had Arvin on here a moment ago. It was literally just about six months ago, that Arvin and I and Paul Cormier and Jim Whitehurst sat down and said, you know what, I think the next big thing for us to partner around is containers. There is so much advantage for speed of software deployment, this hybrid cloud structure you talked about and the fact that, listen, I think we're much more mature in the industry talking about cloud. There were moments a year or two ago where the answer was everything's going to the public cloud, on-prem's dead. I think it's a much more mature conversation now in terms of the role of hybrid. Which means clients are still going to have plenty of their data. Especially if they're a regulated industry. That data's going to stay on-prem, but that still doesn't mean there are parts of their infrastructure, parts of their applications that they're going to want to run on a public cloud, like the IBM cloud. So that ability to have a common container approach, a common container management structure, like IBM cloud private, with OpenShift as the partner, I think it brings tremendous freedom of choice to clients, so where they run what with a common development platform. >> It's interesting, the definition's changed, and we're always squinting through the noise, but the bottom line is if everything's cloudified if you will, using that word, on-prem and public cloud doesn't really make a difference where you locate it because it's cloud operations and Wikibon had the True Private Cloud rapport which basically stated that True Private Cloud is essentially on-premise activity, just operating in a cloud framework meaning same code bases, more operational dashboard. Especially cloud operations not traditional IT. So I think there is the distinction, so it's still on-prem. >> Still on-prem. >> But now you've got the edge of the network as well. Software Base2, so you've got IoT Edge, public cloud, hybrid, all coming together. >> You know we used to, when the world was just on-prem for the most part, we used to talk about different architectures being fit for purpose. What's the right workload to run what kind of applications. I was just up with a large financial institution in your neck of the woods on Friday and we were having this fit for purpose conversation around the cloud based on what kind of workload it is, how sensitive is the data, is it redacted of your and my names and social security numbers, right? All that stuff that's important. Where should that cloud workload run? What cloud should it run in? Or should it run on-prem or across both? So listen, a lot of what's old is always new, but of course it keeps evolving here now to this world of multi-cloud and hybrid cloud as you said. >> What's going on with customers at IBM? Tell us what's happening in your world. Obviously the industry's replatforming as the entire business. It's not just companies. It's an entire infrastructure's changing. You call it cloud infrastructure, data insfrastructure, AI, you're doing the Power stuff being successful. It's a global rearchitecture. >> That's right. >> This is not a one company. >> No. >> This is a complete standard. >> Everybody's transforming and I don't think there's ever an end to transformation. I think transformation is a train ride you decide to get on and you better get on, and you're going to stay on it once you get on. There's milestones along the way that demonstrate progress. But there's no resting anymore in terms of being comfortable in today's world. So transformation is going on forever. In the systems business we're constantly transforming. We brought out a new mainframe last year, we call it the z14. And now recently kind of a sum of our little skinny Zs, the ZR1s. Which are really designed for the modern data center because they fit in a standard, an industry standard rack. So we're bringing that robust security to not only our traditional Z clients, but to brand new Z clients, running Linux by the way. >> Arvin nailed it in his description and then I think this is true. You've got TCP/IP, HTTP, these are seminal moments and now you've got this glue layer with containers and say Kubernetes. This is going to change how software's being built and software being run, and how businesses will be running. So that's an industry wide dynamic shift over. At the infrastructure level. Instrumentation, and all the software behind it. Okay, that's happening. We're agreeing with that and totally agree with that. Now the impact to the customer. What do they have to do? Because they have to now adapt to this new world. Which means they got to put the legacy in. Plugging into the legacy they have to have microservices. So what does that software-defined infrastructure look like for the customer? You've seen the systems side through storage. What does software-defined mean in this new architecture? >> It certainly, part of the objective of ICP, IBM Cloud Private, was to create that on-prem cloud experience. Because again, so many clients were looking for not just having their traditional IT, which they're going to continue to have, but continue to modernize. But also move to a new environment that was much more self-service, all the things and the benefits of the public cloud, but still being careful around their data in many ways, and their core applications. So they're transforming and modernizing from legacy IT to on-prem IT, and then branching out with the fit for purpose discussion to the multi-cloud, to the hybrid cloud world. >> I love that that in the fit for purpose you can it that in so many parts of the stack. We, I think open source, one of its characteristics is it develops in public. And 20 years ago the question was, not is it fit for purpose, but when is Linux going to be ready? When's it going to be ready? Is it going to be ready? I think that answer is pretty clear now, and I think the same thing has been going through with containers and with Kubernetes. On theCUBE you're tracking Kubernetes, the growth of Kubernetes. Is this a real moment where IBM says, okay now, Kubernetes and OpenShift is now ready for the enterprise? >> Absolutely. Absolutely. If I think about kind of big moments in IT that provide a ubiquitous access to developers, you had, we talked about Linux as an operating environment, once all the platforms, the different architectures ran Linux, the ability for application portability while still bringing out the value of the platform, became very much true. Java, from an application programming model was another one. If you wrote in Java, you had the ability then to move that Java workload around without recompilation in many cases, to different architectures getting the value out of where you chose. Containers are the next one. So now we're containerizing workload. And again you have sort of freedom of choice of where you run it. And if you run it in this cloud or that cloud. Or this system or that system. You get different values out of it. >> And we're not just containerizing microservices. Now we're talking about containerizing WebSphere. >> WebSphere and databases and message queuing, and kind of that robust runtime that somebody in the audience joked, gosh I haven't seen those queues in a long time. Not that they haven't been there, they've always been there. But again, this is back to how do you take what you have from a legacy IT and modernize it for this cloud era? Much more than cloud washing. This is really transforming the IT. >> It preserves the adjustment. The bottom line, if I'm a CIO or I'm an executive looking at this market, I say okay, I've got a purchase decision I've made in the past, and I have a stall base of stuff and my choice used to be I've got to replace that, hire new people, move everything over, to now your approach is a little bit different. Great, just containerize it. And then when you're ready, you deal with it on its lifecycle. So you don't really have, so it's an ROI thing and it's also preservation of preexisting conditions. >> Now the other big, of course, client transformation going on is there's not a single client on the planet who's not trying to figure out artificial intelligence and what it means to their business to bring more insights around their clients into their workflows. So that's why in addition to Watson and all the work we do around Watson, of course in our cloud, we've gone down to the system level with our Power platform and really optimized Power9 with flash storage attached to it as the best combination of a platform for this AI era. In fact, I was sharing just before we went live here, is actually a big announce day for our systems business too. We're announcing new models of our AI platform, what we call the AC922 now with six GPUs with our partnership with NVIDIA. We've got new Linux systems, kind of the fall on with Power9, that I started back, they're much better by the way, that I started back in 2013. So here we are at the Linux Summit, we've got a common cloud partnership being announced at the same time we're announcing all the way down to the metal, systems and chips that are optimized to run the Linux and open source platforms. >> The thing that I like about those environments, the level of granularity is getting down to the point where you can have your applications or down to the level, to a service level, and manage it on that based on PowerAI would be a great example of what people can tap into. >> It actually it connects it all together, right? I mean PowerAI, which again, new content there. We've just announced PowerAI on Power9 and on Red Hat for the first time. Back to new news here at the Summit. It'll be containerized later this year. So now you've got PowerAI in a container on IBM Cloud Private, running on OpenShift optimized for Power9. Starts to make your brain hurt a little bit. But that's closer to the level of the thoughtfulness of our strategy and how all the pieces work together from the software and the applications down to the systems and the chip. >> You guys do a good job keeping in the open, too. I really like how that went with Power, certainly great stuff. PowerAI for the folks watching, check it out it's from IBM. Interesting product. I think it's got a lot of capability. Your perspective as an industry participant. You've seen many waves. What's this wave like in your opinion? There's so much going on with this new infrastructure. How do you talk about it when someone says hey Doug, what's going on? All this stuff. You've got blockchain over here. You've got this going on over there. >> I think that, at least from a systems perspective, the way think about it, myself and my peers think about it is, we've gone through so many generations where it was more manufacturing process driven innovation. How do you pack more on a chip? How do you pack more on a chip? How do you pack more on a chip? And it was kind of all about that. We're now in an era where homogeneity is no longer going to cut it. You're going to really need a number of GPUs, a number of processors, different kind of architectures, to fit the kind of workload that's coming so fast at us these days. You really don't have time to step back and say, let me replumb my old data center with that next one chip. It's going to be a diversity of infrastructure. >> Its hard to provision. You need it available immediately. >> So this wave we're in really is about bringing that diversity, that heterogeneity back into the data center, and bringing that value though, back in a simplified deployment way, 'cause heterogeneity means complexity in some ways. And that's where the layering of software packages like PowerAI, like software-defined storage, like ICP and OpenShift with our partnership with Red Hat kind of help bring that diversity and bring it back to a common level of application development. That's kind of the end goal. Common application development, the platform brings out the value. The app doesn't have to worry about it, but you've got that diversity of choice underneath. >> Great, Doug, great stuff. Great to have you on theCUBE. Just to end the segment, briefly summarize for people watching, what's this relationship with Red Hat all about? Obviously you have history, but what's the value? Talk about it right now. What's the impact to the customer watching? The relationship that's announced today with the private cloud initiative with Red Hat. >> I think if we summarize the relationship without getting into the technology, it really is about bringing innovation to enterprise clients. At the end of the day that's what Red Hat's focused on, that's what we're focused on, and that's what we're focused on together. They have great minds in the industry, we have great minds in the industry. The power of those minds coming together to create some of the innovation that we just talked about here in this segment, I mean it's mind blowing for what it means to enterprise clients to help them propel themselves forward and transform. That's what it means. >> These are the kind of partnerships we're going to see now that people are rallying behind Kubernetes and containers and this new software-defined infrastructure that's going on. We expect more of it. Right? We'll see more? >> Absolutely, software-defined is the name of the game these days. Not that there isn't value in the systems by the way. It's got to run someplace. >> They're under the hood. >> They're under the hood. >> Programmable. >> And they're differentiated for sure. >> Yeah infrastructure as code, you still need servers to run this stuff on. >> It does matter. It does matter a lot. >> Doug, great to see you. >> Good to see you as always, John. John, good to see you. >> Absolutely. >> theCUBE bringing all the action here, here in San Francisco. Live coverage, I'm John Furrier, John Troyer, day one, we'll be right back with more after this short break. (electronic music)

brought to you by Red Hat well welcome back everyone this two cubes exclusive coverage here in San Francisco California for Red Hat summit 20:18 I'm John Ferreira co-host of the cube with my analyst co-host this week John Troy year co-founder of The Reckoning advisory services and our next guest is Arvind Krishna who's the senior vice president of hybrid cloud at IBM Reese and director of IBM Research welcome back to the cube good to see you hey John and John Wade you guys just kick it confuse get to John's here great to have you on because you guys are doing some deals with Red Hat obviously the leader at open source you guys are one of them as well contributing to Linux it's well documented the IBM has three books on your role relationship to Linux so yeah check check but you guys are doing a lot of work with cloud in a way that you know frankly is very specific to IBM but also has a large industry impact not like the classic cloud so I want to get who tie the knot here and put that together so first I got to ask you take a minute to talk about why you're here with red hat what's the update with IBM with Red Hat yeah great John thanks and thanks for giving me the time I'm going to talk about it in two steps one I'm going to talk about a few common Tenace between IBM and Red Hat and then I'll go from there to the specific news so for the context we both believe in Linux I think that's easy to state we both believe in containers I think that's the next thing to state and we'll come back and talk about containers because this is a world containers are linked to Linux containers are linked to these technologies called kubernetes containers are linked to how you make workloads portable across many different environments both private and public then I go on from there to say and we both believe in hybrid hybrid meaning that people want the ability to run their workload wherever they want beat on a private cloud beat on a public cloud and do it without having to rewrite everything as you go across okay so let's just average those are the market needs so then you come back and say an IBM as a great portfolio of middleware names like WebSphere and db2 and I can go on and on and rather has a great footprint of Linux in the enterprise so now you say we got the market need of hybrid we got these two things which between them of tens of millions maybe hundreds of millions of endpoints how do you make that need get fulfilled by this and that's what we just announced here so we announced that IBM middleware will run containerized on RedHat containers on Red Hat Enterprise Linux in addition we said IBM cloud private which is the ability to bring all of the IBM middleware in a sort of a cloud friendly form right you click and you install it keeps itself up it doesn't go down it's elastic in a set of technologies we call IBM cloud private running in turn on Red Hat open shift container service on Red Hat Linux so now for the first time if you say I want private I want public I want to go here I want to go there you have a complete certified stack that is complete I think I can say we are unique in the industry and giving you this this and this is where this is kind of where the fruit comes on the tree off the tree for you guys you know we've been good following you guys for years you know every where's the cloud strategy and first well it's not like you don't have a cloud strategy you have cloud products right so you have to deliver the goods you've got the system replays the market need we all knows the hybrid cloud multi-cloud choice cetera et cetera right you take Red Hat's footprint your capabilities your combined install base is foundational right so and nothing needs to change there's no lifting shift there's no rip and replace you can it's out there it's foundational now on top of it is where the action is that's what we're that's what were you kind of getting at right that's correct so so we can go into somebody there running let's say a massive online banking application or the running a reservation system is using technologies from Asus using Linux underneath and today it's all a bunch of piece parts you have a huge complex stuff it's all hard wired and rigidly nailed down to the floor in a few places and I can say hey I'll take the application I don't have to rewrite the application I can containerize it I can put it here and that same app now begins to work but in a way that's a lot more fluid in elastic well by the way I want to do a bit more work I want to expose a bit of it up as micro-services I want search Samia you can go do that you want to fully make it microservices enable to be able to make it as little components and digestible you can do that so you can take it in sort of bite-sized chunks and go from one to the other at the pace that you want and that's game-changing yeah that's what I really like about this announcement it really brings the best of breed together right you did you know there's a lot of talk about containers and legacy and we you know we've been talking about what goes where and do you have to break everything up like you were just saying but the the announcement today you know WebSphere the this the you know a battle-tested huge enterprise scale component db2 those things containerized and also in a framework like with IBM we either with IBM Microsoft things or others right that's um that's a huge endorsement for open shipped as a platform absolutely it is and look we would be remiss if we didn't talk a little bit I mean we use the word containers and containers a lot yes you're right containers is a really really important technology but what containers enable is much more than prior attempts such as vm's and all have done containers really allow you to say hey I saw the security problem I solved the patching problem the restart problem all those problems that lie around the operations of a typical enterprise can get solved with containers VM sold a lot about isolating the infrastructure but they didn't solve as John was saying the top half of the stack and that's I think the huge power here yeah I want to just double click on that because I think the containers thing is instrument because you know first of all being in the media and loving what we do we're kind of a new kind of media company but traditional media has been throwing IBM under the bus and saying oh you know old guard and all these things but here's the thing you don't have to change anything you could containers you can essentially wrap it up and then bring a micro-services architecture into it so you can actually leverage at cloud scale so what interests me is is that you can move instantly value proposition wise pre-existing market cloud if I if you will with operational capabilities and this is where I like the cloud private so I want to kind of go with the ever second if I have a need to take what I have an IBM when it's WebSphere now I got developers I got installed base I'd have to put a migration plan away I containerize it thank you very much I do some cloud native stuff but I want to make it private my use case is very specific maybe it's confidential maybe it's like a government region whatever I can create a cloud operations is that right I can cloud apply it and run it absolutely correct so when you look at about private to go down that path we said well private allows you to run on your private infrastructure but I want all these abilities you just described John I want to be able to do micro services I want to be able to scale up and down I want to be able to say operations happen automatically so it gives you all that but in the private without having to go all the way to the public so if you cared a lot about you're in a regulated industry because you went down government or confidential data or you say this data is so sensitive I don't really I'm not going to take the risk of it being anywhere else it absolutely gives you that ability to go do that and and that is what we brought to our private to the market for and then you combine it with open shift and now you get the powers of both together so you guys essentially have brought to the table the years of effort with bluemix all that good stuff going on you can bring any he'd actually run this in any industry vertical pretty much right absolutely so if you look at what what the past has been for the entire industry it has been a lot about constructing a public cloud not just to us but us and our competition and a public cloud has certain capabilities and it has certain elasticity it has a global footprint but it does not have a footprint that's in every zip code or in every town or in every city that song ought to happen to the public cloud so we say it's a hybrid world meaning that you're going to run some bulk loads on a public cloud and like to run some bulk loads on a private and I'd like to have the ability that I don't have to pre decide which is where and that is what the containers the micro services the open ship that combination all gives you to say you don't need to pre decide you fucker you rewrite the workload on to this and then you can decide where it runs well I was having this conversation with some folks at and recent Amazon Web Services conference to say well if you go to cloud operations then the on-prem is essentially the edge it's not necessary then the definition of on-premise really doesn't even exist so if you have cloud operations in a way what is the data center then it's just a connected tissue that's right it's the infrastructure which you set up and then at that point the software manages the data center as opposed to anything else and that's kind of being the goal that we are all being wanted it sounds like this is visibility into IBM's essentially execution plan from day one we've been seeing in connecting the dots having the ability to take either pre-existing resources foundational things like red hat or whatnot in the enterprise not throwing it away building on top of it and having a new operating model with software with elastic scale horizontally scalable synchronous all those good things enabling micro search with kubernetes and containers now for the first time I could roll out new software development life cycles in a cloud native environment without foregoing legacy infrastructure and investment absolutely and one more element and if you want to insert some public cloud services into the environment beat in private or in public you can go do that for example you want to insert a couple of AI services into your middle of your application you can go do that so the environment allows you to do what he described and these additions we're talking about people for a second though the the titles that we haven't mentioned CIO you know business leader business unit leaders how are they looking at the digital transformation and business transformation in your client base as you go out and talk to us so let's take a hypothetical back and every bank today is looking about at simple questions how do i improve my customer experience and everyone in this a customer experience really do mean digital customer experience to make it very tangible and what they mean by that is how I get my end customer engaged with me through an app the apps probably on a device like this some smartphone we won't say what it is and and so how do you do that and so they say well well you were to check your balance you obviously want to maybe look at your credit card you want to do all those things the same things we do today so that application exists there is not much point in rewriting it you might do the UI up but it's an app that exists then you say but I also want to give you information that's useful to you in the context of what you're doing I want to say you can get a 10 second not a not a 30-day load but a ten-second law I want to make it offer to you in the middle of you browsing credit cards all those are new customer this thinks are hot where do you construct those apps how do you mix and match it how do you use all the capabilities along with the data you got to go do that and what we are trying to now say here is a platform that you can go all that do all that on right to that complete lifecycle you mentioned the development lifecycle but I got to add to the the data lifecycle as well as here is the versioning here are my area models all those things built in into one platform and scales are huge the new competitive advantage you guys are enabling that so I got to ask you on the question on on multi cloud I'll see as people start building out the cloud on pram and with public cloud the things you're laying out I can see that going on for a while a lot of work being done there we seeing that wiki bond had a true private cloud before I thought was truly telling a lot of growth they're still not going away public cloud certainly has grown the numbers are clear however the word multi clouds being kicked around I think it's more of a future state obviously but people have multiple clouds will have relationships with multiple clouds no one's gonna have one Klaus not a winner-take-all game winner take most but you're gonna have multiple clouds what does multi-cloud mean to you guys in your architecture because is that moving workloads in real time based upon spot pricing indexes or is that just co-locating on clouds and saying I got this SAP on that cloud that app on that cloud control plane did these are architectural questions it's the thing hell is multi cloud so these are today and then there is a tomorrow and then there is a long future state right so let's take today let's check IBM we're on Salesforce we're on service now we're on workday we're on SuccessFactors well all these are different clouds we run our own public cloud we run our own private cloud and we have traditional data center and we might have some of the other clouds also through apps that we bought that we don't even know okay so let's just toss I think every one of our clients is like this so multi cloud is here today I begin with that first simple statement and I need to connect the data and it comes connect when things go away the next step I think people nobody's gonna have only one even public cloud I think the big public clouds most people are gonna have to if not more that's today and tomorrow your channel partners have clouds by the way your global s lies all have clouds there's a cloud for crying out loud right so then you go into the aspirational state and that may be the one he said where people do spot pricing but even if I stay back from spot pricing and completely dynamic and of worrying about network and I'm worrying about video reach I just back up on to but I may decide it I have this app I run it on private well but I don't have all the infrastructures I want to bust it today and I've very robust it to I got to decide which public and how do I go there and that's a problem of today and we're doing that and that is why I think multi-cloud is here now not some pointed problem the problem statement there is latency managing you know service level agreements between clouds and so on and so forth governance where does my data go because there may be regulate regulate through reasons to decide where the data can flow and all the great point about the cloud I never thought about that way it's a good good illustration I would also say that I see the same argument of database world not everyone has db2 that everyone has Oracle number one has databases are everywhere you have databases part of IOT devices now so like no one makes a decision on the database similar was proud you're seeing a similar dynamic it's the glue layer that to me interest me as you how do you bring them together so holistically looking at the 20 mile stare in the future what is the integration strategy long term if you look at a distributed system or an operating system there has to be an architectural guiding principle for absolute integration you know well that's 30 years now in the making so we can say networking everybody had their own networking standards and the let's say the 80s though it probably goes back to the 70s right yeah an SN a tcp/ip you had NetBIOS TechNet deck that go on and on and in the end is tcp/ip that one out as the glue others by the way survived but in pockets and then tcp/ip was the glue then you can fast forward 15 years beyond that an HTTP became the glue we call that the internet then you can fast forward you can say now how to make applications portable and I would turn around and tell you that containers on linux with kubernetes as orchestration is that glue layer now in order to make it so just like in tcp/ip it wasn't enough to say tcp/ip you needed routing tables you needed DNS you needed name repositories you needed all those things similarly you need all those here I've called those catalogs and automation so that's the glue layer that makes all of this work this is important I love this conversation because I've been ranting on this in the queue for years you're nailed it a new stack is development DNS this is olden Internet infrastructure cloud infrastructure at the global scale is seeing things like Network effect okay we see blockchain in token economics like databases multiple database on structured data a new plethora of new things are happening that are building on top of say HTTP correct and this is the new opportunity this is the new the new platform which is emerging and it's going to enable businesses to operate you said at scale to be very digital to be very nimble application life cycles are not always going to be months they're gonna come down to days and this is what gets enabled so I want you to give your opinion personal or IBM or whatever perspective because I think you nailed the glue layer on cue and a stalker and these this new glue layer that and you made reference system things like HTTP and TCP which changed the industry landscape wealth creation new up new new brands emerged companies we've never heard of emerged out of this and we're all using them today we expect a new set of brands are gonna emerge new technologies and emerge in your expert opinion how gigantic is this swarm of new innovation gonna be just because you've seen many ways before in your view your mind's eye what are you expecting wouldn't share your your insight into how big of a shift and wave is this is going to be and add some color to that I think that if I take a take a shorter and then a longer term view in the short term I think that we said that this is on the order of 100 billion dollars that's not just our estimate I think even Gartner estimated about the same number that'll be the amount of opportunity for new technologies in what we've been describing and that is I think short term if I go longer term I think as much as 1/2 but at least 1/4 of the complete ID market is going to shift onto these technologies so then the winners are those that make the shift and then bye-bye clusion the losers of those who don't make this shift faster Afghan and stop the market moves that's that's he was interesting we used to like look at certain segments going back years oh this companies reap platform Ising we platforming they're their operative lift and shift and all this stuff what you're talking about here is so game-changing because the industries Reap lat forming that's a company that's it's an industry that's right any and I think the the the Internet era of 1995 to put that point it's perhaps the easiest analogy to what is happening not the not the emergence of cloud not the emergence of all that I think that was small steps what we're talking about now is back to the 1995 statement every vertical is upgrading their stack across the board from e-commerce to whatever that's right it's completely modernizing correct around cloud what we call digital transformation in a sense yes what not a big fan of the word but I lied I understand what you mean great insight our thanks for coming on the Kuban Sharon because we even get to some of the other good stuff but IBM and Red Hat doing some great stuff obviously foundational I mean Red Hat Tier one first-class citizen in every single enterprise and software environment you know now saw open source runs the world you guys you guys are no stranger to Linux being the first billion dollar investment going back so you guys have a heritage there so congratulations on the relationships that go around about ninety nine nine yeah and and I love the strategy hybrid cloud here at IBM and right at this the cube bring you all the action here in San Francisco I'm John for John Troy you're more live covers stay with us here in the cube Willie right back

>> Announcer: Live from Boston Massachusets it's The Cube covering Red Hat Summit 2017. Brought to you by Red Hat. >> Welcome back to The Cubes coverage of the Red Hat Summit, I'm your host Rebecca Knight, along with my cohost Stu Miniman. We are joined by Jim Wasko, he is the vice president of Open Systems at IBM. Thanks so much for joining us. >> Thanks for having me. >> So, before we get into the new ways in which IBM and Red Hat are working together, give us a little history on the IBM, Red Hat alliance and contextualize things for us. >> Oh sure, sure, so we started with Linux back in the very late '90's as a strategic initiative for IBM, and so Red Hat was one of the key players at that time. We worked with other Linux vendors who no longer exist. Linux Care was one of the companies we worked with, Mandrake, things along those lines. But Red Hat has been a constant through all of that. So we started in the very early days with Red Hat and we had an X86 line at the time, and then as well as Power NZ, and even in the very early days, we had ports of Red Hat running on IBM, all of IBM's hardware. >> And the alliance is going strong today? >> Yes it is, yes it is. So we have that long history and then as Red Hat transformed as a company into their enterprise software and REL in particular, that really matured, as far as our relationship was concerned, and I'm the engineering VP with Red Hat, and we just had a very strong collaborative relationship. We know how to work upstream, they obviously work very well upstream. We've worked in the Fedora Project, as a staging area for our platforms and so, yeah, we've known each other very well. I've been working on Linux at IBM since November of 2000. >> Jim, so IBM, long history with Open Source, I remember when it was the billion dollars invested in Linux. We covered on The Cube when Power became Open Power. Companies like Google endorsing Open Power. Bring us up to speed as to Open Power, how that fits with what you're doing with Red Hat and what you're talking about on the show here. >> Oh yeah, so Open Power was really about opening up hardware architecture as well as the operating system and firmware. And so, as that's progressed Red Hat has also joined in that Open Power initiative. If you look at when we started, just a small group of companies kicked it off, and today we're over 300 companies, including Red Hat as a part of Open Power foundation. They're also board members, so as a key partner in strategic partner of ours, they've recognized that it's an ecosystem that is worth participating in, because it's very disruptive, and they've been very quick to join us. >> That's good, we've talked to Jim Lighthurst about how they choose and they look for communities that are going to do good things for the industry, for the world, for the users, so, it's a nice endorsement to have Red Hat participate, I would think. >> Oh, it is, they don't enter into anything lightly. And so, their participation really is a signal, I think, in the marketplace, that this is a good strategic initiative for the industry. >> Where do you see as the biggest opportunities for growth, going forward. >> Opportunities for growth, there's quite a few. A lot of people don't realize that Linux is really the underlying engine for so many things that we do in the technology world. It's everything from embedded into the automotive industry, if you've got Onboard computer, which most new cars do, 80% of those are Linux. If you talked about web serving, websites, front ends, it's Linux, you know. I know with my mom, she's like "What do you work on?" and I say Linux you know, and she's like "Is that like Windows?" and I'm like "No." And then I tell her, you know Mom you've used it, probably a dozen times today, and then I give her examples. And so, all the new innovation tends to happen on Linux. If we look at HyperLedger, and Blockchain in particular, good example, that's one that takes a lot of collaboration, a lot of coordination if it's going to have a meaningful impact on the world. And so, it starts with Linux as foundation to it. So, any of those new technologies, if you look at what we're doing with quantum computing for example, it takes a traditional computer to feed it, and a tradition computer for the output, and we don't have time to go into details behind that but, Linux fed, as a part of it, because really that's where the innovation is taking place. >> Jim, could you expand a little bit more on the Hyperledger and Blockchain piece? A lot of people still, I think they understand BitCoin and digital currency there, but it's really some of the distributed and open source capabilities that these technologies deliver to the market, have some interest and use cases, what's the update on that? >> Oh that's a good question. So, a lot of people think of BitCoin and that says a very limited use case. As we look at Hyperledger, we notice that it could be applied in so many more ways than just a financial kind of way. Where we've done, it is logistics, and supply chain, we've implemented it at IBM for our supply chain and we've taken data from Weather.com, company that we've acquired, and we use that for our logistics for end of quarter for example. So that's something that was easier for us to implement, because it's all within our company. But then we are expanding that through partners. So that's an example where you could do supply chain logistics, you could do financials. But really, in order for that to work 'cause it's a distributed ledger, you need everybody in the ecosystem to participate. It can't be one company, can't be two companies. And so, that's why very early on we recognized we should jointly start up a project that the Linux Foundation, called Hyperledger, to look at what's the best and how could we all collaborate because we're all going to benefit from it, and it will be transformative. >> So what are you doing there, because as you said, these do present big challenges because there has to buy in from everyone? >> Yeah so if I look at the Hyperledger project specifically at the Linux Foundation, we've got customers of ours like JPMC for example, founding member and participant, we've got a distribution partners, we've got technology partners all there and so we contributed early code. Stuff we'd done in research, as kind of like a building block. And then we have members, both from research and product development side of the house, that are constantly working in that upstream community on the source code. >> And continually contributing, and okay... >> Yeah, well continually contributing, that's on the technology side. On the business side we're doing early proof of concepts, so we worked early with a company called Everledger that looks at the history of diamonds and tracks them beginning to end, and the ultimate goal of that is to eliminate blood diamonds from the marketplace and so if you know, it's also a very good market to begin because it's a limited set of players. So you can implement the technology, you can do the business processes behind it and then demonstrate the value. So that's an early project. Most of the financial institutions are doing stuff, whether it's stock trading or what have you. And so we're doing early proof of concept, so we're taking both technology and business, you marry 'em together as Jim Whitehurst said the other day you know, what's the minimal viable product, lets get that out there, lets try it out, lets learn. >> Release early release often. >> Yes, and then modify quickly, don't start with something you think is overly baked, and find that you have to shelf it in order to kind of back track and make corrections. >> And what is like to mesh those two cultures, the technology and the business? I mean, do you find that there is a clash? >> We have not. Now at IBM it was not a simple transition back in the late '90's. There were people that thought Open Source would be just a flash in the pan, and here we are so many years later, that's not true. And so early on, like I said, there were a lot of internal kind of debates, but that debate is long since settled, so we don't have that. And if you look across our different business divisions, even within our company, whether its Cloud, whether it's Cognitive, whether it's systems business, all use Open Source. Whether we contribute everything externally and we're using third party packaged, or we consume it ourselves. And we see that as happening across industry, even with out clients. Some that you might think are very traditional, they recognize that's where the innovation is taking place. And so, you always look at balancing is this viable, is that healthy? Or is still the commercially available stuff the better stuff? Just a quick story, I had a development team and we were doing Agile and we needed a tool to do to track our sprints and everything like that, and so, all of my developers were Open Source developers, and so that's their bias. If we're going to use software, it has to be Open Source, they went and evaluated a couple projects and they found Open Source software that had been abandoned, they were smart enough to recognize we also acquired a company called Rational, and Rational Team Concert does this, but it's proprietary. And so they initially resisted it, but then they looked at these Open Source project and saw, if we picked up that code, we maintain it forever, and we're alone. That is as worthless, as it can be, because there's no benefit. Doing Open Source, where you have multiple people contributing, you give an added benefit. So they went with our in house stuff, Rational Team Concert. Just showed the maturity of the team that even though they think Open Source is really the best thing in life, you've got to balance the business with it. >> Jim, so we look at the adoption of Open Source, it took many years to mature. Today, you talk about things like Cognitive, it's racing so fast, give us a little bit of look forward, you know, what's changing your space? What are you looking forward to? What would we expect to see from you by the time we come back next year? >> Sure, so a lot of what you've heard here at the conference so a lot of things that we're doing, are often offered in a Cloud platform, or as a hosted service, or as a service. So, for example, we do have Blockchain as a service available today. And it's running the back end is on mainframe cloud, for example, running Linux. Other examples of that, looking at new applications for quantum computing. Well that requires severengic freezing in order to keep those cubits alive. And so that's a hosted thing, and we actually have that available online, people can use that today. So I think that you're going to see a lot of early access, even for commercial applications. Early access so people can try it, and then based on their business model, like we've heard from clients this week, sometimes they'll need it on prem, and for various business reasons, and other times they can do it on the cloud and we'll be able to provide that. But we give them early access via cloud and as a service. And I think that's what you're going to see a lot in the industry. >> And it's this hybrid mix, as you said, some on prem, some off prem, okay. >> Jim: Yes. >> Well Jim, thanks so much for joining us, we really appreciate you sitting down with us. >> You're welcome, and thanks for your time. >> I'm Rebecca Knight, for Stu Miniman, we'll have more from the Red Hat Summit after this. (upbeat electronic 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. >> In the words of my colleague CTO David Nicholson, Broadcom buys old cars, not to restore them to their original luster and beauty. Nope. They buy classic cars to extract the platinum that's inside the catalytic converter and monetize that. Broadcom's planned 61 billion acquisition of VMware will mark yet another new era and chapter for the virtualization pioneer, a mere seven months after finally getting spun out as an independent company by Dell. For VMware, this means a dramatically different operating model with financial performance and shareholder value creation as the dominant and perhaps the sole agenda item. For customers, it will mean a more focused portfolio, less aspirational vision pitches, and most certainly higher prices. Hello and welcome to this week's Wikibon CUBE Insights powered by ETR. In this Breaking Analysis, we'll share data, opinions and customer insights about this blockbuster deal and forecast the future of VMware, Broadcom and the broader ecosystem. Let's first look at the key deal points, it's been well covered in the press. But just for the record, $61 billion in a 50/50 cash and stock deal, resulting in a blended price of $138 per share, which is a 44% premium to the unaffected price, i.e. prior to the news breaking. Broadcom will assume 8 billion of VMware debt and promises that the acquisition will be immediately accretive and will generate 8.5 billion in EBITDA by year three. That's more than 4 billion in EBITDA relative to VMware's current performance today. In a classic Broadcom M&A approach, the company promises to dilever debt and maintain investment grade ratings. They will rebrand their software business as VMware, which will now comprise about 50% of revenues. There's a 40 day go shop and importantly, Broadcom promises to continue to return 60% of its free cash flow to shareholders in the form of dividends and buybacks. Okay, with that out of the way, we're going to get to the money slide literally in a moment that Broadcom shared on its investor call. Broadcom has more than 20 business units. It's CEO Hock Tan makes it really easy for his business unit managers to understand. Rule number one, you agreed to an operating plan with targets for revenue, growth, EBITDA, et cetera, hit your numbers consistently and we're good. You'll be very well compensated and life will be wonderful for you and your family. Miss the number, and we're going to have a frank and uncomfortable bottom line discussion. You'll four, perhaps five quarters to turn your business around, if you don't, we'll kill it or sell it if we can. Rule number two, refer to rule number one. Hello, VMware, here's the money slide. I'll interpret the bullet points on the left for clarity. Your fiscal year 2022 EBITDA was 4.7 billion. By year three, it will be 8.5 billion. And we Broadcom have four knobs to turn with you, VMware to help you get there. First knob, if it ain't recurring revenue with rubber stamp renewals, we're going to convert that revenue or kill it. Knob number two, we're going to focus R&D in the most profitable areas of the business. AKA expect the R&D budget to be cut. Number three, we're going to spend less on sales and marketing by focusing on existing customers. We're not going to lose money today and try to make it up many years down the road. And number four, we run Broadcom with 1% GNA. You will too. Any questions? Good. Now, just to give you a little sense of how Broadcom runs its business and how well run a company it is, let's do a little simple comparison with this financial snapshot. All we're doing here is taking the most recent quarterly earnings reports from Broadcom and VMware respectively. We take the quarterly revenue and multiply by four X to get the revenue run rate and then we calculate the ratios off of the most recent quarters revenue. It's worth spending some time on this to get a sense of how profitable the Broadcom business actually is and what the spreadsheet gurus at Broadcom are seeing with respect to the possibilities for VMware. So combined, we're talking about a 40 plus billion dollar company. Broadcom is growing at more than 20% per year. Whereas VMware's latest quarter showed a very disappointing 3% growth. Broadcom is mostly a hardware company, but its gross margin is in the high seventies. As a software company of course VMware has higher gross margins, but FYI, Broadcom's software business, the remains of Symantec and what they purchased as CA has 90% gross margin. But the I popper is operating margin. This is all non gap. So it excludes things like stock based compensation, but Broadcom had 61% operating margin last quarter. This is insanely off the charts compared to VMware's 25%. Oracle's non gap operating margin is 47% and Oracle is an incredibly profitable company. Now the red box is where the cuts are going to take place. Broadcom doesn't spend much on marketing. It doesn't have to. It's SG&A is 3% of revenue versus 18% for VMware and R&D spend is almost certainly going to get cut. The other eye popper is free cash flow as a percentage of revenue at 51% for Broadcom and 29% for VMware. 51%. That's incredible. And that my dear friends is why Broadcom a company with just under 30 billion in revenue has a market cap of 230 billion. Let's dig into the VMware portfolio a bit more and identify the possible areas that will be placed under the microscope by Hock Tan and his managers. The data from ETR's latest survey shows the net score or spending momentum across VMware's portfolio in this chart, net score essentially measures the net percent of customers that are spending more on a specific product or vendor. The yellow bar is the most recent survey and compares the April 22 survey data to April 21 and January of 22. Everything is down in the yellow from January, not surprising given the economic outlook and the change in spending patterns that we've reported. VMware Cloud on AWS remains the product in the ETR survey with the most momentum. It's the only offering in the portfolio with spending momentum above the 40% line, a level that we consider highly elevated. Unified Endpoint Management looks more than respectable, but that business is a rock fight with Microsoft. VMware Cloud is things like VMware Cloud foundation, VCF and VMware's cross cloud offerings. NSX came from the Nicira acquisition. Tanzu is not yet pervasive and one wonders if VMware is making any money there. Server is ESX and vSphere and is the bread and butter. That is where Broadcom is going to focus. It's going to look at VSAN and NSX, which is software probably profitable. And of course the other products and see if the investments are paying off, if they are Broadcom will keep, if they are not, you can bet your socks, they will be sold off or killed. Carbon Black is at the far right. VMware paid $2.1 billion for Carbon Black. And it's the lowest performer on this list in terms of net score or spending momentum. And that doesn't mean it's not profitable. It just doesn't have the momentum you'd like to see, so you can bet that is going to get scrutiny. Remember VMware's growth has been under pressure for the last several years. So it's been buying companies, dozens of them. It bought AirWatch, bought Heptio, Carbon Black, Nicira, SaltStack, Datrium, Versedo, Bitnami, and on and on and on. Many of these were to pick up engineering teams. Some of them were to drive new revenue. Now this is definitely going to be scrutinized by Broadcom. So that helps explain why Michael Dell would sell VMware. And where does VMware go from here? It's got great core product. It's an iconic name. It's got an awesome ecosystem, fantastic distribution channel, but its growth is slowing. It's got limited developer chops in a world that developers and cloud native is all the rage. It's got a far flung R&D agenda going at war with a lot of different places. And it's increasingly fighting this multi front war with cloud companies, companies like Cisco, IBM Red Hat, et cetera. VMware's kind of becoming a heavy lift. It's a perfect acquisition target for Broadcom and why the street loves this deal. And we titled this Breaking Analysis taming the VMware beast because VMware is a beast. It's ubiquitous. It's an epic software platform. EMC couldn't control it. Dell used it as a piggy bank, but really didn't change its operating model. Broadcom 100% will. Now one of the things that we get excited about is the future of systems architectures. We published a breaking analysis about a year ago, talking about AWS's secret weapon with Nitro and it's Annapurna custom Silicon efforts. Remember it acquired Annapurna for a measly $350 million. And we talked about how there's a new architecture and a new price performance curve emerging in the enterprise, driven by AWS and being followed by Microsoft, Google, Alibaba, a trend toward custom Silicon with the arm based Nitro and which is AWS's hypervisor and Nick strategy, enabling processor diversity with things like Graviton and Trainium and other diverse processors, really diversifying away from x86 and how this leads to much faster product cycles, faster tape out, lower costs. And our premise was that everyone in the data center is going to competes, is going to need a Nitro to be competitive long term. And customers are going to gravitate toward the most economically favorable platform. And as we describe the landscape with this chart, we've updated this for this Breaking Analysis and we'll come back to nitro in a moment. This is a two dimensional graphic with net score or spending momentum on the vertical axis and overlap formally known as market share or presence within the survey, pervasiveness that's on the horizontal axis. And we plot various companies and products and we've inserted VMware's net score breakdown. The granularity in those colored bars on the bottom right. Net score is essentially the green minus the red and a couple points on that. VMware in the latest survey has 6% new adoption. That's that lime green. It's interesting. The question Broadcom is going to ask is, how much does it cost you to acquire that 6% new. 32% of VMware customers in the survey are increasing spending, meaning they're increasing spending by 6% or more. That's the forest green. And the question Broadcom will dig into is what percent of that increased spend (chuckles) you're capturing is profitable spend? Whatever isn't profitable is going to be cut. Now that 52% gray area flat spending that is ripe for the Broadcom picking, that is the fat middle, and those customers are locked and loaded for future rent extraction via perpetual renewals and price increases. Only 8% of customers are spending less, that's the pinkish color and only 3% are defecting, that's the bright red. So very, very sticky profile. Perfect for Broadcom. Now the rest of the chart lays out some of the other competitor names and we've plotted many of the VMware products so you can see where they fit. They're all pretty respectable on the vertical axis, that's spending momentum. But what Broadcom wants is that core ESX vSphere base where we've superimposed the Broadcom logo. Broadcom doesn't care so much about spending momentum. It cares about profitability potential and then momentum. AWS and Azure, they're setting the pace in this business, in the upper right corner. Cisco very huge presence in the data center, as does Intel, they're not in the ETR survey, but we've superimposed them. Now, Intel of course, is in a dog fight within Nvidia, the Arm ecosystem, AMD, don't forget China. You see a Google cloud platform is in there. Oracle is also on the chart as well, somewhat lower on the vertical axis, but it doesn't have that spending momentum, but it has a big presence. And it owns a cloud as we've talked about many times and it's highly differentiated. It's got a strategy that allows it to differentiate from the pack. It's very financially driven. It knows how to extract lifetime value. Safra Catz operates in many ways, similar to what we're seeing from Hock Tan and company, different from a portfolio standpoint. Oracle's got the full stack, et cetera. So it's a different strategy. But very, very financially savvy. You could see IBM and IBM Red Hat in the mix and then Dell and HP. I want to come back to that momentarily to talk about where value is flowing. And then we plotted Nutanix, which with Acropolis could suck up some V tax avoidance business. Now notice Symantec and CA, relatively speaking in the ETR survey, they have horrible spending momentum. As we said, Broadcom doesn't care. Hock Tan is not going for growth at the expense of profitability. So we fully expect VMware to come down on the vertical axis over time and go up on the profit scale. Of course, ETR doesn't measure the profitability here. Now back to Nitro, VMware has this thing called Project Monterey. It's essentially their version of Nitro and will serve as their future architecture diversifying off x86 and accommodating alternative processors. And a much more efficient performance, price in energy consumption curve. Now, one of the things that we've advocated for, we said this about Dell and others, including VMware to take a page out of AWS and start developing custom Silicon to better integrate hardware and software and accelerate multi-cloud or what we call supercloud. That layer above the cloud, not just running on individual clouds. So this is all about efficiency and simplicity to own this space. And we've challenged organizations to do that because otherwise we feel like the cloud guys are just going to have consistently better costs, not necessarily price, but better cost structures, but it begs the question. What happens to Project Monterey? Hock Tan and Broadcom, they don't invest in something that is unproven and doesn't throw off free cash flow. If it's not going to pay off for years to come, they're probably not going to invest in it. And yet Project Monterey could help secure VMware's future in not only the data center, but at the edge and compete more effectively with cloud economics. So we think either Project Monterey is toast or the VMware team will knock on the door of one of Broadcom's 20 plus business units and say, guys, what if we work together with you to develop a version of Monterey that we can use and sell to everyone, it'd be the arms dealer to everyone and be competitive with the cloud and other players out there and create the de facto standard for data center performance and supercloud. I mean, it's not outrageously expensive to develop custom Silicon. Tesla is doing it for example. And Broadcom obviously is capable of doing it. It's got good relationships with semiconductor fabs. But I think this is going to be a tough sell to Broadcom, unless VMware can hide this in plain site and make it profitable fast, like AWS most likely has with Nitro and Graviton. Then Project Monterey and our pipe dream of alternatives to Nitro in the data center could happen but if it can't, it's going to be toast. Or maybe Intel or Nvidia will take it over or maybe the Monterey team will spin out a VMware and do a Pensando like deal and demonstrate the viability of this concept and then Broadcom will buy it back in 10 years. Here's a double click on that previous data that we put in tabular form. It's how the data on that previous slide was plotted. I just want to give you the background data here. So net score spending momentum is the sorted on the left. So it's sorted by net score in the left hand chart, that was the y-axis in the previous data set and then shared and or presence in the data set is the right hand chart. In other words, it's sorted on the right hand chart, right hand table. That right most column is shared and you can see it's sorted top to bottom, and that was the x-axis on the previous chart. The point is not many on the left hand side are above the 40% line. VMware Cloud on AWS is, it's expensive, so it's probably profitable and it's probably a keeper. We'll see about the rest of VMware's portfolio. Like what happens to Tanzu for example. On the right, we drew a red line, just arbitrarily at those companies and products with more than a hundred mentions in the survey, everything but Tanzu from VMware makes that cut. Again, this is no indication of profitability here, and that's what's going to matter to Broadcom. Now let's take a moment to address the question of Broadcom as a software company. What the heck do they know about software, right. Well, they're not dumb over there and they know how to run a business, but there is a strategic rationale to this move beyond just doing portfolios and extracting rents and cutting R&D, et cetera, et cetera. Why, for example, isn't Broadcom going after coming back to Dell or HPE, it could pick up for a lot less than VMware, and they got way more revenue than VMware. Well, it's obvious, software's more profitable of course, and Broadcom wants to move up the stack, but there's a trend going on, which Broadcom is very much in touch with. First, it sells to Dell and HPE and Cisco and all the OEM. so it's not going to disrupt that. But this chart shows that the value is flowing away from traditional servers and storage and networking to two places, merchant Silicon, which itself is morphing. Broadcom... We focus on the left hand side of this chart. Broadcom correctly believes that the world is shifting from a CPU centric center of gravity to a connectivity centric world. We've talked about this on theCUBE a lot. You should listen to Broadcom COO Charlie Kawwas speak about this. It's all that supporting infrastructure around the CPU where value is flowing, including of course, alternative GPUs and XPUs, and NPUs et cetera, that are sucking the value out of the traditional x86 architecture, offloading some of the security and networking and storage functions that traditionally have been done in x86 which are part of the waste right now in the data center. This is that shifting dynamic of Moore's law. Moore's law, not keeping pace. It's slowing down. It's slower relative to some of the combinatorial factors. When you add up in all the CPU and GPU and NPU and accelerators, et cetera. So we've talked about this a lot in Breaking Analysis episodes. So the value is shifting left within that middle circle. And it's shifting left within that left circle toward components, other than CPU, many of which Broadcom supplies. And then you go back to the middle, value is shifting from that middle section, that traditional data center up into hyperscale clouds, and then to the right toward infrastructure software to manage all that equipment in the data center and across clouds. And look Broadcom is an arms dealer. They simply sell to everyone, locking up key vectors of the value chain, cutting costs and raising prices. It's a pretty straightforward strategy, but not for the fate of heart. And Broadcom has become pretty good at it. Let's close with the customer feedback. I spoke with ETRs Eric Bradley this morning. He and I both reached out to VMware customers that we know and got their input. And here's a little snapshot of what they said. I'll just read this. Broadcom will be looking to invest in the core and divest of any underperforming assets, right on. It's just what we were saying. This doesn't bode well for future innovation, this is a CTO at a large travel company. Next comment, we're a Carbon Black customer. VMware didn't seem to interfere with Carbon Black, but now that we're concerned about short term disruption to their tech roadmap and long term, are they going to split and be sold off like Symantec was, this is a CISO at a large hospitality organization. Third comment, I got directly from a VMware practitioner, an IT director at a manufacturing firm. This individual said, moving off VMware would be very difficult for us. We have over 500 applications running on VMware, and it's really easy to manage. We're not going to move those into the cloud and we're worried Broadcom will raise prices and just extract rents. Last comment, we'll share as, Broadcom sees the cloud data center and IoT is their next revenue source. The VMware acquisition provides them immediate virtualization capabilities to support a lightweight IoT offering. Big concern for customers is what technology they will invest in and innovate, and which will be stripped off and sold. Interesting. I asked David Floyer to give me a back of napkin estimate for the following question. I said, David, if you're running mission critical applications on VMware, how much would it increase your operating cost moving those applications into the cloud? Or how much would it save? And he said, Dave, VMware's really easy to run. It can run any application pretty much anywhere, and you don't need an army of people to manage it. All your processes are tied to VMware, you're locked and loaded. Move that into the cloud and your operating cost would double by his estimates. Well, there you have it. Broadcom will pinpoint the optimal profit maximization strategy and raise prices to the point where customers say, you know what, we're still better off staying with VMware. And sadly, for many practitioners there aren't a lot of choices. You could move to the cloud and increase your cost for a lot of your applications. You could do it yourself with say Zen or OpenStack. Good luck with that. You could tap Nutanix. That will definitely work for some applications, but are you going to move your entire estate, your application portfolio to Nutanix? It's not likely. So you're going to pay more for VMware and that's the price you're going to pay for two decades of better IT. So our advice is get out ahead of this, do an application portfolio assessment. If you can move apps to the cloud for less, and you haven't yet, do it, start immediately. Definitely give Nutanix a call, but going to have to be selective as to what you actually can move, forget porting to OpenStack, or do it yourself Hypervisor, don't even go there. And start building new cloud native apps where it makes sense and let the VMware stuff go into manage decline. Let certain apps just die through attrition, shift your development resources to innovation in the cloud and build a brick wall around the stable apps with VMware. As Paul Maritz, the former CEO of VMware said, "We are building the software mainframe". Now marketing guys got a hold of that and said, Paul, stop saying that, but it's true. And with Broadcom's help that day we'll soon be here. That's it for today. Thanks to Stephanie Chan who helps research our topics for Breaking Analysis. Alex Myerson does the production and he also manages the Breaking Analysis podcast. Kristen Martin and Cheryl Knight help get the word out on social and thanks to Rob Hof, who was our editor in chief at siliconangle.com. Remember, these episodes are all available as podcast, wherever you listen, just search Breaking Analysis podcast. Check out ETRs website at etr.ai for all the survey action. We publish a full report every week on wikibon.com and siliconangle.com. You can email me directly at david.vellante@siliconangle.com. You can DM me at DVellante or comment on our 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)

>> Narrator: From around the globe, it's the Cube with digital coverage of VMworld 2020, brought to you by VMware and its ecosystem partners. >> Hi everybody welcome back, this is the Cube's coverage of VMworld 2020, of course,it's remote coverage virtual VMworld 2020, Dennis Kennelly is here. He's the newly minted, General Manager of IBM storage, Dennis, thanks so much for spending some time with us, and congratulations. >> Thank you, Dave. Great to be here and great to talk. >> Yeah, so you're 30 days in, you know, so you're an expert by now, but of course, long time IBMer and you've touched a lot of different basis at IBM. So that's very exciting, but your background is in engineering and products, which I think is significant. And I want to talk about that a little bit, but you've got expertise in Cloud, hybrid Cloud. You ran the security division for quite a bit of time. Actually spent some time in data management as well. So, why do you feel as though this is a great opportunity for you and of course for IBM, given your background? >> Yeah Dave, I think as you say, I'm a technologist, I'm a product guy for many, many years, almost 30 years in the business. I came to IBM as a lot of people through an acquisition, of a small company in the networking space. But since then I've had, you know, two or three careers in IBM where I worked in security, I worked in hybrid Cloud, and actually way, way back, I worked for EMC, in the storage business. >> Yeah Right now, you know, as you look at hybrid Cloud, we're in this hybrid multicloud world, I think, and again, that ties into what VMware is also talking about, I think we're the two vendors in the Mac that really pushing and focused on that strategy. And, you know, the reality is of Clouds, if you look at Cloud today where the world is, I mean, even though we have 10, 15 years, you know, 15 years into the Cloud business is 15 years since the first hyperscaler was launched. Reality is about 20, 25% of what I would call enterprise workload have actually moved on to the Cloud. And there are many reasons for that, be it security, compliance, data, privacy, et cetera, transformation, a lot of other people challenges, et cetera. But now we are actually right in the cusp of adapting that enterprise workload. The storage has a critical role to play in that, especially in the hybrid multicloud world, and we're making sure that storage is a key enabler on that genre. And that's why I think it's a critical time right now to be in storage and to help in that journey. >> And I want to come back to talk a little bit about it, but one of the things that I am excited about, in terms of your background, you've got a strong product background, and for years I had indicated that IBM sort of for a while, lost its formula in storage, you'd do all this R&D and it never hit the market, and then under your predecessor, I think IBM has done a much, much better job and you see it in your now, the last couple of quarters have been really strong for you guys. Of course, you've got the mainframe attached, which is the gift that keeps on giving, but how are you looking at your business? Again, I know you're only 30 days in, but there's been some tailwinds lately, you guys have seemed to do pretty well relative to the market. >> Yeah, my predecessor has done a fantastic job, I mean, if you look at our core storage business, as you said Dave, like our mainframe that's all was our flagship. I mean, you know, we continue to innovate there, particularly around the mainframe, things like, you know, copy services, et cetera, where we're driving a lot of innovation, and continue to lead there. But I think the more interesting, and the really exciting part is what we've done in an our what I would call our open system storage, our flash line up, where the team had got to a single core base, and a single hardware platform where we can scan right up and down the stack. And really innovating and driving very quickly there, is a critical part of what I'm driving right now and accelerate the work that has been done today. Then I think, you know, beyond, you know, the core storage platforms, if you start to look at some of the other areas like cyber resiliency, data protection, and really driving innovation there, but also leveraging other parts of IBM. I mean, we have a very strong base in security. I'm working very closely with our security teams, because I know from my days in security, you know, data protection, data recovery, real challenges for the CISO, I'm bringing those technologies and packaging those technologists so that they can help in those challenges critical for me. And last but not least, I mean, you know, as you look at things like getting an AI and I'm bringing AI to the enterprise. One of the big challenges is being able to identify where all the data is and to get an access to the data. And again, storage is a critical role to play there in terms of discovery services, et cetera, which again is a key innovation. So I think it comes down to those three things. making sure... Obviously you need a very strong product line-up, which I think we are very well equipped right now, and we have, based on the work the team have done over the last number of year. But then applying that to some of the critical problems around cyber resiliency, data protection, and also leveraging and enabling AI in the enterprise. >> So let's stay on cyber for a minute, It's an area obviously, you know, a lot about and we used to think, okay, what's the relationship between storage and cyber, and it was maybe it was encryption, you know, data at motion or data at rest, and now the lines between data protection, and cyber are really getting blurred. I mean, it's become a... Especially with COVID, it's become, >> Mhm >> A fundamental part of business resiliency, So how are you thinking about storage, and the intersection of cyber? >> Yeah, I mean, I think, you know, when, I had the, my security hat on, I mean, reality and security is, you know, the World is, you know, how you deal with a breach because at the end of the day, pretty much there is to be a security event. It's not a case of if, it's a case of when it happens, and you know, really how you respond to that, and that was where a lot of our focus was in terms of how you respond to those events, how you recover quickly, et cetera. Now, when you come across into storage, I mean, lately in the world we live in today, where at the end of the day, when there's a cyber attack, I mean, what is it that the nefarious actor is after, they are pretty much after your data assets. And, you know, things like ransomware now there's various different techniques. But how quickly your crew can respond or recover from those is really important. And that's where storage has a critical role to play. And a lot of what we are doing in the innovations, of course, things like base encryption and encryption everywhere, they are table stakes as far as IBM is concerned, we've had that for many years, within our mainframe and in our open systems, but now really thinking about how you actually recover very quickly when an event happens, and that's really where we see a lot of innovation, and where we want to talk to both sides of the house, both the storage I've been, but also on the CISO who have frankly, a big influence in terms of where investment dollars are put today and making sure that they have the capability in place to actually recover quickly when there's an attack. >> Well, as you well know for years it was, you know, security was the problem of the, you know, the Sec-Ops team, you know, >> Yes >> Not my Swim lane, but that has really changed. I mean, security has become a board level issue. Everybody's got to be involved. We're seeing more CISOs reporting into the CIO. We're also seeing CISOs have a seat at the table, they're reporting, you know, at quarterly board meetings, and so, we see every part of the IT stack, really focused on security, and even the lines of business as well. What do you say? >> Yeah, exactly, I mean, I think the CISO role has evolved over the last number of years, I mean, I think if I think back, you know, maybe five, 10 years ago, the CISO role was very much what I would call a compliance type role. So in other words, making sure we all the checks and balances in place that, you know, at the right time. putting the fast pace, changing world with Cloud and transformation, digital transformation, the CISO has to be an active part of that. We used to use the expression that the CISO was the doctor know, in other words, how to stop, you know, innovation, or how to stop things changing, That's, you know, yesterday's news, today, the CISO has to be much more pro-active, helping technology, helping transformation, and that's why you're seeing that, they have a seat at the top table right now, because they are critical, to all decisions that are made. The fact is that, you know, massive transformation is happening in every enterprise, but you're got to do that in a secure and safe manner, and the CISO is absolutely critical to that, and is influencing a lot of fine decisions around that as well. And by that we see that as a critical part of our strategy that we make sure that we have offerings and capabilities that addresses that need. >> Love to come back to the, the Cloud discussion, the hybrid Cloud, and multi-Cloud, you mentioned that early on, you guys obviously have a big play there with Red Hat and an open shift we've seen in our data that is becoming real multicloud and there used to be, you know, a lot of vendor talk, but now it's becoming a fundamental strategy. So you were saying it, you know, as a smaller portion of workloads, you know, are in the Cloud, it's all the, all the hard stuff has stayed on Prem. What's the motivation for your customers to move to a Cloud, or a hybrid Cloud strategy? What are they trying to achieve as an outcome? >> Well, I think when everything, you know, you got to stop at a business level, right? I mean, fundamentally what enterprises are doing is, especially in this cold world, everything is becoming increasingly digital going online, et cetera. So that transformation is accelerating that digital transformation, the rate and pace of that is accelerated. Now you actually stop to think about that and say, what does that mean in terms of your existing enterprise? In many cases, you know, especially for incumbents, right? They have existing systems that have existing data repositories, et cetera. So how do they leverage that and transform those to meet these new needs? And, and then of course back to the cyber concerns, right, you have security data privacy concerns, et cetera. So you have all these multiple variables going on, in our world, you know, and if you look at what has happened over the last, as I said, 15 plus years, you know, everybody said, you know, everything is moving to the public, game over, we're done. That hasn't actually happened. We really are in a multicloud world. When we talk about multicloud, that means, you know, you have the what we refer to as a traditional hyperscalers, but also the SAS properties, et cetera, that we see in every enterprise. And also you have to have a on-premise capability, but it's different than what it was traditionally, it has to have Cloud like economics. And what has been very good about the Cloud, a tremendous innovation is the elastic scaling, et cetera, on the economics that has come with the Cloud. But you have to bring that back on-premise. You can't just have one operating model in the Cloud and have something else on-premise, your infrastructure has to be flexible at scale and across border environments. And that is the true definition of what we call a hybrid multicloud. And one with critical technologies, will give you that consistency across that, and one of the reasons why, you know, we named the strategic pattern Red Hat, is containers, because from a number of years back, we could see that was the part of the technology that enabled a lot of these hybrid multicloud capabilities. IBM talked about hybrid Cloud long before, it was a popular thing to talk about a number of years back. But we could see that, you know, to enable that to happen, the critical technology was containers, and that because of both, combination of containers and Linux and hence the acquisition of Red Hat, and now we are actually leveraging that to actually drive footprint across the Hybrid Cloud environment, and everything we're doing is integrated into that container technology including storage. >> Yeah, well, of course we're here at VMworld again, virtually, but the big trends we're hearing from, from VMware and the ecosystem this week, they're, pounding on networking hybrid multicloud, as we've just talked about, you mentioned containers and Kubernetes, we're hearing a lot about security, which we just addressed the AI, ML, thinking about the points of commonality, you guys are big partners with VMworld. VMware have been for, for many, many years, a lot of open shift runs on VMware,We know that. a lot of your business critical, and mission critical workloads. So what are those points of commonality, and maybe what are some of the points of divergence in what you guys are doing? as part of >> Yeah, I mean, >> VMware tremendous partner of ours, I mean, a lot of VMware workload, as customers move to the cloud, moves to the IBM Cloud. We're probably their premier choice right now in terms of VMware workload. Also, I think in terms of, you know, I think if you look at VMware today, I think they also see a hybrid multicloud strategy, and I think there's the VMware, I would say a strategy has evolved over time. Clearly they have a huge installed base of virtual machines, which a lot of our container technology at Red Hat runs on top off. But VMware has also evolved into a container approach as well, with a lot of the announcements they've made. So I think we're on a very similar strategy when it comes to my own area on storage, in terms of how we integrate storage into that container world, there's a lot of commonality in how we approach that. I mean, developing CSI drivers, et cetera, into the container world, I think we're both doing that and doing that together. In areas, obviously we will compete and very much compete. I talked about that product lineup and obviously BMR, and obviously that relationship with Dell and others, is got to be areas where we will compete in the storage. But in terms of where we really will collaborate, I think is a lot around the hybrid multicloud strategy, and building an open ecosystem that everybody can play on. And they'll, you know, where we sit on them or they sit on us. I think you're going to see an open ecosystem across us in this hybrid multicloud World. >> Well, it seems as though from a storage standpoint, that you've got no choice, but to be open, you have to give clients as much optionality as possible. You can't say, okay, we're going to be all IBM Red Hat, you've been, you've got so many other opportunities for, term expansion. I wonder if you could talk about that, and maybe express your philosophy, just in terms of openness, and it's important in terms of competing in storage. >> I think that's been fundamental to storage since the very beginning of the storage industry. And of course, we absolutely, we have to be very open in terms of who we integrate with. And we go everywhere from like optical containers, to virtual machines to any system, all the ways for something as traditional as tape. I mean, tape, many have said, tape is dead. Tape is far from dead, even in the, hyperscaler world, where we're seeing a lot of the hyperscalers right now, are actually using tape technology and integrating tape into their environment. So there's an example, where you might not have thought about us, you know, it's something that we do, we do that in a very open fashion and continue to do that. Likewise, when it comes to security, when it comes to things like data and AI, you know, our philosophy is don't take another copy of the data, be able to access the data so that you can build your AI models, et cetera on top of that. we may have a lot to happen with some of our capabilities around spectrum scale, and we will integrate with backend arise from EMC, Hitachi, and others actually enable that to happen. So we're very open ecosystem, want to bring unique value, and if I'm making sure we can integrate both up and down the stack. >> Yeah. Well, I mean, you guys, of course, for those who have been around the storage industry, as much as I have the San volume controller, a hub was kind of the early days of storage virtualization, I think IBM was clearly one of the leaders there, and you've kind of taken that concept to data. We've seen that with Cloud packs, and so, you know, one IBM executive, you know, said to me one time, you know, we, learned our lesson many, many years ago about the importance of openness, and then you got the religion there. So I think it's pretty, >> pretty fundamental. >> I mean, >> Isn't it? >> It's pretty fundamental, I guess, we learned hard lesson many years ago, and I think, you know, when you talk about openness and something like Red Hat, I think we're definitely, putting our money where our mouth is in terms of being an open company, I'm really enabling something like Red Hat, and continue that ecosystem as you know, Red Hat is independent, was run independent of IBM, so that we want to drive that open ecosystem around Red Hat, and that is pretty fundamental to a lot of IBM, a lot of our platforms and our capability, I mean, you know, back for many years, we talked about the sound volume controller, but even if you go back far enough in history, which I can do in the storage World, and the storage API world, IBM was one of the leaders I'm building an open API around storage and storage access as well back then. So it's fundamental to the company has always been, and continues to be, I mean, we were one of the major contributors to things like Linux, That's not well known, but that, that is the truth, and, you know, things like that, what we have done over many, many years. >> Yeah, undoubtedly, I mean, I go back to Steve mills, epic decision to invest a billion dollars in Linux back in the day, and we've seen those billion dollar bets pay off in terms of flash and other areas. Dennis, what's your style going to be? I mean, again, I'm excited that you've got an engineering background, you're a product person at the end of the day, it's all about innovation, and getting that R&D out to market. What should we expect from your leadership style? >> I think you kind of said it there, I mean, I'm an engineer at heart, I really want to deliver value to our clients. You know, we have the big R&D spend in our storage unit, and I want to show value for that spend on IBM has given me a responsibility to deliver on. So to begin to deliver massive innovation and productivity from our engineering team. I mean, that's fundamentally what I do. So starting from day one, understanding our portfolio top to bottom, what are our strengths in the market, Where are our weaknesses, where we need to address some of the gaps, but also listening to our clients, which is very important to me and making sure that they see the innovation, the quality of the deliverables and that, you know, as a client or as a customer of IBM, you can be guaranteed that IBM would deliver and continues to deliver on innovation on a road map on storage. And that's really fundamental to my philosophy. I'm making sure that we can establish leadership, and continues to establish leadership, in the storage industry. So that we are a trusted partner, and a valued partner in your transformation journey. So that when you make investments with us, as a technology provider that we deliver on a roadmap and a vision that actually needs your needs going forward. I mean, that's fundamental to what, you know, my management style is about and making sure I have the right people that I can put in front of our clients and make sure they can deliver that value. >> I mean, I think that's critical, Dennis, and again, I keep hitting on your engineering background, because yes, while you have a big R&D budget, IBM probably spend $6 billion a year in R&D, you're fighting for that budget, with a lot of other divisions at IBM, so staying close to the customer is critical because you've got to place those bets. And I have firmly believed that with a strong technical background and product background, and staying close to the customer, you're going to have, you know, some big wins and more wins than losses, and you're going to be able to more efficiently deploy that capital in the form of R&D, and then quickly get it out into products. I see that as crucial today in terms of the innovation equation. >> Yeah. I mean, my philosophy, you know, fundamentally, you know, a lot of times, and I've been in engineering a long time, it's not about the size of the budget, be the dollar, be a $10, be it $100. It's how efficient we are with that dollar, and how innovative we are with that dollar. And sometimes, you know, you look at IBM and people look at a big company, maybe it doesn't move as quickly. I can guarantee you that, you know, that's fundamental that, you know, I run a startup within a small company, within a large company. I like to think of it that way and how we can innovate and move very quickly. And that's, you know, fundamental to my philosophy in terms of how I think, it's not about, okay, how can I get more budget to do exits? How can I be more efficient that I can drive more value? And then, you know, maybe then I get more budget, but you know, you got to think about detail more rather than saying, I don't want to have more inefficiency, I wanted to have more innovation, more creativity, entering new markets, looking at new capabilities, and being able to just create great new opportunities for IBM storage. >> Well, Dennis, again, congratulations on the new appointment, we look forward to at some point in the future of being able to meet face to face, but thanks so much for coming on the Cube and our coverage of VMworld. >> Thank you, Dave, and thanks for your time today, I appreciated the conversation. Thank you. >> All right, You're very welcome, and thank you for watching everybody, This is Dave Vellante for the Cube, again, wall to wall coverage of VMworld 2020, We'll be right back right after this short break. (soft music)