(gentle music) >> Okay, thank you Adam. Thank you everyone for joining us on the main stage here, folks watching, appreciate it. I'm John Furrier, Dave Vellante co-hosts of theCube. We're here in the main stage to talk to the two main players of Totogi, Danielle Royston, CEO as of today, the big news. Congratulations. >> Danielle: Yeah. Thank you. >> And Robin Langdon the CTO, Totogi. >> Robin: Thanks. So big news, CEO news today and $100 million investment. Every wants to know where's all the action? Why is this so popular right now? (Danielle chuckles) What's going on? Give us the quick update. >> Yeah, I met the Totogi guys and they have this great product I was really excited about. They're focused purely on telco software and bringing, coupling that with the Public Cloud, which is everything that I talk about, what I've been about for so long. And I really wanted to give them enough funding so they could focus on building great products. A lot of times, telcos, startups, you know they try to get a quick win. They kind of chase the big guys and I really wanted to make sure they were focused on building a great product. #2, I really wanted to show the industry, they had the funding they needed to be a real player. This wasn't like $5 million or a couple million dollars, so that was really important. And then #3, I want to make sure that we could hire great talent and you need money for compensation. And so $100 million it is. >> $100 million is a lot of fresh fat financing as they say. I got to ask you, what's different? Because I've been researching on the refactoring aspect of with the Cloud, obviously public cloud with AWS, a big deal. What's different about the charging aspect of this? >> Yeah I mean, charging hasn't been exciting, maybe ever. I mean, it's kind of like this really sort of sleepy area, but I think what the Totogi guys are doing is they're really coupling the idea of charging and network data to bring hyper-personalization to subscribers. And I think that's where it changes from being a charging engine to become an engagement engine. Telcos know more about us than Google, which is kind of crazy to think about it. They know when we wake up, they know what apps we use. If we call or text, if we game or stream and it's time to start using that data to drive a better experience to us. And I think to Totogi is enabling that. I'm super excited to do that. >> So Robin, I wonder if you could talk about that a little bit. I mean, maybe we get into the plumbing and I don't want to go too deep in it, but I think it's important because we've seen this movie before where people take their on-prem stacks, they wrap it in containers and they shove it into the Public Cloud and they say, "Hey, we're cloud too." If reading a press release, you guys are taking advantage of things like Amazon Nitro of course, but also Graviton and Graviton2 and eventually 3, which is the underlying capabilities, give you a cloud native advantage. Can you explain that a little bit? >> Yeah, absolutely. I mean, we wanted to build this in the Cloud using all of those great cloud innovations. So Graviton2, DynamoDB and using their infrastructure, just allowing us to be able to scale out. These all available to us to use and essentially free for us to use. And it's great, so as you say, we're not shoehorning something in that's decade's old technology, wrapping it in some kind of container and pushing it in. Which is just then, you just can't use any of those great innovations. >> And you've selected DynamoDB as the database. Okay, that's fine. We don't have to get so much into why, but maybe you could explain the advantage because I saw some benchmark numbers which were, like an order of magnitude greater than the competition, like share with us, why? How you were able to get there? And maybe share those numbers. >> Yeah, no, we do. So we just launched our benchmark. So, a million transactions per second. So we just blew away everyone else out there. And that's really because we could take advantage of all that great AWS technology in there and the database side we're using DynamoDB, where we had a huge debate about using what kind of database to go and use? There's a lot of people out there probably get very religious about the kind of database technology that you should be using. And whether it should it be SQL in-memory object database type technology, but really a single table design, gives you that true scalability. You can just horizontally scale that easily, across the whole planet. >> You know, Danielle. Again, I said that we've seen this movie before. There are a lot of parallels in telco with the enterprise. And if you look at enterprise SAS pricing, a lot of it is very static, kind of lock you in, per seat pricing, kind of an old model. And you're seeing a lot of the modern SAS companies who are emerging with a consumption pricing models. How are you guys thinking about pricing? >> Yeah, I don't know of any other company in telco that's starting to price by usage. And that is a very standard offering with the cloud providers, right? Google we know, Amazon, all those guys have a price by the API, price by the transaction. So we're really excited to offer that to telcos. They've been asking for it for awhile, right? Pay for what you need, when you need it, by the use. And so we're really excited to offer that, but I think what's really cool is the idea of a free tier, right? And so I think it's smaller telcos have a trade-off to make, whether, am I going to buy the best technology and pay through the nose and maybe at an unaffordable level, or do I compromise and buy something more affordable, but not as great. And what's so great about Totogi, it's the same product just priced for what you need. And so I think a CSP it'll, below 250,000 subscribers should be able to use the Totogi absolutely for free. And that is, and it's the same product that the big guy would get. So it's not a junior version or scaled back. And so I think that's really exciting. I think we're the only ones that do it. So here we go. >> Love the freemium model. So Robin, maybe you could explain why that's so much, so important in the charging space, because you've got a lot of different options that you want to configure for the consumer. >> Yeah. >> Maybe you could talk about sort of how the old world does that, the old guard and how long it takes and how you're approaching this. >> Yeah so it's, I mean traditionally, charging design, there's as you say, there's lots of different pricing leavers you want to be able to move and change to charge different people. And these systems, even if they say they're configurable, if they normally turn into an IT project where it takes weeks, months, even years to build out the system, you know, marketing can't just go in there and configure the dials and push out your new plans and tariffs. They have to go and create a requirement specification. They hand it down to IT. Those guys go and create a big change project. And by the time they're finished, the market's moved on. They're on to their next plan, their next tariff to go and build. So we wanted to create something that was truly configurable from a marketing standpoint. You know, user-friendly, they can go in there, configure it and be live in minutes, not even days or weeks. >> No, IT necessary. >> Robin: No IT necessary. >> So you know, I've been thinking about, John and I talk about this all the time, It's that there's a data play here. And what I think you're doing is actually building a data product. I think there's a new metric emerging in the industry, which is how long does it take me to go from idea to monetization with a data product. And that's what this is. This is a data product >> Yeah. >> for your customers. >> Absolutely, what Robin was talking about is totally the way the industry works. It's weeks before you have an idea and get it out to the market. And like Robin was mentioning, the market's changed by the time you get it out there, the data's stale. And so we researched every single plan in the world from every single CSP. There is about 30,000 plans in the world, right? The bigger you are, the more plans you have. On average, a tier one telco has 40 to 50 plans. And so how many offers, I mean think about, that's how many phones to buy, plans to buy. And so we're like, let's get some insight on the plans. Let's drive it into a standardization, right? Let's make them, which ones work, which ones don't. And that's, I think you're right. I think it's a data play and putting the power back into the marketer's hands and not with IT. >> So there's a lot of data on-prem. Explain why I can't do this with my on-prem data. >> Oh, well today that, I mean, sorry if you want to jump in. Feel free to jump in, right. But today, the products are designed in a way where they're, perpetually licensed, by the subscriber, rigid systems, not API based. I mean, there might be an API, but you got to pay through the nose to use it or you got to use the provider's people to code against it. They're inflexible. They were written when voice was the primary revenue driver, not data, right? And so they've been shoehorned, right? Like Robin was saying, shoehorned to be able to move into the world that we are now. I mean, when the iPhone came about that introduced apps and data went through the roof and the systems were written for voice, not written for data. >> And that's a good point, if you think about the telco industry, it seems like it could be a glacier that just needs to just break and just like, just get modern because we all have phones. We have apps. We can delete them. And the billing plans, like either nonexistent or it has to be all free. >> Well I mean, I'll ask you. Do you know what your billing plan is? Do you know how much data you use on a monthly basis? No one knows. >> I have no clue. >> A lot. >> No one. And so what you do is you buy unlimited. >> Dave: Right. >> You overpay. And so what we're seeing in the plans is that if you actually knew how much you used, you would be able to maybe pay less, which I remember the telcos are not excited to hear that message, but it's a win for the subscriber. And if you could >> I mean it's only >> accurately predict that. >> get lower and lower. I having a conversation last night at dinner with industry analysts, we're talking about a vehicle e-commerce, commerce in your car as you're driving. You can get that kind of with a 5G. The trend is transactions everywhere, ad-hoc, ephemeral... >> Yeah. >> The new apps are going to demand this kind of subscriber billing. >> Yeah >> Do people get this? Are you guys the only ones kind of like on this? >> No I think people have been talking about it for years. I think there's vendors out there that have been trying to offer this idea of like, build your own plan and all that other stuff but I think it's more than just minutes, text and data. It's starting to really understand what subscribers are using, right? Are you a football fan? Are you a golf fan? Are you a shopper? Are you a concert goer? And couple that with how you use your phone and putting out offers that are really exciting to subscribers so that we love our telco. Like we should be loving our telco. And I don't... I don't know that people talk >> They saved us >> about loving their telco. >> from the pandemic >> They saved us during the pandemic. The internet didn't crash, we got our zoom meetings. We got everything going on. What's the technical issue on solving these problems? Is it just legacy? Is it just mindset? Robin, what's your take on that? >> I'll keep talking as long as Robin will let me. (Daniel laughing) >> So the big technical issues, you're trying to build in this flexibility so that you can have, we don't know what people are going to configure in the future. It's minutes and text messages are given away for free. They're unlimited. Data is where it's at, about charging for apps and about using all that data in the network the telcos have, which is extremely valuable and there's a wealth of information in there that can be used to be monetized and push that out. And they need a charging system on top that can manage that and we have the flexibility that you don't have to go off and then start creating programs and IT projects that are going to do that. >> Well it's funny Danielle, you say that the telcos might not like that, right? 'Cause you might pay less. But in fact, that is the kind of on-prem mindset because when you have a fixed resource, you say, okay, don't use too much because we have to buy more. Or you overbuy to your point. The cloud mindset is, I'll try it. I'll try some more, I'll try some more. I'm aligning it with business value. Oh, I'm making money. Oh, great. I'm going to keep buying more. And it's very clear. It's transparent where the business value is. So my question is when you think about your charging engine and all this data conversation, is there more than just a charging engine in this platform? >> Well, I think just going back to what Robin was talking about. I think what Totogi is doing differently is by building it on the Public Cloud gives you virtually unlimited resources, right? In a couple of different directions, certainly hardware and capacity and scalability and all those other things, right? But also as Amazon is putting out more and more product, when you build it in this new way, you can take advantage of these new services very, very easily. And that is a different mindset. It's a different way to deploy applications. And I think that's what makes Totogi really different. You couldn't build Totogi on-premise because you need the infinite scalability. You need the machine learning, you need the AI of Amazon, which they have been investing in for decades, if they now charge you by the API call. And you get to use it like you were saying. Just give it a try, don't like it, stop. And it's just a completely different way of thinking, yeah. >> If I have to ask you a question about the Public Cloud, because the theme here in Cloud City is the Public Cloud is driving innovation, which is also includes disruption. And the new brands are coming in, old brands are either reinventing themselves or falling away. What is the Public Cloud truly enabling? Is it the scale? Is it the data? Is it the refactoring capability? What is the real driver of the Public Cloud innovation? >> I think the insight that CSPs are going to have is what Jamie Dimon had in banking. Like I think he was pretty famously saying, "I'm never going to use the Public Cloud. Our data is too precious, you know, regulations and all that stuff." But I think the insight they're going to have, and I hopefully, I do a keynote and I mentioned this, which is feature velocity. The ability to put out features in a day or two. Our feature velocity in telco is months. Months, months. >> Seriously? >> Yeah, sometimes years. It's just so slow between big iterations of new capability and to be able to put out new features in minutes or days and be able to outmaneuver your competition is unheard of. So the CSPs that starts to get this, it's going to be a real big get, and then they're going to start to.. (Danielle makes swishing sound) >> We just interviewed (Dave speaking indistinctly) a venture capitalist, Dave and I last month. And he's a big investor in Snowflake, on the big deals. He said that the new strategy that's working is you go to be agile with feature acceleration. We just talked about this at lunch and you get data. And you can dismantle the bad features quickly and double down >> Yup. >> on the winners. >> Ones that are working. So what used to be feature creep now is a benefit if you play it right? >> Danielle: It's feature experimentation. >> That's essentially what you- >> It's experimentation, right? And you're like, that one worked, this one didn't, kill that one, double down on this one, go faster and faster and so feature experimentation, which you can't do in telco, because every time we ask for a feature from your current vendor, it's hundreds of thousands, if not millions of dollars. So you don't experiment. And so yeah- >> You can make features disposable. >> Correct. And I think that we just discovered that on this stage just now. (group chuckling) >> Hey look at this. Digital revolution, DR. Telco DR. >> Yeah. >> Great to have you guys. >> This is super awesome. Thanks so much. >> You guys are amazing. Congratulations. And we're looking forward to the more innovation stories again, get out there, get the momentum. Great stuff. >> Danielle: It's going to be great. >> And awesome. >> Feature experimentation. >> Yeah. >> Hashtag. >> And Dave and I are going to head back over to our Cube set here, here on the main stage. We'll toss it back to the Adam in the studio. Adam, back to you and take it from here.

>>From around the globe. It's the cube with digital coverage of IBM. Think 20, 21 brought to you by IBM, >>Welcome back to IBM. Think at 2021, the virtual edition, my name is Dave Volante and you're watching the cubes continuous coverage of think 21. And right now we're going to talk about banking and the post isolation economy. I'm very pleased to welcome our next guests. Look at Wigley's the general manager global banking financial markets at IBM and John diagonal is the global CTO and vice president and distinguished engineer for banking and financial services. Gentlemen, welcome to the cube. That's my pleasure. Look at this current economic upheaval, it's quite a bit different from the last one. Isn't it? I mean, liquidity doesn't seem to be a problem for most banks these days. I mean, if anything, they're releasing loan loss reserves that they didn't need. What's from your perspective, what's the state of banking today and hopefully as we exit this pandemic soon. Okay. >>So, so Dave, I think, like you say, it's a, it's a, it's a state in a picture that, uh, in a significantly different from what people were expecting. And I, and I think some way, in some ways you're seeing the benefits of a number of the regulations that were put into, into place after the, you know, the financial crisis last time round, right? And therefore this time, you know, a health crisis did not become a financial crisis because I think the banks were in better shape. And also, you know, governments clearly have put worldwide a lot of liquidity into the, into the system. Um, I think if you look at it though, um, maybe two or three things ready to call out, firstly, there's a, there's a massive regional variation. So if you look at the U S banking industry, uh, it's extremely buoyant and I'll come back to that in a managing the way in which it's performing. >>Uh, you know, the banks that are starting to report that first quarter results are going to show a profitability that's significantly ahead of where they were last year. And probably some of those, some of that best performance for quite a long time, if you go into Europe, it's a completely different picture. I think the banks are extremely challenged at that. And I think you're going to see a much Bleaker outlook in terms of what those banks report, as far as Asia Pacific is concerned again, you know, because they did, they have come out of the pandemic much faster that consumer businesses back into growth. Again, I think they're showing some pretty buoyant up performance as far as, as far as banking performance is concerned. I think the beast that's particularly interesting. And I think Kim is a bit of a surprise to most, uh, is, is what we've seen in the U S right? >>And in the U S what's actually happened is, uh, the investment banking side of banking businesses has been doing better than they've ever done before. There's been the most unbelievable amount of acquisition activity. You've seen a lot of what's going on with the specs that's driving the res you know, deal based fee income for the banks, the volatility in the marketplace, meaning that trading income is much, much higher than it's ever been. And therefore the banks are very much seeing a profitability on that investment banking side. That was way ahead of what I think they were, they were expecting. Consumer business is definitely down. If you look at the credit card business, it's down, if you look at, uh, you know, lending activity, that's going down, going out, it's substantially less than where it was before. There's hardly any lending growth because the economy is flat at this moment in time. >>But again, the good news that, and I think this is a worldwide, but you're not just in the us. The good news here is that because of the liquidity and some of them are special mentions that government put out that there has not been, uh, the, the level of bankruptcies that people were expecting. Right. And that for most of the provisioning that the banks did, um, in expectation of non-performing loans has been, I think, a much more, much greater than what they're going to need, which is why you're starting to supervision is being released as well, which I kind of flattering, flattering the income flattering. I think going forward though, you're going to see a different picture. >>It's the, thank you for the clarification on the regional divergence is that you're right on, I mean, European central banks are, are not the same, the same position, uh, to, to affect liquidity, but is that nuance, is that variation across the globe? Is that, uh, is that a blind spot? Is that a, is that a, a concern, uh, or the other, other greater concerns, you know, inflation and, and, and the, the, the pace of the, the return to the economy. What are your thoughts on that? >>So I think, I think the, um, the, the, the concern, um, you know, as far as the European marketplace is concerned is, um, you know, whether the, the performance that in particularly, I don't think the level of Verition in there was quite as generous as we saw in other parts of the world. And therefore, um, you know, ease the issue around non-performing loans in, in Europe going to hold the European, uh, European banks back. And are they going to, you know, therefore constrained them under lending that they put into the economy. And that then, um, you know, reduces the level of economic growth that we see in Europe. Right. I think, I think that is certainly that is certainly a concern. Um, I would be surprised and I've been looking at, you know, forecasts that have been brought forward by various people around the world around infection. >>I would be surprised if inflation starts to become a genuine problem in the, in the kind of short to medium term. I think in the industry that are going to be two or three other things that are probably going to be more, you know, going to be more issues. Right. I think the first one, which is becoming top of mind for chief executives is this whole area around operational resiliency. So, you know, regulators universally are making very, very sure that banks do not have a technical debt or a complexity of legacy systems issue. They are. And, you know, the UK has taken the lead on this and they are going so far as even requiring non-executive directors to be liable. If banks are found to not have the right policies in place, this is not being followed by other regulators around the world. Right. So, so that is very much top of mind at this moment in time. >>So I think discretionary investment is going to be, uh, you know, to watch, um, uh, solving that particular problem. I think that that's one issue. I think the other issue is what the pandemic has shown is that, and, and, and this was very evident to me. I mean, I spent the last three years out in Singapore where, you know, banks have become very digital businesses. Right. When I came into the U S in my current role, it was somewhat surprising to me as to where the U S marketplace was in terms of digitization of banking. But if you look in the last 12 months, uh, you know, I think more has been achieved in terms of banks becoming digital businesses. And they've probably done in the last two or three years. Right. And then the real acceleration of that, uh, digitalization, which is going to continue to happen. But the downside of that has been that the threat to the banking industry from essentially fintechs and big decks has exactly, you know, it's really accelerated. Right, right. I mean, just to give you an example, pay Pat is the second largest financial services institution in the us, right. So that's become a real problem of my English. The banking industry is going to have to deal with, >>I want to come back to that, but now let's bring John into the conversation. Let's talk about the tech stack. Look, it was talking about whether it was resiliency going digital. We certainly saw with the pandemic remote work, huge, huge volumes of things like PPP and, and, and, and, and mortgages and with dropping rates, et cetera. So, John, how has the tech stack been altered in the past 14 months? >>Great question, Dave and it's top of mind for almost every single financial services firm, regardless of the sector within the overall industry, every single business has been taking stock of how they handled the pandemic and the economic conditions thereafter, and all of the business needs that were driven by the pandemic. In so many situations, firms were unable to service their clients or were not competitive in serving their clients. And as a result, they've had to do very deep, uh, uh, architectural, uh, transformation and digital transformation around their core platforms, their systems of analytics and their systems, their front end systems of engagement in terms of, uh, the core processing systems that many of these institutions, some in many cases, they're 50 years old. And with any 50 year old application platform, there are inherent limitations as an inflexibility and flexibility as an inability to innovate for the future as a speed of delivery issue. In, in other words, it can be very hard to accelerate delivery of new capabilities onto an aging platform. And so in every single case, um, institutions are looking to hybrid cloud and public cloud technology, and pre-packaged AI and pre-packaged solutions from an ISV ecosystem of software vendor ecosystem to say, as long as we can crack open many of these old monolithic cores and surround them with new digitization, new user experience that spans every channel and automation from the front to back of every interaction, that's where most institutions are prioritizing. Yep. >>Banks, aren't gonna migrate. Uh, they're gonna, they're going to build a abstraction layer. I want to come back to the disruption is so interesting. You had the Coinbase IPO last month, see Tesla and micro strategy. They're putting Bitcoin on their balance sheets. Jamie diamond says traditional banks are playing a smaller role in the financial system because of the new fintechs. Look at, you mentioned PayPal, the Stripe does Robin hood. You get the Silicon Valley giants have this dual disruptive disruption agenda, Apple, Amazon, even Walmart, Facebook. The question is, are traditional banks going to lose control of the payment systems? >>Yeah, I mean, I think to a large extent that is, that is already happened, right? Because I think if you look at, if you look at the experience in Asia, right, and you look at particularly organizations like iron financial, uh, you know, in India, you look at organizations like ATM the, you know, very substantial trends, particularly on the consumer payment side has actually moved, uh, away from the banks. And I think you're starting to see that in the West as well, right. With organizations like, you know, cloud. Now that's coming out with this, um, you know, pay, you know, buying out the later type of schemes. You've got and then, so you've got PayPal. And as you said, Stripe, uh, and, and others as well, but it's not just, um, you know, in the payment side. Right. I think, I think what's starting to happen is that, that are very core part of the banking business, you know, especially things like lending, for instance, where again, you are getting a number of these, um, fintechs and big, big tech companies entering the marketplace. >>And I, and I think the threat for the banks is, and this is not going to be small chunks of market share that you're going to actually lose. Right. It's, it's, it's actually, uh, it could actually be a Kodak moment. Let me give you an example. Uh, you know, you will have just seen that grab is going to be acquired by one of these facts for about $40 billion. I mean, this organization started like the Uber in Singapore. It very rapidly got into both the payment side, right? So it actually went to all of these mom and pop shops and it offered QR based, um, go out code based payment capabilities to these very small retailers. They were charging about half or a third of what MasterCard or visa were charging to run those payment routes. They took market share overnight. You look at the remittance business, right? >>They, they went into the remittance business, they set up these wallets in 28 countries around the ICR and region. They took huge chunks of business completely away from DBS, which is the local bank out there from Western union and all of these, all of these others. So, so I, I think it's a real threat. I think Jamie Dimon is saying what the banking industry has said always, right? Which is the reason we are losing is because the playing field is not even, this is not about playing fields and even right. All of these businesses have been subject to exactly the same regulation that the bank shop subject to regulations in Singapore and India, more onerous than maybe in other parts of the world. This is around the banking business, recognizing that this is a threat. And exactly, as John was saying, you got to get to delivering the customer experience. >>That juniors are wanting at the level of pasta they're prepared to pay. And you're not going to do that by purely shorting out the channels and having a cool app on somebody's smartphone. Right? If that smartphone is 48 by arcade processes and legacy systems, where can I apply? You know, like, like today, you know, you make a payment, your payment does not clear for five days, right? Whereas in Singapore I make a payment, the payment is instantaneously cleared, right? That's where the banking system is going to have to get to in order to get to that. You need to order the whole stack. And the really good news is there are many examples where this has been done very successfully by incumbent banks. You don't have to set up a digital bank on the side to do it. An incumbent bank could do it, and it can do it in a sense of a period of time, or does sense for level of investment. A lot of IBM's business across our consulting, as well as our, our technology stack is very much trying to do that with our clients. So I am personally very bullish about what the industry >>Yeah. I mean, taking friction out of the system sometimes with the case of crypto taking the middle person out of the system. But I think you guys are savvy. You understand that, you know, like, yeah, Jamie diamonds a couple of years ago said, he'd fire anybody doing crypto Janet Yellen and says, ah, I don't really get it. You know, Warren buffet. But I think as technology people, we look at it and say, okay, wait a minute. This is an interesting Petri dish. There's, there's fundamental technology here that has massive funding that is going to inform, you know, the future. I think, you know, big bags are gonna lean in some of them and others, others. Won't, uh, John, give you the last word here, >>But for sure they're leaning in. Uh, so to just, to, to, to think about, uh, uh, something that Likud said a moment ago, the reason these startups were able to innovate fast was because they didn't have the legacy. They didn't have the spaghetti lying around. They were able to be relentlessly laser focused on building new, using the API ecosystem, going straight to public and hybrid cloud and not worrying about everything that had been built for the last 50 years or so. The benefit for existing institutions, the incumbents is that they can use all of the same techniques and tools and hybrid cloud accelerators in terms. And we're not just thinking about, um, uh, retail banking here, your question around the industry, that disruption from Bitcoin, blockchain technologies, new ways of processing securities. It is playing out in every single securities processing and capital markets organization. Right now I'm working with several organizations right now, exactly on how to build custody systems, to take advantage of these non fungible digital assets. It's a hot, hot topic around which there's, uh, incredible, uh, appetite to invest an incredible appetite to innovate. And we know that the center of all these technologies are going to be cloud forward cloud ready, AI infused data infuse technologies. >>So I want to have you back. I wish you had more time. I want to talk about specs. I want to talk about NFTs. I want to talk about technology behind all this really great conversation and really appreciate your time. I'm sorry. We got to go. >>Thank you. Thanks so much indeed, for having us. >>Oh, really? Pleasure. Was mine. Thank you for watching everybody. This is Dave Volante for IBM. Think 2021. You're watching the cube.

>>from >>around the globe. It's the cube with digital >>Coverage of IBM think 2021 brought to you by IBM. >>Welcome back to IBM Think 2021 The virtual edition. My name is Dave Volonte and you're watching the cubes continuous coverage of think 21. And right now we're gonna talk about banking in the post isolation economy. I'm very pleased to welcome our next guest. Look at wag lee is the general manager, Global banking financial markets at IBM and john Degnan is the global ceo and vice president and distinguished engineer for banking and financial services. Gentlemen, welcome to the cube. >>Thank you. Yeah >>that's my pleasure. Look at this current economic upheaval. It's quite a bit different from the last one, isn't it? I mean liquidity doesn't seem to be a problem for most pecs these days. I mean if anything they're releasing loan loss reserves that they didn't need. What's from your perspective, what's the state of banking today and hopefully as we exit this pandemic soon. >>So so dave, I think, like you say, it's, you know, it's a it's a state and a picture that in a significantly different from what people were expecting. And I think some way, in some ways you're seeing the benefits of a number of the regulations that were put into into place after the, you know, the financial crisis last time around, right? And therefore this time, you know, a health crisis did not become a financial crisis, because I think the banks were in better shape. And also, you know, governments clearly have put worldwide a lot of liquidity into the, into the system. I think if you look at it though, maybe two or three things ready to call out firstly, there's a there's a massive regional variation. So if you look at the U. S. Banking industry, it's extremely buoyant and I'll come back to that in a minute in the way in which is performing, you know, the banks that are starting to report their first quarter results are going to show profitability. That's you know significantly ahead of where they were last year and probably some of the some of their best performance for quite a long time. If you go into europe, it's a completely different picture. I think the banks are extremely challenged out there and I think you're going to see a much bleaker outlook in terms of what those banks report and as far as Asia pacific is concerned again, you know because they they have come out of the pandemic much faster than consumer businesses back into growth. Again, I think they're showing some pretty buoyant performance as far as as far as banking performance is concerned. I think the piece that's particularly interesting and I think him as a bit of a surprise to most is what we've seen in the U. S. Right. And in the US what's actually happened is uh the investment banking side of banking businesses has been doing better than they've ever done before. There's been the most unbelievable amount of acquisition activity. You've seen a lot of what's going on with this facts that's driving deal raised, you know, deal based fee income for the banks. The volatility in the marketplace is meaning that trading income is much much higher than it's ever been. And therefore the banks are very much seeing a profitability on that investment banking side. That was way ahead of what I think they were. They were expecting consumer businesses definitely down. If you look at the credit card business, it's down. If you look at, you know, lending activity that's going down going out is substantially less than where it was before. There's hardly any lending growth because the economy clearly is flat at this moment in time. But again, the good news that, and I think this is a worldwide which are not just in us, the good news here is that because of the liquidity and and some of the special measures the government put out there, there has not been the level of bankruptcies that people were expecting, right. And therefore most of the provisioning that the banks did um in expectation of non performing loans has been, I think, a much more, much greater than what they're going to need, which is why you're starting to see provisions being released as well, which are kind of flattering, flattering the income, flattering the engine. I think going forward that you're going to see a different picture >>is the re thank you for the clarification on the regional divergence, is that and you're right on, I mean, european central banks are not the same, the same position uh to to affect liquidity. But is that nuances that variation across the globe? Is that a is that a blind spot? Is that a is that a concern or the other other greater concerns? You know, inflation and and and the the pace of the return to the economy? What are your thoughts on that? >>So, I think, I think the concern, um, you know, as far as the european marketplace is concerned is um you know, whether whether the performance that and particularly, I don't think the level of provisions in there was quite a generous, as we saw in other parts of the world, and therefore, you know, is the issue around non performing loans in in europe, going to hold the european uh european banks back? And are they going to, you know, therefore, constrain the amount of lending that they put into the economy and that then, um, you know, reduces the level of economic growth that we see in europe. Right? I think, I think that is certainly that is certainly a concern. Um I would be surprised and I've been looking at, you know, forecasts that have been put forward by various people around the world around inflation. I would be surprised if inflation starts to become a genuine problem in the, in the kind of short to medium term, I think in the industry that are going to be two or three other things that are probably going to be more, you know, going to be more issues. Right. I think the first one which is becoming top of mind for chief executives, is this whole area around operational resiliency. So, you know, regulators universally are making very very sure that banks do not have a technical debt or a complexity of legacy systems issue. They are and you know, the U. K. Has taken the lead on this and they are going so far as even requiring non executive directors to be liable if banks are found to not have the right policies in place. This is now being followed by other regulators around the world. Right. So so that is very much drop in mind at this moment in time. So I think discretionary investment is going to be put you know, towards solving that particular problem. I think that's that's one issue. I think the other issue is what the pandemic has shown is that and and and this was very evident to me and I mean I spent the last three years out in Singapore where you know, banks have become very digital businesses. Right? When I came into the U. S. In my current role, it was somewhat surprising to me as to where the U. S. Market place was in terms of digitization of banking. But if you look in the last 12 months, you know, I think more has been achieved in terms of banks becoming digital businesses and they've probably done in the last two or three years. Right. And that the real acceleration of that digitization which is going to continue to happen. But the downside of that has been that the threat to the banking industry from essentially fintech and big tex has exactly, it's really accelerated. Right, Right. Just to give you an example, Babel is the second largest financial services institutions in the US. Right. So that's become a real problem I think with the banking industry is going to have to deal with >>and I want to come back to that. But now let's bring john into the conversation. Let's talk about the tech stack. Look, it was talking about whether it was resiliency going digital, We certainly saw over the pandemic, remote work, huge, huge volumes of things like TPP and and and and and mortgages and with dropping rates, etcetera. So john, how is the tech stack Been altered in the past 14 months? >>Great question. Dave. And it's top of mind for almost every single financial services firm, regardless of the sector within the overall industry, every single business has been taking stock of how they handled the pandemic and the economic conditions thereafter and all of the business needs that were driven by the pandemic. In so many situations, firms were unable to service their clients or we're not competitive in serving their clients. And as a result they've had to do very deep uh architectural transformation and digital transformation around their core platforms. Their systems of analytics and their systems different end systems of engagement In terms of the core processing systems that many of these institutions, some in many cases there are 50 years old And with any 50 year old application platform there are inherent limitations. There's an in flex itty inflexibility. There's an inability to innovate for the future. There's a speed of delivery issue. In other words, it can be very hard to accelerate the delivery of new capabilities onto an aging platform. And so in every single case um institutions are looking to hybrid cloud and public cloud technology and pre packaged a ai and prepackaged solutions from an I. S. V. Ecosystem of software vendor ecosystem to say. As long as we can crack open many of these old monolithic cause and surround them with new digitalization, new user experience that spans every channel and automation from the front to back of every interaction. That's where most institutions are prioritizing. >>Banks aren't going to migrate, they're gonna they're gonna build an abstraction layer. I want to come back to the disruption is so interesting. The coin base I. P. O. Last month see Tesla and microstrategy. They're putting Bitcoin on their balance sheets. Jamie diamonds. Traditional banks are playing a smaller role in the financial system because of the new fin text. Look at, you mentioned Paypal, the striped as Robin Hood, you get the Silicon Valley giants have this dual disrupt disruption agenda. Apple amazon even walmart facebook. The question is, are traditional banks going to lose control of the payment systems? >>Yeah. I mean I think to a large extent that is that has already happened, right? Because I think if you look at, you know, if you look at the experience in ASia, right? And you look at particularly organizations like and financial, you know, in India, you look at organizations like A T. M. You know, very substantial chance, particularly on the consumer payments side has actually moved away from the banks. And I think you're starting to see that in the west as well, right? With organizations like, you know, cloud, No, that's coming out with this, you know, you know, buying out a later type of schemes. You've got great. Um, and then so you've got paper and as you said, strike, uh and and others as well, but it's not just, you know, in the payment side. Right. I think, I think what's starting to happen is that there are very core part of the banking business. You know, especially things like lending for instance, where again, you are getting a number of these Frontex and big, big tech companies entering the marketplace. And and I think the threat for the banks is this is not going to be small chunks of market share that you're going to actually lose. Right? It's it's actually, it could actually be a Kodak moment. Let me give you an example. Uh, you know, you will have just seen that grab is going to be acquired by one of these facts for about $40 billion. I mean, this organization started like the Uber in Singapore. It very rapidly got into both the payment site. Right? So it actually went to all of these moment pop shops and then offered q are based um, 12 code based payment capabilities to these very small retailers, they were charging about half or a third or world Mastercard or Visa were charging to run those payment rails. They took market share overnight. You look at the Remittance business, right? They went into the Remittance business. They set up these wallets in 28 countries around the Asean region. They took huge chunks of business completely away from DBS, which is the local bank out there from Western Union and all of these, all of these others. So, so I think it's a real threat. I think Jamie Dimon is saying what the banking industry has said always right, which is the reason we're losing is because the playing field is not even, this is not about playing fields. Been even write, all of these businesses have been subject to exactly the same regulation that the banks are subject to. Regulations in Singapore and India are more onerous than maybe in other parts of the world. This is about the banking business, recognizing that this is a threat and exactly as john was saying, you've got to get to delivering the customer experience that consumers are wanting at the level of cost that they're prepared to pay. And you're not going to do that by purely sorting out the channels and having a cool app on somebody's smartphone, Right? If that's not funny reported by arcade processes and legacy systems when I, you know, like, like today, you know, you make a payment, your payment does not clear for five days, right? Whereas in Singapore, I make a payment. The payment is instantaneously clear, right? That's where the banking system is going to have to get to. In order to get to that. You need to water the whole stack. And the really good news is that many examples where this has been done very successfully by incumbent banks. You don't have to set up a digital bank on the site to do it. And incumbent bank can do it and it can do it in a sensible period of time at a sensible level of investment. A lot of IBM s business across our consulting as well as our technology stack is very much trying to do that with our clients. So I am personally very bullish about what the industry >>yeah, taking friction out of the system, sometimes with a case of crypto taking the middle person out of the system. But I think you guys are savvy, you understand that, you know, you yeah, Jamie Diamond a couple years ago said he'd fire anybody doing crypto Janet Yellen and says, I don't really get a Warren Buffett, but I think it's technology people we look at and say, okay, wait a minute. This is an interesting Petri dish. There's, there's a fundamental technology here that has massive funding that is going to inform, you know, the future. And I think, you know, big bags are gonna lean in some of them and others, others won't john give you the last word here >>for sure, they're leaning in. Uh so to just to to think about uh something that lick it said a moment ago, the reason these startups were able to innovate fast was because they didn't have the legacy, They didn't have the spaghetti lying around. They were able to be relentlessly laser focused on building new, using the app ecosystem going straight to public and hybrid cloud and not worrying about everything that had been built for the last 50 years or so. The benefit for existing institutions, the incumbents is that they can use all of the same techniques and tools and hybrid cloud accelerators in terms And we're not just thinking about uh retail banking here. Your question around the industry that disruption from Bitcoin Blockchain technologies, new ways of processing securities. It is playing out in every single securities processing and capital markets organization right now. I'm working with several organizations right now exactly on how to build custody systems to take advantage of these non fungible digital assets. It's a hard, hard topic around which there's an incredible appetite to invest. An incredible appetite to innovate. And we know that the center of all these technologies are going to be cloud forward cloud ready. Ai infused data infused technologies >>Guys, I want to have you back. I wish I had more time. I want to talk about SPAC. So I want to talk about N. F. T. S. I want to talk about technology behind all this. You really great conversation. I really appreciate your time. I'm sorry. We got to go. >>Thank you. Thanks very much indeed for having us. It was a real pleasure. >>Really. Pleasure was mine. Thank you for watching everybody's day. Volonte for IBM think 2021. You're watching the Cube. Mhm.

(techno music) >> Announcer: Live, from New York, it's theCUBE. Covering Blockchain Week. Now, here's John Furrier. (techno music) >> Hello and welcome back. this is the exclusive coverage from theCUBE. I'm John Furrier, the co-host. We're here in New York City for special on the ground coverage. We go out where all the action is. It's happening here in New York City for Blockchain Week, New York, #BlockchainWeekNY Of course, Consensus 2018 and a variety of other events, happening all over the place. We got D-Central having a big boat event here, tons of events from Hollywood. We got New York money, we got Hollywood money, we got nerd money, it's money everywhere, and of course great deals are happening, and I'm here with two friends who have done a deal. Al Burgio is a CEO of DigitalBits co-founder, and Nithin who's the partner at Arcadia Crypto Ventures. You guys we've, you know, we're like family now, and you're hiding secrets from me. You did a deal. Al, what's going on here? Some news. >> Yeah, well first John, thanks for having us. We always love coming on the show, and really enjoy spending time with you and so forth. We, you know previous conversations that we've had, we were not out there fundraising. But really had the opportunity to meet a lot of great people Nithin and his firm being definitely one of them. And as a result of that, really building this, say, following, these relationships within the venture community, more specifically the crypto venture community. When we were ready to actually go out and do, let's say a first round, for us it happened very quickly, and it was a result of being able to leverage those relationships that we had. For me, it was kind of remarkable to see that support come and happen so quickly. Normally venture, it's just a process. Many many months. >> John: Long road. >> Then a month to close. >> John: Kiss all the frogs. >> Yeah, here it's like, you know, people can do due diligence on the fly, You have an opportunity with events like this. >> John: They're smart. >> They're smart, and and there's an opportunity to really foster these relationships in this really tight-knit community. And, you know, Nithin and his firm being obviously one of those. And so when we were ready to go out and do our first round, it happened quickly, and I'd like to think that in a lot of ways, it happened amongst friends. >> Well, you're being humble. We've been covering you, you've been on theCUBE earlier, when you just started the idea, so it's fun to watch you have this idea come to fruition, but you're in a, you're hitting a TAM a Total Available Market that's pretty large. And that's one of the secrets, to have a TAM. Aggressive bold move, we'll how it turns out for you, but you know, you got to have the moonshot, you're going after the loyalty market, which is completely run by the syndicate, what do you want to call it, the mafia of loyalty. >> Yeah, well, I would say that in some cases, those that are supporting us see that as really just one use case. Because we built this general-purpose blockchain, one of the use cases and one of the first use cases that were out there to support, happens to be the loyalty space. >> John: Big. And it's massive, highly fragmented but massive market, and we can solve a lot of liquidity issues with our technology. But then it goes beyond that. So it's a big market at the start, and then that can scale even greater from there. and I think that's part of what, I mean obviously, I'm not going to speak for Nithin. >> Nithin, let me weigh in here, pass the mic over. Nithin talk about the deal, why these guys? I know you met 'em, you like Al, and the feedback I've heard from other folks is he's a classic entrepreneur and that obviously, the entrepreneur gets the deal, but obviously you don't just give money 'cause you like someone. What about this deal is it that you guys like? You guys been there early, you got some great people on your team, what about this deal is it that you like? >> Sure, for us, Al met pretty much most of, almost all the criteria that we had, okay. That we had when we go, the thesis before we go fund someone. We don't get so many deals like that. Usually we get you know, they made 50% of the criteria, we might still put money because you can't get the 100%. So one thing, Al as a founder, he's experienced, he has done it multiple times before, he sold companies. Tech guy, which is very key for us. A tech project is very key. Okay, second thing, he's built the whole thing. It's not like he's raising the money to go and build it. He built it, now he's raising money to go for go to market strategies, which makes sense. He's shown it, and we tested it out. So like, we were completely blown away. He has a team behind 'im. He's built a team on every side, on the marketing side, on PR, events. And the idea, this is a general blockchain, but he's addressing a very specific issue. It is a real problem. Loyalty points, or rewards points, or gift points. Or whatever you call them. It is segmented, it's fragmented, and this is a chance. And there might be many people who are trying to solve this problem, but I think Al has the greatest possibility, or probability, of becoming the winner. >> You and I have talked on theCUBE before, both of you guys are CUBE alumni, I know you both, so I'll ask you, 'cause I'll just remind everyone, we've talked about token economics. One of the things that's coming up here at the Consensus 2018 event in New York, onstage certainly, and some fireworks in one of the sessions, is like if you're not decentralized, why the hell are you doing a decentralized model? So one of the criterias is, the fit for the business model, has to fit the notion of a decentralized world, with the ability of tokens becoming an integral part. What about this deal makes that happen? Obviously, fragmentation, is that still decentralized? So, how are you sorting through the nuances of saying, okay, is it decentralized the market for him, and this deal? Or does it fit? >> See no, decentralize is one thing okay, in here, more than decentralized, I would say there was the platform, so that all the companies can come in, use this common platform, release it, and as a user you're getting a chance to atomically swap it if you don't like something. Most of the reward points or loyalty points go waste. Maybe the companies want it to go waste, I don't know if that is. >> It's a natural burn at equilibrium going on anyway right? Perfect fit! >> So that is the only, that was the only doubt that we had. Would companies want this, because do they want their customers' loyalty points going waste rather than swapping it for something else? That was the only question that we had. Well, that's a question that will get answered in the market. But otherwise we hadn't seen something like this before. >> What's your take of the show so far? We saw each other in the hallway as we were getting set up for theCUBE, for two days of coverage, in New York, for Blockchain Week, New York, what's your take? Obviously pretty packed. >> Oh my god, it's so packed, and it's great, the show is going on. It is bringing a lot of money in, it's bringing all the investors in a new money, old money, traditional money, nerd money as you said. >> It smells like money! >> Everybody's coming in. See the beauty about those things coming in is, you're going to get a lot of people from other fields that are going to come into this field to solve problems. 'Cause earlier, if there is no money coming in, you're going to have very smart people, or very intelligent people stick with physics or whichever was their field. Now, they're going to look into the space because they're getting paid. See that brings more people who are intelligent, and who can solve problems. That is very key for me. >> Al, I want to ask you as an entrepreneur, one things you usually have to struggle with, as any entrepreneur, is navigating the 3-D chess you got to play, whether it's competitive strategy, market movement, certainly the market's moving and shifting very quickly, but you've got growth, big tailwind for you. What's your takeaway? Because now you have new things coming on. Every every day it seems like a new shoe is dropping. SEC's firing a warning on utility tokens, security tokens are still coming, are now coming online, but that looks very promising, and then ecosystems become super important. You guys just announced news this morning around the ecosystem. >> Yeah, tomorrow we have some. We had some news today, but we have more tomorrow. >> John: Well talk about the news. >> Yeah, so we have a multi-tiered go to market strategy. Obviously in the loyalty space, again I want to emphasize, it's just one use case, but it's a massive one. You have brands, the enterprise. And many of those those enterprises or brands may operate their loyalty program internally, in terms of like back offices systems, in some cases they're outsourcing the app to a SAS provider, some application provider, that's kind of hidden in the background. But let's just say like Hilton. I use Hilton, it's the location for the event, but Hilton, you have this user experience using this app, but maybe that technology, the SAS application that's powering that, is actually not Hilton technology. And so let's just say, there's 30 million people in the Hilton program and there may be 30 million of them on the Marriott, coexisting on some SAS application. And so that's another important category for us. SAS providers and so forth, supporting that industry. And then last but not least, today, whether enterprise or SAS company, many cases not touching their own hardware, right? They're using the cloud. >> So they're outsourcing the backend. >> Yeah, and so you have managed cloud providers. >> So what does it mean for the market? I don't understand, I'm not following you. >> Well, I guess what I'm saying is that there needs to be a common standard, across enterprise application provider, in global cloud community, cloud is the new hardware. >> True. So horizontally scaling loyalties as we were (mumbles). >> Exactly, so we have, we're basically securing partnerships on all three levels, to make sure that, if you want to use new technology, you want to ensure that it's widely supported, across a variety of partners you may want to work with if you're an enterprise. Whether, a software company, cloud company, and so forth. You want to be able to ensure that it can back up the truck. So we've basically signed partnerships at all of these tiers. You're going to see news in the morning. It's late here on a Monday evening. So tomorrow 9:00 a.m, major cloud company, one of the major cloud companies, and there's more to follow, making an announcement that they've joined our ecosystem partner program, and supporting this open source technology in a number of different ways. Which we're really excited about. >> You see ecosystem as a strategic move for you. >> Absolutely, this is, for us, this is, it's all about helping the consumer, but it's not about one consumer at a time for us. It's very much an enterprise play. It's one enterprise at a time. And with each enterprise we basically add to the ecosystem millions if not tens of millions of consumers instantly. >> Nithin I want to ask you a question, because what he just brought up is interesting to me as well. As a new thing, it's not new, but it's new to the crypto world, new to the analog world, that's not in the tech field. Tech business, we all know about global system integrators, we know about ecosystems, we know the value of developer programs, and community, all those things, check, check, check. But now those things are coming to new markets. People have never seen an ecosystem play before. So it's kind of, not new, it's new for some people, it's a competitive advantage opportunity. >> True, it is. See the whole thing is so new, that you can't even define it at this point. It's very hard to define. It's like, see, as an example I would say, none of us thought that when the iPhone came, there would be a 60 billion dollar taxi sharing economy that comes out of it, right? Same thing. Blockchain comes, we just don't know. And it's very hard to predict. >> New brands are going to emerge, I mean if you look at every major inflection point, I point to a couple that I think are relevant, TCP/IP was created, internetworking. >> Yep. >> That essentially went after proprietary networks, like IBM, Digital, Stacks, but it didn't replace, it wasn't a new functionality, it was interoperability. >> Yes. >> The web, HTTP, created a whole new functionality. >> Yep. >> Out of that emerged new brands. >> Yeah. >> So I think this wave's coming is a, new brands are going to emerge. >> Here, what's the brand, I don't know what's going to emerge. There it was interoperability. >> John: Well, new players. >> It's here, it's more, the collaboration. The collaboration is so huge, it's the scale is so huge, in the sense you can collaborate across the world. You're cutting those borders, there are no borders that can hold you. Even though interoperability happened in internet, There were the Googles, and the Facebook, that still had those borders. >> Well, don't put it, Cisco came out of that, 3Com, and those generations, but the hyper-scalers came out of the web. >> Yep. >> So I'm saying, well I'm saying, I want to get your reaction to, is I think that is such a small scale relative to blockchain and crypto because it's global, it's every industry, it's not just tech it's just like everything. So there's got to be new brands. Startups going to come out of the woodwork, that's my point. >> It's not yet time for the brands to come in. See that's the whole thing. So let's put it this way, the internet was there from 1978, if you really look at it, ARPANET or DARPA, those things were there. Email was there, but it was by 1997, or by the time we all came to know Google it was 2001. There is that gap between the brand forming, because it has to permeate first, more people have to use it, like what is the user-- >> Everything was was a bubble, but everything happened. I got food delivered to my house today, right? It happened, people were saying that's a crazy idea. >> It's now it's going on, right. So it's the timing and they know the time for it to permeate so here, how many people are using Bitcoin, and to do what? Most of them are just speculating right? There's very few real use case of remittance or speculative trading, that's what's happening. See that's what I said. The other use cases, it has to permeate. And that comes with more user adoption. And the user adoption initially is going to come from the speculation. >> I think it's a good sign, honestly I think it's a tell sign, because I remember when the web was new, I was in coming out right and growing in the industry. People were poo poo, oh that's just for kids. The big company's said, we wouldn't, who the hell is going to use the World Wide Web? Enter the search engines. >> I remember that like it was yesterday. I forget that I'm not a kid anymore, and I had the opportunity to be an entrepreneur during that era. One of the things I want to add is that, we had, I think what Nithin is really pointing out, it started with the infrastructure, you had network engineers and ISPs, you know, and email. But what was the enterprise application here? What was that consumer application, and that followed right? So it started infrastructure, then it evolved. Once we saw these applications, enterprises started to go crazy. Whether it was the Ubers of the world surfacing, or enterprises reinventing themselves, that's kind of the next wave. >> Well, this is why I think you're a good opportunity. 'Cause I remember licking stamps and sending out envelopes to get people to come to a seminar, held at a hotel. That's how you did it in the old world. The web replaced that with direct response. >> But there's some, there's something else-- >> The mainframe ran faster than the web. You're replacing an old loyalty, that's like licking the stamps. It's not about comparing what you're doing to something else. >> There's also something that helps, that we're not acknowledging, that really helped take internet from 1.0 to 2.0, it's Linux. You know I remember websites were insanely expensive. It was Windows servers, it was Sun Solaris, all of this crazy, expensive, server systems, that you needed to have, so the barrier of entry was extremely high. Then Linux came along, and you still needed to have your own data center space, and so still high, but the licensing fees kind of went away. >> And now with containers and Kubernetes-- >> Exactly. >> I made a bet I was going to get Kubernetes in a crypto show. >> Anybody from a bedroom could start a company, right? You could do it with your pajamas still on. >> John: Well orchestration's easier. >> Absolutely. So this has started, this really, revolution. Now you have blockchain and you start to introduce enterprise-grade blockchain technologies, it's the next wave, you know, it's not VoIP, it's value over IP. >> Okay, I'm going to ask both you guys a final question, to end this segment here at the block event. I know you guys want to get back, and I'm taking you anyway from the schmoozing and networking and the fun out there, deejay. Predictions, next year this time, what are we going to be? What's the we're going to look like? What's going to evolve? I mean we had a conversation with Richard, who partnered with you guys at Arcadia Crypto Partners, saying the trading things interesting, the liquidity has changed. What's your take? I want you guys both to take a minute to make a prediction. Next year, what's different, who's out, who's in, what's happening, is it growing? >> So I, you know, I would say this, surprisingly, CTOs, I love CTOs, but many CTOs, I would say that well above 50% of CTOs, still can't spell blockchain. Really, and what I mean by that, really understand the transformational power what this is, in terms of how this is really web 3.0. This is going to change so many industries, create so much value for consumers, help businesses and so forth, and we're going to cross that 50% mark. >> Next year. >> With CTOs-- >> 50% of what? Be clear on-- >> Basically, we're going, in terms of the net, that blockchain's going to capture, and really enterprises and not just enterprises, service providers and so forth-- >> 50% of the mind share or 50% of the projects? >> Yeah no, I'm talking it's, people aren't going to be saying, oh, blockchain, isn't that Bitcoin? They're going to really understand, and they're going to understand that impact. And over the course of the next 12 months, we're going to see that. And it starts, obviously in many cases, with the CIO, CTO of many companies. There are definitely a lot of CIOs and CTOs on the forefront of innovation that get it, but what I'm saying is that more than 50% don't. >> So you're saying-- They're very busy in doing what they're doing today, and it hasn't hit them yet. >> To recap, you're saying by next year, 50% of CTOs or CTO equivalents, will have a clear understanding of what blockchain is-- >> Absolutely. >> And what it can do. >> Absolutely. >> Nithin, your prediction, next year, this time, what's different, what's new, what's the prediction? >> So, one of the key things that I think is going to happen is there's going to be a lot more training, and knowledge that's going to spread out, so that a lot more people understand, what blockchain is and what bitcoin is. Even now, as Al said, he was telling about CTOs, if the CTOs are, that's the state, that they can't spell blockchain, imagine where the real common man is. You've got people like Jamie Dimon coming on TV and saying he doesn't like Bitcoin, but he likes blockchain. I'm like, what the heck is he saying? That he likes a database? >> He was selling it short 100% (chuckles) >> Yeah, he likes a database. And then you have Warren Buffett coming over there-- >> Rat poison. >> And then this is rat poison. And like my question is, does any of his funds buy gold? Do they buy gold? He was telling that this is only worth as much as the next buy buying at a higher price. >> What's Warren Buffett's best tech investment? >> I don't know, I think he bought Apple, he started buying Apple now, right? When it's reached a thousand bucks? Or it reached a trillion dollars or close to that, or 750 billion? >> The Apple buy was 2006. If you were there, then you were good. >> Yeah, but-- >> So, your prediction? >> Market wise I don't know, what's going to happen? I'm expecting this, the crypto, the utility token, or the crypto market, to be at least a six trillion dollar business. But it'll happen next year? Definitely not. But I've been proven wrong, like I was expecting it to happen by 2025, but then it went to 750 billion by December. Well, it's not too far. >> You did get the prediction right, in the Bahamas at POLYCON18, about the drop around the tax consequences of the-- >> Right. >> People slinging trades around, not knowing the tax consequences. >> Right, right. We don't know because, who knows? Because what is going on over there, is IRS is still saying it's a property. That's what the last (slurs) is. SEC is saying it is all equity, and the CFTC was saying it's commodity. So what tax do I pay? >> Okay, lightning round question, 'cause I want to, one more popped in my head. The global landscape, from an investor standpoint, the US, we know what's going on in the US, accredited, SEC is throwing, firing across, bullets across the bow of the boats, kind of holding people in line. What percentage of US big investors will be overseas by next year? >> Percentage of-- >> Having, meaning having deals being done, proxy deals being down outside the US, what percentage? >> It's still going to be low though. That is going to be low, because that, I don't think the US investor, means the large scale of those investors-- >> You don't think the big funds will co-locate outside the US? >> There will be some, but not enough. >> Put a number, a percentage. >> Percentage-wise I think it's still going to be less than 10%. >> Al, your prediction? >> In terms of investment? >> Investment, investors saying hey, I got money here, I want to put it out there. >> Outside of the United States? >> Share money, not move their whole fund, but do deals from a vehicle. >> Do deals outside. I think I agree with Nithin. >> Throwing darts at the board here. >> No, I'm going to clarify. There's definitely massive investment happening overseas. In some respects probably bigger than the United States. So that's not going away. If anything that's going to grow. But your question is, in terms of US entities, making abroad investments, overseas investments, versus just domestic? I think that trend doesn't necessarily change. You have the venture community, there are certain bigger venture funds that can have global operations 'cause at the end of the day, they need to have global operations, to be able to do that, and most venture funds aren't that massive, they don't have that infrastructure. So they're going to focus on their own backyard. So I don't necessarily think blockchain changes the venture mindset. It's just easier for them logistically to do due diligence on their own backyard and invest in those. >> Guys, always a pleasure. Great to see you. You guys are like friends with entourage here, great to get the update here at Blockchain Week. We get to Silicon Valley week, we'll connect up again. I'm John Furrier, here in New York, theCUBE's continuing coverage of crypto, decentralized applications, and blockchain of course, we're all over it. You'll see us all over, all of the web, all the shows. Thanks for watching. (techno music)

>> Announcer: Live from Las Vegas, it's The Cube covering IBM Think 2018. Brought to you by IBM. >> Hello and welcome to The Cube here in IBM Think 2018, I'm John Furrier. It's The Cube, our flagship program, we go out to the events and extract the signal in the noise. We're the number one live event coverage. We're here with The Cube with IBM Think 2018. Our next guess is Jesse Lund who's the vice president of IBM Blockchain. He's in the financial services side. Into blockchain, into crypto, into token economics, seeing the future, how money flows, Jesse great to have you on The Cube, thanks for joining me. >> Yeah, thanks for having me. It's great to be here. >> We were talking before on camera about blockchain, and we love blockchain, IBM certainly put it out there as part of the innovation sandwich. Blockchain, data, AI, kind of making that innovation, but it's really what it enables, and I want to talk to you about. You are involved in payments. We've been saying on The Cube that the killer app is money in this market. >> I agree, yeah. >> You agree, and you talk about it. This is a new market, so a stack is kind of developing. You got blockchain, then you got crypto which as protocols and you got infrastructure, then you got decentralized applications which you could call ICOs up top, certainly a little bit scammy and bubbly, but that's as arbitraging and optimizing the capital markets, you could argue that. But so this is a really big dynamic. Your thoughts on this trend. >> Sure, well so I joined IBM from 18 years at Wells Fargo. I spent really the majority of my career in financial services and when blockchain came along, I sort of immediately saw the impact, the potential for, I'll call it positive disruption, disruption in the positive sense. Transformational paradigm shift kind of stuff in terms of how money moves around the world and how we classify assets and how we transfer ownership of assets, I mean that's just, it's, the possibilities are limitless. And you're right, IBM is the place where I think blockchain has started as a mainstream focus for enterprises around building private networks, but that's really just the beginning. What we talked about earlier was it gets really interesting when data and money are connected together and they move at high velocities together. >> Let's get into that. I mean first let's just address the IBM thing. They got to put a stake in the ground, blockchain, it's a safe harbor to say supply chain stuff because that's their business, they've been building technologies for supply chains for companies, that's what enterprises do, that's IBM. But the game is where the money is and that's where the businesses are going to be transformed. We're talking about disrupting structural industries. This is where the money power comes in. Money's flowing, I mean if you want to move money from China, go to bitcoin. If you want to move it from anywhere, this is what's happening. >> Yeah, so think about bitcoin. It's kind of what started it all. It's a little bit of a bad word in banks and in regulated financial circles, but let's face it, the only real mainstream blockchain application today is still bitcoin, but you know we're only three years in to the blockchain industry, right? I mean think about when we were three years in to the internet industry, where we were still talking about which browser is going to win and then it went on to which application server's going to win, and it wasn't til a decade later we were really focused on what are the applications, the killer apps that are enabled by an interconnected world and that's exactly what's happening now. Other industries have already been completely disrupted. Look at retail, it's just, it's banking's turn. It's financial services turn. >> One of the founders, the co-founders of Ethereum, Anthony Diiorio, who I interviewed a couple weeks ago at the Bahamas, he said "While it is the new browser," to your points, browser wars, if you think about the payment, wallets are now becoming part of the mechanism for money transfer. If you don't have a wallet, if you want to send me some Ripple, you want to send me some Ethereum, I need a wallet. This is a no brainer, right? I mean if you want to leverage any money, that's one thing. The second thing I want to get your thoughts on besides the wallets, the fiat conversion, right? These are two threshold conversations that are going on. Your thoughts, wallet and conversion to fiat. >> Well I mean I think wallets are really important because this whole thing is based on key management, this whole concept is based on cryptography. It only works on a public, private key notion and you got to keep that private key private, but you got to keep it, right? You got to keep it safe and you got to keep it, it's like your wallet. You've got a wallet, you've got cash in your wallet, you lose your wallet, you lose your cash. It's the same kind of analogy, so wallets are really important and you're going to want to turn to providers who have made their business in encryption, who have made their business in security, I mean-- >> And cold storage, old school is kind of coming back, people are taking their keys and they're spreading them across multiple lock boxes, multiple states. People are getting broken into their house or their PCs are getting broken into. >> Right, yeah. >> I mean security, going old school. >> And why not? I mean, it works. >> Because if someone knows you got 100 million dollars in your house, they're going to get it if you don't lock it. Okay back to the reality of the money transfer. We were talking before you came on, I've been saying on The Cube, token economics really is where the action is, at least in my opinion. I want to get your thoughts because really the business model innovation is on the table because whoever can innovate the business model has more of a chance to disrupt an existing industry. This is where tokenization becomes part of the money piece of it, so how do you convert that value into capture? Is that token? Is that where you see it? What's your thoughts? >> Yeah so well first of all, I mean if you think of tokens as another form of currency, and by the way, I think we have to be careful about what we say, cryptocurrencies, the industry talks about thousands of cryptocurrencies out there where there's really not. There's maybe dozens and they're all derivatives of just a few models, bitcoin being one prominent model and there's a lot of offshoots off of that. But the rest of what we call cryptocurrencies are really tokens that represent primarily securities, which is why the SCC's getting involved. But the really interesting thing about this is these tokens move at high velocity because they're digital and so, but these digital things represent a claim on real world value, and that's where it becomes really interesting. IBM's built and launched as kind of its first foray into the solution space of financial services where IBM is an investor in this technology, a cross-border payment solution that inherently re-engineers this whole correspondent banking, this international wire process, and where FX, foreign exchange, becomes a real time capability in a series of operations that execute as an atomic unit. That's novel today. When you want to send money from here to somewhere else in the world, you go to your bank, your bank sends an instruction to another bank, and they respond and say "Yeah you know it's okay "because the person you're sending it to is not a terrorist, "is not on a some sort of sanctions list," great, now the bank has to actually go settle and it settles through another network, so the novelty is why can't the messages and the data and the value itself, the digital asset, why can't they exist and move together at the same time? That's what we've really built. But as we've built and deployed that and are getting banks and non-bank financial institutions to sign up for it because the cost of moving money goes way, way, way down and the user experience goes way, way, way up because instead of taking two or three days and you don't know how much it's going to cost until it gets there, it takes 10 or 15 seconds and you know before you even press send how much it's going to cost to get there. It all boils down to this notion of digital assets, that's what it all comes down to, is the way to settle value with finality in real time is for one party to exchange a digital asset with another party. Today, initially, the only form of negotiable digital assets are cryptocurrencies which has banks a little scared, but as we start talking through what we've learned in the enterprise blockchain space, we realized that we can tokenize all sorts of other asset classes, commodities, securities, and even fiat currencies where central banks or commercial banks can issue a token that represents a claim on deposits held at some financial institution and that's, that's a-- >> So you see tokenization as a big deal. >> It's a huge deal. I mean it's everything, I think it's-- >> It's the economic value of the ... >> I think it's the tipping point for blockchain. The irony is it goes back to bitcoin kind of started this all. You know we said "Well we like the idea of the technology "underneath bitcoin, but we want to focus on blockchain," I mean forget for a second blockchain is actually terminology that's invented by the bitcoin primer that was published nine years ago by Satoshi, so yeah it's their, whoever they are, it's their terminology, and it's kind of coming back full circle where you're seeing the convergence of all of these cool optimization capabilities, you know, immutability and workflow optimization, supply chain management-- >> And there's a lot of work to be done on performance and whatnot, but the concept of decentralized immutability data is fine, store the data. Now there's, it's got to get fixed, but I think that what that enables and I think you agree that tokenization's critical. So for a company that wants to token their business or raise money via tokens or get involved in this new economic value creation, innovation trend, how do they do it? And by the way are there tools available? You mentioned banking, and the banking business got to where it was because you had to build the picks and shovels to make it happen, you had to do a swift and you had to have this stuff go on. Now developers don't necessarily have the tools, so there's a picks and shovel market and there's also the real innovation. >> Yeah and that's I think the value contribution that IBM brings. I mean we bring 107 years of credibility in developing and operating mission critical, transactional, and financial systems, and I could do just an ad for a second, that's what the IBM blockchain platform is all about and as the industry evolves, as our platform offering evolves, what we want to be able to bring to small business, medium sized businesses, large businesses is the ability to develop solutions using our toolkit. >> So Jesse I want you to put your financial hat on and at the same time put your payments hat on and your token economics hat on, three hats. Hey I want to tokenize my business, I really want to get in. So we have an innovative team, we're seeing new business model formulas and logic that we want to disrupt, what do I do? I got an existing, growing business that I know has assets and I'm not a startup, but I'm not trying to pivot like Kodak, so I'm not dying, throwing the hail Mary, or I'm not a startup and got to build a whole product. I'm a real business, I'm growing, and I see tokenization as a way for me to be successful. What do I do? What's your advice? >> Well I think you look at it from all potential angles. If you look at any business, they're always looking to improve the bottom line by shrinking costs, right? They're also looking to improve the bottom line by increasing the top side, increasing revenue, and I think as a mid-sized business or a growing business, you have the opportunity to use tokenization, to use blockchain and digital currencies to do both of those things. You have the ability to accelerate the adoption of whatever your good or service or product is by if it's tokenizable, and most things are whether it's a utility, access to some service you provide, or whether it's an asset, some widget that you sell, you enable primary and secondary markets by creating a digital asset that can be bought by anybody anywhere around the world. I mean that's one way to do it and so I think getting people to realize the potential there-- >> You got programs, they call up IBM or get some developers, make it happen. Okay so killer apps money, that's going to be a 30 plus year trend and certainly this highlights that, but the other thing that's happened, it's coming out of either, in the open source community as well as cloud, the notion of marketplaces and communities so marketplaces and communities become a very important role in the token economics piece. What's your thoughts and opinion on that narrative? >> Well again for me, it goes back, I always go back to digital assets. We in the U.S. and around the world, when we start talking about financial instruments, we classify assets differently, but when it comes to an ecosystem and a community that becomes inherently peer to peer and inherently democratic, it's about an asset class agnostic distributed exchange where I can sell you my security token in exchange for your fiat token, or I can sell you my commodity token or utility token for the same. I think the ecosystem gets built automatically by way of new assets coming to a common network or interoperable set of networks, and that's what's missing today by the way, same in capital markets, right? The holy grail in the capital market space today is how do I shrink the time between trade and settlement? There's this whole t plus three and we're spending billions of dollars to go to t plus two, we gain a day, so the trade day and the settlement date are two days apart. I mean you just think about kind of the absurdity of that. If you just say well if the security that you're buying is a digital asset, and the money that you're buying it with is a digital asset, and they both exist on either the same network or an interoperable network, the transfer of ownership and the transfer of value happen together as two operations or a single operation in one atomic transaction, you've solved the problem. >> Speed of light can make it happen. >> Right, delivery versus payment, that's what the capital markets industry is trying to optimize for, right? Because it improves the balance sheet of all sorts of finance-- >> You had a phrase you mentioned before we came on camera, something about money, the future of money. What was that phrase? >> Programmable money? >> Programmable money. >> Yeah, right, right. >> I want you to take a minute to explain. Love this concept, Miko Matsumura, thought leader friend of ours, has a vision called open source money which is more of an open source, this hey money's flowing, it's open, it's out there, but you have a different perspective which I like too which is programmable money. What does that mean? Describe the concept and take a minute to unpack that. >> The concept of programmable money comes out of a paper that I jointly authored with Jed McCaleb who is the founder of Stellar and was the co-founder of Ripple and is a really smart guy so I feel like I have a small brain when I'm around him but we really wrote it in the context of central banking and the ultimate issuer of an asset because central banks are the issuers of currencies. Right now the primary dealers, if you will, for currencies are commercial banks and so that whole commercial, central, fractional reserve banking model has been replicated from the western world to everywhere else in the world and you can't get access to central bank money as they say. But if the central banks were to issue digital currencies which is essentially a token of fiat currency, so you own the token, you own a claim of fiat deposits held on the balance sheet of the central bank, now you have the ability to move that around. You can actually program the movement of money because it's a digital thing, it's a digital asset that's as good as cash and if you are working with a central bank who's issuing it, not only is it electronic money, it's actually legal tender because if the central bank issues it, it becomes legal tender which means everybody who accepts it has to accept that form of payment. That's pretty profound if we can get to that point and we're working with-- >> And software's a big driver in that because you need software to manage digital assets. >> Oh yeah, absolutely. >> The software's driving it. Bill Tai is an investor, I interviewed him, and he had an interesting topic and I made a highlight of it. He said after World War II, we talked about the oil situation when the dala was pegged to OPEC, that was essentially tokenizing oil. Then okay that's good, so that was their ICO. >> Right, right, yeah, essentially. >> That's what you're saying, you can actually put fiat to the digital token and take advantage of the efficiencies of digital. >> Right, yeah, okay-- >> Taking down all the structural inefficiencies that were built prior to digital. Is that ... >> It is. You fast forward a little bit and think where that takes us. It's no secret that the U.S. dollar is the trade currency of the world, and I want to be careful what I say because, you know, I'm an American patriot here but there are other large G20 nations who wouldn't mind dethroning the U.S. dollar as the trade currency of the world and so as you see central banks starting to get involved in the issuance of digital currency, you create a situation where all of a sudden well maybe oil could be traded heresy in other currencies besides the U.S. dollar which is all it's traded in today. Goes back to your ecosystem question. >> This is a great point. We could riff on this stuff, let's riff on this. The UK just signed a deal with Coinbase, this is a major signal. >> Sign, yeah. >> You got a legitimate country saying we're going to give a license to Coinbase, now they have Brexit to deal with so they're looking at it as an opportunity. Outside of the UK coming in and doing that deal with Coinbase, it's on the web, look up Coinbase in the UK, you'll see the deal. You have other companies trying to jockey for who's going to be the Wall Street for crypto? Meaning I want to convert crypto to fiat, where do I go? Do I go to Estonia? Do I go to Dubai? Bahrain? Armenia? China? There is no place yet. Your thoughts, what's going to happen? What shoe will drop first? Is there a domino effect? >> Yeah, well there's a couple things as it relates to the UK and kind of the extension to Coinbase of access to the national payment system which is really what enables them to then convert fiat to crypto and back. That's pretty interesting. Going back to the programmable money thing, though. If you have a central bank issued token, you've essentially extended the real time gross settlement system which has been only accessible by commercial banks to anybody that holds that token, right? It's a trend, I think the UK sees it coming, I think the Federal Reserve sees it coming. It's going to happen. >> Is it winner take all or winner take most? >> I think it creates a much more purely efficient market. It's a democratic system so I don't think there is going to be a new Wall Street, I think it's going to be-- >> John: Decentralized. >> Exactly, I mean that's the beauty of it. It's scary though for establishments like Wall Street to look at this and it-- >> I mean are the banks scared? You're dealing with the banks right now. >> Yes, they're scared. I mean I've actually read a recent article that Bank of America, the headline was "Bank of America's afraid of digital currency." You've seen Jamie Dimon who came out with a kind of a hard stance against bitcoin and has since kind of backed away from that. >> Of course you probably bought in when it dropped and now it's back up again. >> Well I think part of the bank was actually facilitating their clients and trading bitcoin so that might've been it. There's a natural reaction to it, especially if you're part of the mainstream establishment. >> There's no proof of that, I'm just saying we're posting on Reddit and whatnot. >> No we're just joking around. Jamie's a, he's a good guy, right? >> Can I get your thoughts on digital nations? We've been talking about this. Just a few years ago, smart cities, IoT was kind of the narrative, oh be a smart city, control the traffic lights, and instrument the physical goods and services. Now with crypto and blockchain front and center conversation is digital nations with sovereignty around their cash. This is kind of your point earlier. How are you seeing that? What's your view? Are you seeing that trend? Are there dots connecting for you? Because again, people are jockeying for a position on the global digital backbone to be a major part of the money flow, the fiat conversion, what is the goods and services? Who's going to clear the values? All digital, it's a perfect storm. >> Well I think there's always going to be the need for trusted entities to be the issuers of these assets because it all comes down to trust at the end of the day. The thing with bitcoin is that it's purely autonomous and people are a little bit skeptical of it because they're like, "Well who's controlling "the monetary policy?" and the answer is the market, you know, the users of the network are controlling it and that's why you see such volatility, right? Because the traders love it, they can go in and trade the up trends and the down trends. As long as there's volatility, traders are making money. I think there is still going to be a place for central authorities to add value, but that's going to be the pressure, is for them to prove that they're adding value not, you know, bureaucracy masquerading as process. >> I was reading an article that Telegram, which is doing a huge ICO, just got shut down by the Russian government, they went to turn over their keys, their private keys of their users. Say goodbye to the-- >> Jesse: I didn't read that, that's crazy. >> It's really crazy, so that's going to put a damper on their ICO but regulatory and then government issues around countries becomes a big deal. In your experience as Wells Fargo, at a bank, looking forward in the new digital world, is it one of those situations where path of least resistance, the countries that go more friendly get around that in a sovereignty where you domicile, where you start your company, where you do your banking. I mean I could start a company in Gibraltar and bank in Switzerland. >> Well transparency is part of the benefit or the downside of this, right? I think there may be advantages that pop up but I think they will equalize over time. I've been around the world now for IBM talking to 20 plus central banks, and I had a really interesting conversation with one of them recently in Asia. We're in the room with deputy director level people who are responsible for things like the NA money laundering policy and the economics and monetary policy and things like that and one person said, "You know, we're really torn "between two equally unacceptable decisions. "One is to ignore cryptocurrencies altogether, "and the other end of the spectrum is "to make them illegal, to ban them." I thought it was poignant that they see those as unacceptable, they have to do something in the middle. >> Do they weigh or ban? I mean look, the banning's happening. >> But okay so you saw that Trump used the executive order to prevent Americans from using or trading in the Venezuelan crypto that was issued on Ethereum, right? I saw that Venezuelan thing as a publicity stunt more than anything, an active of global defiance. So there's precedent now for, and the Russia thing with Telegram-- >> The United States of America has to step up its game because look at it, we have a lot of, I mean I remember back in the crypto days when I was just getting into the business, late 80s, early 90s, you couldn't even do it in the U.S., you go to Canada, that's why Canada's got a lot of innovation up there. We're risking our country, and I had one guy tell me in Puerto Rico, he's from South Africa, and he shouldn't be throwing any stones either but his point was, he says, "America's becoming Europe. "There's a shrinking middle class "while other emerging markets have a growing middle class," so the global impact of blockchain, cryptocurrency, and these applications are significant and have to be factored into policy decision making for governments. The U.S. can't just think about itself anymore in a vacuum. >> Right, not anymore. >> Because there's implications otherwise the U.S. will turn into Europe, regulated, all these rules, byzantine stuff. It's a real problem. Your thoughts on that. >> It is. It's cliche, but we live and work in a global economy. The flow of information globally in real time has been around now for a while and it's about time it came to money. The internet of money is a term I've heard. It's just, it's unavoidable. >> Jesse Lund here inside The Cube. Great guest, great conversation. >> Yeah, thanks. >> How do people get ahold of you on IBM's, you mentioned you got some great stuff going on, you've written a paper, you've got a lot of content, where does someone go to discover some of the stuff that you're working on they could get involved with you guys? >> Yeah well I mean the best place to go is IBM.com/blockchain, that'll tell you a lot about what we're doing and the different industry-- >> And the programmable money paper you wrote, is that there? >> It's out there as well, there's a link to that. >> On IBM.com? >> You can get me directly on LinkedIn, I try to be pretty responsive with that because I really enjoy the dialogue. This is a revolution of the peoples, man, it's all over the world, so it's great, it's great to be a part of it. >> And people tokenizing their business, there's real opportunities to change the game to bring consensus, data driven, new kind of supply chain whatever to the markets you're in, great opp-, and you need banking. >> Yeah of course. >> You need to have money. Money, marketplaces, and communities, that's my mantra. >> I subscribe to it. >> Thanks for coming on. >> Thank you, thanks for having me. >> Jesse Lund. I'm John Furrier here at IBM Think 2018. Cube coverage continues after this short break. (upbeat music)

>> Narrator: Live from Orlando, Florida, it's theCube covering PentahoWorld 2017 brought to you by Hitachi Ventara. >> Welcome back to theCube's live coverage of PentahoWorld brought to you by Hitachi Ventara. My name is Rebecca Knight, I'm your host along with my co-host, Dave Vellante. We're joined by Michael Weiss, he is the senior manager at NASDAQ, and Shere Saidon, who is analytics manager at NASDAQ. Thanks so much for coming back to theCube, I should say, you're Cube veterans now. >> We are, at least I am. This is his first year, this is his first time at PentahoWorld. So, excited to bring him along. >> Okay so you're a newbie but you're a veteran so. (laughing) >> Great. So, tell us a little bit about what has changed since the last time you came on, which was 2015, back then? >> So the biggest thing that's happened in the past 18 months is we've launched seven new exchanges. Integrated seven new exchanges. We bought the ISE, the International Stock Exchange, which is three options markets. We just completed that integration in August. We've also bought the Canadian, CHI-X, the Canadian Exchange, which also had three equities markets, so we integrated them, and we went live with a dark pool offering for Goldman back in June. So now we operate a dark pool for Goldman Sachs, and we're looking to kind of expand that offering at this point. >> So you're just getting bigger and bigger. So tell our viewers a little bit how Pentaho fits into this. >> So Pentaho is the engine that kind of does all our analytics behind the scenes at post trade, right. So we do a lot of traditionally TL, where we're doing batch processing. In the back-end we're doing a little bit more with the Hadoop ecosystem leveraging things like EMR, Spark, Presto, that type of stuff, And Pentaho kind of helps blend that stuff together a little bit. We use it for reporting, we do some of the BA, we're actually now looking to have the data Pentaho generates plug in a little bit of Tableau. So, we're looking to expand it and really leverage that data in other ways at this point. Even doing some things more externally, doing more data offerings via Pentaho externally. >> So I got to do a NASDAQ 101 for my 13 year-old. Came up to me the other day and said, "Daddy, what's the NASDAQ index and how does it work?" Well, give us a 20 second answer. >> Michael: On the NASDAQ index? >> Yeah, what's the NASDAQ Index and how does it work? >> Probably the wrong person to answer that one but, the index is generally just a blend of various stocks. So the S&P 500 is a blend of different stocks, much like that the cues, are NASDAQ's equivalent of the S&P, right, so, we use a different algorithm to determine the companies that make up that blend, but it's an index just like at the S&P. >> They're weighted by market cap- >> Michael: Right, yeah. >> And that determines the number at the end- >> Michael: Correct. >> And it goes up and down based on what the stock's index. >> Right, and that's how most people know NASDAQ, right. They see the S&P went up by 5 points, The Dow went down by 3 and the NASDAQ went up by a point, right. But most people don't realize that NASDAQ also operates 27 exchanges worldwide, I think it is now. So, probably a little bit more, maybe closer to 32, but... >> So you mentioned that you're doing a dark pool for Goldman >> Michael: Yes. >> So that's interesting. We were talking off camera about HFT and kind of the old days, and dark pools were criticized at the time. Now Goldman was one of the ones shown to be honest and above board, but what does that mean the dark pool for your business and how does that all tie in? >> Michael: So, dark pools are isolated markets, right, so they don't necessarily interact with the NASDAQ exchange themselves, it's all done within the pool. You interact with only people trading on that pool. What NASDAQ has done is we took our technology and we now host it for Goldman so, we have I-NETs our trading system, so we gave them I-NET, we built all the surrounding solutions, how you manage symbols, how you manage membership. Even the data, we curate their data in the AWS. We do some Pentaho transformations for them. We do some analytics for them. And that's actually going to start expanding, but yeah, we've provided them an entire solution, so now they don't have to manage their own dark pool. And now we're going to look to expand that to other potential clients. >> Dave: So that's NASDAQ as a technology >> Yes. >> Dave: Provider. Very interesting. So I was saying, earlier, the Hong Kong Stock Exchange is basically closing the facility where they house humans, again another example of machines replacing humans. So the joining, well NASDAQ, kind of, but NYSE, London Stock Exchange, Singapore, now Hong Kong... Essentially, electronic trading. So, brings us to the sort of technology underpinnings of NASDAQ. Shere, maybe you can talk a little bit about your role, and paint a picture of the technology infrastructure. >> Yeah so I focus primarily on the financial side of corporate finance. So we leverage Pentaho to do a lot of data integration, allow us to really answer our business questions. So, previously it would take days to put basic reporting together, now you've got it all automated, or we're working towards getting it mostly automated, and it just answer the questions that we need. And no longer use our gut to drive decisions, we're using hard data. And so that's helped us instrumentally in a lot of different places. >> Dave: So, talk more about the data pipeline, where the data's coming from, how you're blending it, and how you're bringing it through the pipeline and operationalizing it. >> Yeah, so we've got a lot of different billing systems, so we integrate companies, and historically we've let them keep their billings systems. So just kind of bring it all together into our core ERP, seeing how quantities...and just getting the data, and just figuring out on the basic side, how much do we make from a certain customer? What are we making from them? What happens in different scenarios if they consolidate, or if they default? And some of the pipeline there is just blending it all together, normalizing the data, making sure it's all in the same format, and then putting it in a format where our executives or business managers can actually make decisions off of it. >> Well you're talking about the decision making process, and you said it's no longer gut, you're using data to drive your decisions, to know which direction is the right direction. How big a change is that, just culturally speaking? How has that changed? >> Yeah, it's huge, at least on our side, it's making us a long more confident in the decisions we're making. We're no longer going in saying, hey this is probably how we should do it. No, the numbers are showing us that this is going to pay off, and we stick to it and look at the hard facts, rather than what do we think is going to happen? >> So, talk a little bit about what you guys are seeing here, and you're doing a lot of speaking here, we were joking earlier, you're kind of losing your voice. You're telling your story, what kind of reactions you getting? Share with us the behind the scenes at the conference. >> I think at this conference you're seeing a lot of people kind of fall in line with similar ideas that we're trying to get to. Taking advantage more instead of your traditional MPPs, or your traditional relational databases, moving more towards this Hadoop ecosystem. Leveraging Spark, Presto, Flume, all these various new technologies that have emerged over the past two to five years, and are now more viable than ever. They're easier to scale, if you look at your traditional MPPs, like we're a big Redshift user, but every time you scale it there's a cost with that, and we don't necessarily need to maintain all that data all the time, so something in the Hadoop ecosystem now lets us maintain that data without all the unnecessary cost. I see a lot of more of that than I did two years ago, a lot more people are following that trend. I think the other interesting trend I've seen this week is this idea of becoming more cloud agnostic. Where do you operate, and how do you store your data should be irrelevant to the data processing, and I think it's going to be a tough nut to crack for Pentaho, or any vendor. But if you can figure out a way to either do some type of cloud parity, where you have support across all your services, but you don't have to know which service you deploy to when you design your pipelines, I think that's going to be huge. I think we're a little ways from that, but that's been a common theme this week as well, both private and your big three cloud providers right now, your Googles, your Azures, and your AWS. >> So when I asked you said cloud agnostic, that's great, good vision and aspiration. The follow up would be, am I correct that you don't see it as data location agnostic, right, you want to bring the cloud model to your data, versus try to force your data into a cloud? Or not necessarily? >> A lot of it I think is being driven by not wanting to be vendor locked in, so they want to have the ability to, and I think this is easier said than done, the ability to move your data to different cloud providers based on pricing or offerings, right, and right now going from AWS to Google to Azure would be a very painful process. So you move petabytes of data across, it's not cost efficient and all the savings you want to realize by moving to maybe a Google in the future, are not going to be realized cause of all the effort it's going to take to get there. >> Dave: We had CERN on earlier, and they were working on that problem... >> Yeah, it's not a trivial problem to solve, but if you can crack that, and you can then say hey I wanna...even if I have a service offering, Like our operating a dark pool for Goldman. We also have a market tech side, where we sell our trading platform and various solutions to other exchanges worldwide. If we can come up with a way to be able to deploy to any cloud provider, even on an on-prem cloud, without having to do a bunch of customizations each time, that would be huge, it would revolutionize what we do. We're, as our own company, starting to look at that, and talking with Pentaho, they're also... are going to eye that as a potential way to go, with abstractions and things like that, but it's going to take some time. >> We're you guys here yesterday for the keynotes? >> Michael: Saw some of the keynotes, yes. >> The big messaging, like every conference that you go to, is be the disruptor, or you're going to get disrupted. We talked earlier off camera... Trading volumes are down, so the way you traditionally did business is changing, and made money is changing. >> Michael: Right. >> We talked earlier about you guys becoming a technology provider, I wonder if you could help us understand that a little bit, from the standpoint of NASDAQ strategy, when we hear your CEOs talk, real visionary, technology driven transformations. >> Yeah, I think Adena's coming in is definitely looking at that as a trend, right? Trading volumes are down, they've been going down, they've kind of stabilized a little bit, and we're stable able to make money in that space, but the problem is there's not a ton of growth. We acquire the ISE, we acquire the CHI-X, we're buying market share at that point. So you increase revenue, but you also increase overhead in that way. And you can only do so many major acquisitions at a time, you can only do how many one billion dollar acquisitions a year before you have to call it a day. And we can look at more strategic, smaller acquisitions for exchanges, but that doesn't necessarily bring you the transformation, the net revenue you're looking for. So what Adena has started to look at is, how do we transform to more of a technology company? We're really good at operating exchanges, how do we take that, and we already have market tech doing it, but how do we make that more scalable, not just to the financial sector, but to your other exchanges, your Ubers or your StubHubs of the world? How do you become a service provider, or a platform as a service for these other companies, to come in and use your tech? So we're looking at how do we rewrite our entire platform, from trading to the back-end, to do things like: Can we deploy to any cloud provider? Can we deploy on-prem? Can we be a little bit more technology agnostic so to speak, and offer these as services, and offer a bunch of microservices, so that if a startup comes up and wants to set up an exchange, they can do it, they can leverage our services, then build whatever other applications they want on top of it. I think that's a transformation we need to go through, I think it's good vision, and I'm looking forward to executing it. It's going to be a couple years before we see the fruits of that labor, but Adena's really doing a great job of coming in, and really driving that innovation, and Brad Peterson as well, our CIO, has really been pushing this vision, and I think it's really going to work out for us, assuming we can execute. >> Well you know what's interesting about that, if I may, is financial services is usually so secretive about their technology, right? But your business, you guys are becoming a technology provider, so you got to face the world and start marketing your capabilities now, and opening about that. It's sort of an interesting change. >> I think you'll see that starting to become more of a thing over the next year or two, as we start actually looking to build out the platform and figure it out. We do market on the market tech side, I mean it's not a small business, but we're more strategic about who we market to, cause we're still targeting your financial exchanges, more internationally than in the U.S., but there's only so many of them, again you have to start looking at rebranding, rebuilding, and rethinking how we think about exchanges in general, and not thinking of them as just a financial thing. >> Well that's what I wanted to get into, because you're talking about this rebranding, and this rebuilding, this transformation, to the backdrop within an industry that is changing rapidly, and we have sort of the threat of legislative reform, perhaps some administrative reforms coming down all the time, so how do you manage that? I mean, those are a lot of pressures there, are you constantly trying to push the envelope right up until any changes take place? Or what would you say Shere and Michael? >> Probably again not the right person to ask about this, but we're definitely trying to stay on top of the cutting edge in innovation and the technologies out there that, whether it be Blockchain, or different types of technologies. I mean we're definitely trying to make sure we're investing in them, while maintaining our core businesses. >> Right, it's trying to find that balance right now of when to make the next step in the technology food chain, and when to balance that with regulatory obligations. And if you look at it, going back to the idea of being able to launch marketplaces, I think what you're ending up seeing over the coming years is your Ubers, your StubHubs, I think they're going to become more regulated at some level. And we're good at operating more regulated markets, so I think that's where we can kind of come in and play a role, and help wade through those regulations a little bit more, and help build software to adhere to those regulations. >> Since you brought up Blockchain, Jamie Dimon craps all over Blockchain, or you know, Bitcoin, and then clarifies his remarks, saying look, technology underneath is here to stay. Thoughts on Blockchain? Obviously Financial Services is looking at it very closely, doing some really advanced stuff, what can you tell us? >> Yeah, I think there's no argument that it's definitely an innovation and a disruptive technology. I think that it's definitely in it's early stages across the board, so we're investing in it where we can, and trying to keep a close eye on it. We think that there's a lot of potential in a lot of different applications. >> As the NASDAQ transforms its business, how does that effect the sort of back-end analytics activity and infrastructure? >> The data is just growing, that's like the biggest challenge we have now. Data that used to be done in Excel, it's just no longer an option, so now in order to get the insights that we used to get just from having a couple people doing Excel transformations, you need to now invest in the infrastructure in the back-end, and so there's a lot that needs to go into building out an infrastructure to be able to ingest the data, and then also having the UI on the front-end, so that the business can actually view it the way they want. >> So skills wise, how's that affecting who you guys are hiring and training? And how's that transformation going? >> Michael: I'll let you go first. >> I think there's definitely, data analytics is a hot field. It's very new, there's definitely a big skills gap in administrative work and in the analytics side. Usually you have people could perform analytical functions just by being administrative or operational, and now it's really, we're investing in analysts, and making sure that we have the right people in place to be able to do these transformations, or pull the data and get the answers that we need from them. >> I mean from the tech side, I think what you're seeing is where we traditionally would just plug a developer in there, whether a Java developer, or an ETL developer, I think what you're seeing now is we're looking to bring more of a business minded data analyst to the tech side, right? So we're looking to bring a data engineer, so to speak, more to the tech side. So we're not looking to hire a traditional four year Computer Science degree, or Software Engineering degree, you're looking for a different breed of person, cause quite honestly because you're traditional Java dev. or C++ developer, they're not skilled or geared towards data. And when we've tried to plug that paradigm in, it just doesn't really work, so we're looking now to hiring more of an analyst, but someone who's a little bit more techie as well. They still need to have those skills to do some level of coding, and what we are finding is that skill gap is still very much... There's a gap there. There's a huge gap. And I think it's closing, but- >> And as you have to fund those for the new areas, I presume, like many companies in your business, you're trying to move away from the sort of undifferentiated low-level infrastructure deployment hassles, and the IT labor costs there, especially as we move to the cloud, presumably, so is that shift palpable? I mean, can you see that going on? >> Yeah, I think we made a lot of progress over the past couple years in doing that. We do more one button deployments, where the operation cost is a lot lower, a lot more automation around alerting, around when things go wrong, so there's not necessarily a human being sitting there watching a computer. We've invested a lot in that area to kind of reduce the costs, and make the experience better for our end user. And even from a development side, the cost of a new application is a lot less every time you have to do a release. The question is, how do you balance that with the regulations, and make sure you still have a good process in place. The idea of putting single button deployments in place is a great one, but you still have to balance that with making sure that what you push to productions been tested, well defined, and it meets the need, and you're not just arbitrarily throwing things out there. So we're still trying to hit that balance a little bit, it's more on the back-end side. The trading system is not quite there for obvious reasons, we're way more protective of what goes out there, then surrounding it a lot of the times, but I can see a future where, again going back to this idea of transforming our business, where you can stand up and do an exchange with the click of a button. I think that's a trend we're looking at. >> Rebecca: It's not too far in the future. >> No, I don't think it is. >> Last question, Pentaho report card. What are they doing really well? What do you want to see them do better? >> I think they continue to focus in the right areas, focusing more on the data processing side, and with the big data technologies, trying to fill that gap in the big data, and be the layer that you don't have to tie yourself to ike vCloud Air or MapR, you can kind of be a little bit more plug and play. I think they still need to do some improvements on there visualizations in their front-ends. I think they've been so much more focused on the data processing, that part of it, that the visualization's kind of lacked behind, so I think they need to put a little more focus into that, but all in all, they're an A, and we've been extremely happy with them as a software provider. >> Great. >> Shere: I think the visualization part is the part that allows people to understand that value being created at Pentaho. So I think being able to maybe improve a little bit on the visualization could go a far way. >> Michael, Shere, it's been so much fun having you on theCube, and having this conversation, keep that bull market coming please, do whatever you can. >> We'll do our best. >> I'm Rebecca Knight. We are here at PentahoWorld, sponsored by Hitachi Vantara. For Dave Vellante, we will have more from theCube in just a little bit.