>> Narrator: Live from Las Vegas, it's theCUBE covering IBM Think 2018 brought to you by IBM. >> We're back at IBM Think 2018. This is theCUBE the leader and live tech coverage. My name is Dave Vellante and I'm here with my cohost Peter Burst. Day two of our wall to wall coverage of IBM's inaugural Think conference. Rajesh Nambiar is here, he's the general manager of global business services for application services within IBM. Thanks for coming on theCUBE. >> Thank you for having me here. >> So how's this event going for you? You're in from Singapore. We were saying you must love the fact that IBM's consolidated a lot of it's major events in one place. You get a lot done in a week. >> Absolutely, I think this is four or five days that we're going to be here. Phenomenal amount of energy, I mean when you go around you can see that. I think as you said, combining some of the events it's made it even more interesting for us. I'll be meeting more people, more clients, more productive session for sure. >> So let's talk about what you do with application services and then we really want to get in to one of the themes that Jenny hit on today which is incumbent disruptors and competing from the core of your proprietary data. So let's get in to it. Start with your organization and what you guys do. >> Absolutely, so as you mentioned and I do the application services for GBS in IBM. Within application services I think we focus on application development and management which is a large area for us and as you know that IBM has been managing applications for many, many large clients over the period of time and it's a very large portfolio for IBM. What we see truly is enterprises as you saw and they are going to have enormous amount of issues with the new age companies if you may, all of the new companies which are sort of coming out. You can call them bond digital or bond in cloud or uberization of the organizations, whatever. So you'd find that the enterprises are going to have significant issues maintaining the company advantage over a period of time. And one of the ways they could sort of regain the leadership or company advantage would be by ensuring that they are digitally reinventing themselves. The problem is, I think as Forbes said recently in an article around saying that, about 80 percent of the digital transformation projects really fail with multiple reasons as to why they fail. I want to argue saying that one of the, and you heard from Jenny this morning, that you know you have the business architecture and the technology architecture. If we focus on the technology for second, you would find that many of these new incumbents that you mentioned will, they try to compete purely on the digital side of the equation. They will have a harder chance or they might not even get where they want to go. And we want to argue saying that if they kind of pay attention to the core they have, and I want to sort of define what this core and digital is going to be, so think of it this way, I mean core is what, if any company has been around for awhile, then they would of had a significant amount of core systems, systems of records if you want to call it where they have the business process embedded into that. They have the customer data embedded into that. Now what's happening on the other side, of course everybody wants to get there, the whole digital dimension, on the digital side of the equation you do have systems of engagement, where you truly understand and engage, I want to say customers but then again also have employees of your organization. So you're going to engage them in the last mile if you may. What touches the customer, touches your employees, that's what we call systems of engagement in the digital. Now, organizations tend to see these two as two different things and if you do not build your digital eco system, leveraging what you have in core, I believe that the chances of you failing in your digital transformation are very, very high. Why is that? Because I believe the intersection of these two worlds if you may, the core and the digital, is not that easy for people to leverage and I believe that we as a company, we help our clients sort of leverage that intersection if you may. >> Okay so, where do you start? Is it application modernization? Is it allowing them to develop applications that are more sort of more native as you say? When you talk to customers where do you see the starting point? >> Okay so, when you look at these two fundamentally there are synergies between these two worlds and they are discouraged. Synergies are natural why? Because as I mentioned before, in the core or in the systems of records you'll find business processes getting embedded, customers data getting embedded. And then on the other side of the digital system, you always have the user experience which is what we all want to try. I mean the user experience is all about everything. I was talking to a bank recently (foreign name). So they said, we built this phenomenally wonderful user friendly mobile app for our customers and what happened was the app was fantastic and it was great user experience and everything was fine, he just add for every transaction it took like a minute for the balance to show up on the mobile app. That's not what he wanted because why is that? Because your focusing on the digital only. The fact that it just go to your core systems, get the customer data and bring it back to the watch app or the mobile app or whatever, that wasn't the plan that I weighed and hence my point being that if you look at the synergies which is great, there are a lot of discordance because the way that all systems are being built is very different. Maybe you're using a waterfall. The new systems are getting built in a different way. If you leverage the synergies, manage the discordant in a nicer way. A great example would be, so do you have micro services coming out of your core systems to enable your digital systems. You have the right API's getting built from the core systems to enable your digital systems. If you're able to manage this intersection well, then I think you have a play and that's how I believe that we should. So again to your point, do you modernize? I believe you do the three things to get the synergy right. One would be you are to optimize your core systems for efficiency because more and more the systems get older and older. You're going to have challenges in maintaining them, more expensive to maintain them, so you optimize those systems for efficiency. Then you modernize them to build in or enable new capability. So second, as I said modernize, what you really do, you're making sure that it is easier for the digital systems to get to you, to understand what you're doing, to get the customer data, so that is a modernized space. The third is that you have to innovate sort of co create if you may and make sure that you're able to build those newer systems, digital systems using the core and enabling the core for growth. So if you had an organization, if you want growth, you're not going to get it if you don't do these three things in my opinion. >> So Rajesh, many years ago I did a research project for a client and we looked very closely at the consequences of increasing the functionality and automation in systems of engagement and how that drove work back in the core and we found that every success of generation of enhancement on the systems of engagement, drove the number of transactions back at the core sevenfold. Are you seeing relationships like that? Is there rules of thumbs that people should use now as their systems of engagement get even more powerful, more human friendly? What is the new kind of expectation these days? >> So the issue is definitely what you said. I mean for every about seven or eight times is what you want to drive the, for every single transaction which is rising out systems of engagement. However, one of the way to make it more efficient when the systems of records, which is the core systems if you may, is by using the modern, stuff we'll be talking about, if you have designed your core systems and enabled micro services in the right way, maybe instead of having seven or eight transactions, you could be able to do that in two or three. Similarly >> Peter: Unstage them. >> Unstage them, yeah in a certain way so that you're not getting into the performance issue which I talked about in this banking example as you know, you don't want to build a wonderful digital app but having that to go through a significant performance issue over the period of time. So that is one of the things. The other important element of what he just now said is also the talent piece of it. We underestimate, I think, as we said, one of the reasons why many of these engagements fail is also because people don't think talent is a big deal in a lot of this. Because when you really see, if you're a big company, been around for awhile, you have a very strong core, and your people in the IT organization are going to be wired somewhat to the processes which are going to be sort of the ordeal if you may. And how do you move to this new world of digital? So there is a fundamental difference from the talent point of view. Two things, as an organization you're moving from process centric to user centric. Now you want to build something for your customer, for your employee. When you do that the talent base, of course their minds have changed, but also a simple example, we always hire people for skills. Maybe still, some companies still do, for skills. But I believe that's a passe because you know what do you now need is a tenacity for learnability or tenacity for a life long learning for the people whom you're hiring. Not necessarily a skill that you value today because what happens in today's world, after six months that skill is no longer valuable for you. So what do you do with them? But if you have a tenacity for life long learning, the ability for you to pick up new skills and then transform yourself will be so high that you're not stuck with people who are all skills for a long period of time. >> I was talking to a senior, a guy who owns development and he said one of the biggest impacts of open source over the last few years was that it brought the notion of responsibility, recognition, reputation, and change the way that the evolvers talk about collaboration with each other, not just in the open source world but overall. I think collaboration and new collaboration agile also has to be part of the equation. What do you think? >> Well without a question. In fact, I was about to say, collaboration's very, very key because again, when you move from process interviews as intrigue, you also find, traditionally organizations are very role based, so everybody had a role. I'm a developer, I'm a tester, I'm a architect. But in the new world, this is going to be changing into maybe parts of people who are sort of working on a garage metal. Everybody does everything. You have a smaller group of people who are able to evaluate something very, very quick and in an agile fashion as opposed to the traditional way of saying, I'm sort of role based, I have an organization and that's how they operate. So I think there's significant difference and again, I would probably say to leverage the talent for the newer market. Again there are about two or three things that one could potentially do. One would clearly be this learnability. Skills are no longer what is valued, it's the learnability. The ability for you to sort of quickly move from one to another would be valued. Second would be diversity of skills. Today we hire more people with user experience, with psychology major. You would of never thought of this 10 years ago. We never hired anybody from art school but we do that today because of... >> I was really happy. My son's a music major. >> My son is a psychology major, I was just telling you in the University of Colorado. So they get hired probably as well as already the STEM students are going to be, so that's good. (laughing) And the last one is of course, I have this notion called digital label . I don't know if you've heard this before. And Jenny talked about it today. So you're going to have man and machine, when you do that, automation is a great influencer in all of this. I think there are going to be the digital label and the human label are going to co exist. So we're calling it hybrid label. So any task that you're going to do, we will have people which is sort of high capability now, leveraging watts, which is a digital label. So that's another important thing in the talent market. >> And the laborer increasingly requires sort of multi tool skills not only domain expertise but also digital skills. >> Rajesh: Absolutely >> At least being able to understand how the leverage, the machine intelligence. I want to ask you, and I know Peter you got to go soon. But this trend with IOT, Blockchain, we saw the IV and Maersk example today where they're attacking inefficiencies where there's a third party trust involved and it's creating a trustless system. Do you see a trend toward sort of putting token economics embedded inside of applications, things like Blockchain, increasingly going into core applications? Is that a trend you're seeing yet? >> Yes, yes, I think not as much as we would like to see but I think it's beginning to sort of level up in a period of time. I think Blockchain is still, as I said, there's a more in the experimentation phase, and there are a few companies who have leveraged fully. Great example is as you saw this morning with what we're doing with the APMM Maersk, the fact that we're able to do the distribution systems within shipping. And any radio finding that there's going to be a significant amount of paperwork or transactional arrangements that are being done outside of the normal systems. I think Blockchain would be a great way to solve this issue. >> I want to tease your session a little bit. You're going talk, you got a CIO panel, what is that? >> Well the talk is actually going to be I think unlocking the value of the core system. So there's going to be something similar to what we talked about. We've got great session with three CIO's who are going to be on the panel. We're going to have the Carhartt CIO John Hill is going to be on the panel, and they've done a lot of good work in terms of truly making sure that they understood that if they don't level the core they can't really get to the digital. >> Was that CarHartt? >> Carhartt, yes. >> The only brand I wear. >> Really? (laughing) >> They'll be interesting, then KLM with (mumbling) with their history of the core that they've had for several years and how they're really moving into the new digital era and then being sort of a customer friendly airline if you may, so he's going to talk about some of that. And then we also have the TPX which is the communications organization which they've done gone through about 12 acquisitions over the last 12 years, so one a year pretty much. How are they integrating all of those companies and how are they really putting them together into sort of one system. >> Peter: And when is that session? >> That session's on Thursday morning at 11:30, I hope you guys are there to watch that. I'm worried because it's the last day. >> It's a getaway day but listen, a good day to go down and check it out because that notion of what incumbents should be doing and competing from the core is very, very important idea. So Rajesh thanks for coming on theCUBE and explaining that. Best of luck to you tomorrow and great to see you. >> Thank you so much, thank you. >> Alright, keep it right there buddy. We'll be back with our next guest. This is CUBE, you're watching live from IBM Think 2018. We'll be right back. (upbeat music)