>>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.

>> live from San Francisco celebrating 10 years of high tech coverage. It's the Cube covering Veum World 2019 brought to you by IBM Wear and its ecosystem partners. >> Welcome back to San Francisco. We continue our coverage here. Live on the Cube. 10th year John of covering Veum World This is 29 teens version John for John Wall's Got to have inside the Moscone Center. We're joined now by Varun Chabrol It was the vice president of marketing at Delhi M. C. Good to see you today. >> Thanks for having me. >> How's your week been? So far? >> It's been amazing. How can you don't get excited? All the innovation we're seeing this week >> we'll hear about some big announcements. Do you guys have made? And Moon Young Man Azzedine, who is the vice president of product marketing that for cloud security and works based solutions at Veum wear when you're good to see you. >> Good to see you again. You, By >> the way, you might be the busiest guy here. Yesterday, when you came into the set, you were coming in. Just spoken to 1300 people in a standing room only session You coming out? 500 folks, How many sessions have you done? The seven. So >> you don't count the the one on one with the analyst. And, uh, you know, the customers and partners and press. And tomorrow actually host ah 140 press media analyst on campus in Palo Alto from Asia Pacific because they float all the way from Asia >> plus 140. Yeah, it's a piece of cake. >> Yeah, hose them from 10 to 4. So, I mean, >> you're always smiling >> knowing that this is a pretty wide audience to whom you've been speaking. But just generally, what are you if there's a common thread at all about the kinds of questions that people are coming to you with, or or the concerns or maybe just the things they want to talk about being inspired. But what they're hearing here at the show, >> Okay. Now, according to two aspects of it, one obviously from analysts themselves, you know, they are actually have been very complimentary about the way we've taken our approach. I'm not sure if you could have paid attention. In the last couple of years, we've been talking especially the cloud side, the narrative, to be very much about use cases, solving problems. You know the key? No, we talked about hate my grade modernize. It wasn't about Hey, I've got the next big product here with all these features and capabilities. You do this and that. So we're gonna shifted out narrative. And it was very, you know, the the analyst across the boat. You know, we've been seeing an appreciative of the fact that you actually changing a narrative to be re compelling and we're gonna reflected. And we have some things here like Cloud City, where it's not a standard demo boot. It's a it's ah, Customers walk in and they touch and feel and see which we did it, Adele technology will, too. It's like, What's your business? Probably going through these applications. I'm sitting. I don't know if I should be modernizing them or should be migrating into Amazon. A ridge or so. So you know that narrative the analysts are appreciative off, and that reflects into the customer conversations I've been having in the briefings, like one on one with customers. They're really kind of lost us. D'oh! Hey, I've I'm working in this environment. There's a lot of pressure for me. Thio modernize my applications or go adopt my cloud. First strategy is where do I start? Where do I go? It's like, you know, there's a big pressure, so they just want clarity. I think in the end, everything we're gonna we're doing in our study that comes out obviously the buzzword for this weird world. It stanza, right? And, you know, >> we've won the product announcements was >> actually Brandon can Oh, yeah. Branding announcement, to be honest is yeah, because we're trying to bring together, as you know, in Tansy has landed in Bill Run Manage billed as in you know how our intent to acquire Pivotal Already acquired Big Tommy. How all our different acquisitions with different brand names are coming together to establish our bills portfolio again. The sphere. Everybody knows the sphere Project Pacific P ks. All of those create a good run time, environment and manageability like Adi manage with assets from ve Franta gain morbid Nami and you know it. So this multiple brands that are coming into this package off Iran. So we had a creative tan Xue too, you know, put forward statement together that yes is going to be 78 different brands coming into this, but going forward to stand. >> So so that's a great strategy on De Liam Seaside on Del Technology. Michael Dell was in here and I asked him. I said he could have been number one in everything you could. Let's talk about I'm number one in servers again. You kind of get on HP, little baby. But those air peace parts now. So we've got the cloud game. It's bringing despair it at parts together kind and making it coherent from a positioning standpoint and understandable and deployable. So you guys are going down there. That's your cloud strategy. Take a minute to explain that. >> Yeah, absolutely, John. So So what? What we've been doing. We announced this at Del Technologies will this year. But, you know, in the cloud infrastructure space, we're working very closely with the anywhere too tightly integrate our hardware solutions with their their cloud software. And we think that by combining these two in a tightly integrated joined engineer, jointly engineered solutions coupled with the service, is that you know, both of'em were and l e m c bring the customers we think we have. We're giving customers are very consistent experience both with their own premises, infrastructure with public cloud as well as with the edge cloud. And that's really what we're trying to do. That's what we've been building upon and uniting the announcements this week. You know, just just hopefully show customers that the sky's the limit, whether it's not just your infrastructure management. Also app development. Managing your APS both traditional and and cloud native. It's all here for And >> what's the big takeaway free from your standpoint that you'd like people to know about what's going on? Adele the emcee for the VM. Where relation. What's the big top item? >> Yeah, there's there's there's just so much good Doctor Wait forever drank the town about. If someone rises >> way, only have two hours >> time work. The most important thing that people should should know about it, >> you know, both deli M. C and V. M. R. I think, are very, very customer driven companies that we respond to customer feedback and we try to respond to them very fast. That's been true to our respective lifetimes and what we've done in the so that I think there's two broad areas of collaboration. One is in the cloud space, which is all about, you know, making sure that the the innovation that GM is bringing the market, we're providing that in a toy tightly integrated infrastructure solution. Right. So we announced from a deli in seaside support for Vienna, where p ks being deployed automatically on Vieques trail using VCF return. Our customers can you know, a lot of teams were telling us we have our developers and turning developers banging slash knocking on the door, saying we need to build a cloud. Native applications. You need to give us an environment that we can use. And you know, if if all righty, if these IittIe teams don't turn around and give them something relatively quickly Well, guess what? The developers will go somewhere else, right? Yeah, exactly. So And if you look at the kubernetes environment today, if you really look look at what the work that's required to set up kubernetes and ready infrastructure. So a lot of scripting a lot of manual, you know, work command line interface is testing stuff. And what what? V m r p k s does. And you know what times you will do as well is really makes it easy when we've taken that with the magic of the American Foundation sitting on top of the exhale to make it super easy for our customers to be able to deploy kubernetes ready infrastructure and then have it be ready for scale, right? And then the important thing here also is this is the same infrastructure of the expelling bcf that our customers are using for traditional applications as well, right? Trying to reduce that complexity. Give them the one platform. So this cloud, you know, we had we were doing the same integration on just with R A C I platform, but also with our best to breach storage or we're not working with the C f. And then we're also making investments on data protection like it's so important to be able to manage your data in this multi cloud world. We have applications sitting everywhere, data. We all know that it is a crown jewel. So >> it's really a king validating from the Vienna a point of view. How that works right is is about applications is about the infrastructure, and it's about the operation and it really kind of together as we talk about Han Xue p. K s is giving our customers that Chuy's off. You pick Cuban eighties, you know, environments, application choice. >> Um, >> it took us. Actually, we didn't We didn't arrive it in that order. Wait. Did it. In the outer off Infrastructure Plot Foundation is a critical piece of the joint engineering. But being aware and the Della Bella Technologies is really from aviary perspective. It took Locke Foundation, and that's the stack that runs in every public cloud. So, you know AWS as your G C P 4000 plus, you know, cloud provider partners. But Flat Foundation is a platform that was validated on. They'll take hardware and you know, that's the package. But now, as you see, we're lighting that it's same infrastructure up for traditional and culminated applications. >> I think the app sides important to point out, because if you could ve m wears heritage, you look at Dale's heritage. You had abs that ran on PCs absent, ran on servers, client server. And if you look at the fertilization that wasn't under the covers, apt an innovation that didn't require code changes. So that's the DNA that you guys have. Now, when you think about like cloud to point out which we've been riffing on that concept that's basically enterprise cloud mean donut. Hybrid cloud applications are gonna drive. The value on our premises is that they're going to be customer requirements that traditionally wouldn't have fit in the product. Marketing, management, featureless customs. Gonna define what they want. They'll build it, and then they'll dictate to the infrastructure to make it run. What? We can't do that yet. It'll be, Yes, we cannot be enabled to be dynamics. This is a a new cloud. 2.0, feature. This changes the complete game on suppliers >> completely agree. You know to your point, because, you know, you bring it thio back toward civilization. We've been going higher up the stack on So Day zero virtualization infrastructure will virtual eyes. So the line off abstraction has just been climbing from hardware retort realization next to like, you know, Pat platform of the service, and you kind of were working up our way down infrastructure. Now that base infrastructure platform looks like plants. Right? >> And there were times out a little bit over here. On the upside, you meet in the middle of >> it in the middle >> that is Hello, >> absolutely so ap and at middle wears shrinking down this way. Infrastructures. You know that the cloud incriminating stride in the middle to say, Well, that's a bit of, you know, infrastructure is a Kodak and pull. He's a bit of a AP AP eyes I can can I draw from And that's kind of nice future middleware. But our dad, I >> mean, I think applications air in charge, right? I mean, that's not sure That's the dynamic. That's the way it should be. But it never was that way before is basically the infrastructure was your gating factor. The network exact cloud two points Network security data. Yes, Dev Ops. A true Dev Ops Devane, Ops, Infrastructures Code. >> The only point I wanted to add is the reason the emphasis on abscess change acts in the past. Used to be a business support system after today is business. >> Yeah, I mean, it's >> really or you're you're gonna live or die based on the digital services you provide your customers. The other thing I was going to say about cloud 2.0, is that it's also becoming increasingly clear when we Dr customers that, um, customers are realizing Cloud is not a place right. There was this kind of cloud. One point it was okay. Big honking data centers, hyper skaters will be found now is that customers have gone through that process of and there's a lot more maturity in terms of understanding. What is good, better running on premises. What is what's better running in public Cloud? There's a place for both of them and that, um, and the cloud is actually the automation, the service delivery. It's Maurin operation and a way of being almost than a place. >> And what is it? Well, what does it do for you all? Then, in terms of challenge, especially at your teams, because you talk about all this customization, you're allowing the application to almost drive. You know, you're changing places in terms of who's the power of the relationship? Yes. Oh, me, yeah, How what? What does that do for you? Oh, in terms of how you approach that, how you change of mindset and how you change what you deliver? >> I think John, it's the way I think about it is that both daily emcee in Vienna, or any technology provider that's worth their salt is in the business of building platforms. Right? And platforms are essentially extensible. They're really they really provide a foundation that other people can innovate on top of it. And that's how I think you handled the customers issue. If one thing I think we can all agree on is that I t has always taught us there's no one size fits. All right? Right. So I think providing choice along every single dimension is super important for our >> customers. Yeah, I think that platform thing is a huge point. And I was gonna ask that question before John got jumped in because one of the things that you just brought up was platform is you guys have to build an enabling platform. One as suppliers. Okay, The successful cloud to point out cos are ones that are innovating in weird areas. Monitoring, for instance, they who will have thought that monitoring now observe ability would be such a massive, lucrative sector four. I pose M and A Why? Because it's data. It's instrumentation. This is operating system kind of thinking here is like network. So thinking like a platform on the supplier size one, the customers got to start thinking like a platform because their stakeholders air their internal developers or a P I shipping to suppliers. This is new for enterprises. This is news requires full hybrid capability. This requires date at the center of the value proposition. >> That's again the biggest value is business and I tr coming together on the area of applications and data. Yeah, that's starting up giving because the successful businesses are the ones who leveraged. Those guys have failed in the future, or the ones who don't pay attention to how critical applications are to the business logic and how critical data is to be able to mine and get the behavioral analytics to get ahead. And >> now the challenge in all this. But I'm learning and covering some of the public sector activity from the C I. A contract Jedi with Amazon to we had Raytheon Her here earlier is another customer example with another client is that procurement? And how they do business is not just a technical thing. There's like all this old legacy, things like, How do you procure technology, who you hire her and we hire developers? We build our own stack, so there's a lot of things going on. >> Yes, and you know, it's really interesting on the even on the procurement front, how our customers experience with Cloud has changed expectations, right, And that's really what we're doing with the McLaren DMC is what customers told us is, Hey, I love the agility of the cloud portal based access. Easy procurement. I love just being able to click a button and not have to navigate all this complexity. I need that for my own premises infrastructure. Imagine FRA structure. And that's, you know, in an example, while all of these dynamics are really all converging, >> well, if you can create abstraction, layer on a level of complexity and make things easy, simple and affordable, that's good business. Model >> one of our customers without taking the name right. The massive retailer you know they're spinning up, um, the retail outlets like crazy. They measure success in This was one truck roll, so they wanna have the entire infrastructure come into stand up one of the retail outlets in one truck roll. When everything comes in one button push that everything gets in a provision and up together. >> So that means I gotta have full software instrumentation automation Got intelligence. This is kind of where cloud 2.0, will lead us all >> likely. And that's expectation now that they go so fast and deploying this one Truck roll Hardware's there. Switch it on from the cloud it stood up and they're in operation 24 hours. >> Well, guys, we're going to get you on our power panels in our Palace of studio on this topic cloudy. But it's gonna be very aggressive and controversial topic because it's going to challenge the status quo. And that's really what this we're talking about >> that's in our DNA. >> And the good news is that that's more time with John. >> So as we before, we say so long, we've talked about clients. We talked about the folks you bet here. We talked about the presentation on this thing and what they're all getting out of it. What are you getting out of this? I mean, what are your takeaways? As you had back to your respective work orders, you get first. Okay? >> I think for me the biggest takeaway is just how incredibly vibrant via more user communities. I mean, it is unlike anything else I've seen before and now with the things like Project Pacific. I just feel like it's It's an opportunity for this community to be able to take the skills they have right now and actually go into this brave new world of containers with so much help forces having to do this all by yourself. Which means it's gonna be, you know, if you think about how largest community is, think about how much innovation this will spore in the container space and because of that in the application space and then because of that in business is I mean, this is a It just feels like a tipping point for me >> to me. Sure, I got high fives from every tech geek, you know, when we came out, you know, I also on our technical advisory boats for the company that these are the hot core geeks who were followed and you know us to the, you know, these were the fans and they were like, you know, they always kind of like if you walk out of them and you talk to them and they, uh how did it work? Because they my bar, you have a very high bar. They cut through all your marketing messaging. They go right to the hay. Is there meet in this And the high fives? I got the hajj. I got out. This is like, guys, you're nailing it. That's enough to tell me that a This is, like, 10 years ago. Yeah, that body. It's like you're so busy. I'm still smiling because the energy is I >> can't give you a hug. Give me a high five. Right. Good work, gentlemen. Thanks for the time. Always, he's still smiling to >> get you to a step. >> Good deal. Thanks for being with us. Thank you. Live on the Cube. You're watching our coverage in world 2019. Where? San Francisco. Back with more. Right after this.

(upbeat music) >> Hello there and welcome to a special Cube conversation here at The Cube's Palo Alto studios, I'm John Furrier. Join with me for this special Cube Conference, Stu Miniman with Wikibon and The Cube co-host as well just up at Amazon Web Services Summit. Stu, great to see you again. Our next guest is Ben Golub, who's the executive chairman and interim CEO of Storj, pronounced storage. So it's a really hot cryptocurrency, blockchain based storage solution. I should say decentralized storage, not necessarily cryptocurrency, but tokens are involved, encryption. Great to see you. >> Great to see you, it's good to be back. >> Formerly Docker CEO and now advising at Mayfield Fund as a venture partner and also interim CEO of a hot-- >> Yeah really exciting company. And I'm really excited to talk to you about it today. >> So let's just jump into it. So obviously the ICO craze is awesome and we've always speculated that the blockchain and the decentralized applications are coming is going to be the real action. But yet it's going to create efficiencies where there's inefficiencies. >> Sure. >> Venture capital is one of them and that's why the ICO craze is going. People are raising a boatload of money that they probably wouldn't have gotten that amount. >> Wouldn't have gotten, yeah no dilution, things like that. It's interesting yeah. >> So give us an update on Storj or storage. How much in ICO did they raised, whitepapers out there? It's peer to peer, give a quick, take a minute to explain what the company's doing. >> Yeah well I guess that I should probably start by saying that I think that blockchain is bigger than just cryptocurrency, and decentralized is bigger than blockchain, and Storj is primarily a decentralized storage company. So we're about decentralized apps and the whole thing would absolutely work even if we were just using dollars. But I think it does make it a whole lot more exciting. And so the company, kind of unique in the crypto space in that we actually had a running service that was providing real value, before we did the large token sale. And the token sale raised about $30 million. Fortunately they took about 10 of that in Ethereum and Bitcoin which rose up. So there's a good deal more than that in the bank account right now. >> John: Hopefully they converted to fiat currency. >> And then they converted to fiat along the way. >> It's at an all-time high of $20,000 right now. It's like $7,000, something like that. >> Yeah, so you know, didn't sell everything at the peak, but didn't sell at the-- >> Yeah, so we've been having many blockchain and crypto or token-based economic kind of things. But the real question is what's happening? Now we know the action's been on the infrastructure side. We look at all the top hedge funds, Polychain, amongst others. They love these deals because it's infrastructure. Is that where the action is and how are you guys looking at that because at the same time, there's a wave of decentralized applications also known as Dapps coming on. So there's a relationship going on between how fast the infrastructure can go, and then how applications are going to work with either on chain or off chain dynamics. >> Sure, sure. So maybe it would be helpful to give you a sense of what it is that we do. 'Cause I think that if you do that, then I think it makes sense in the context of decentralized infrastructure, decentralized apps, but also actually traditional infrastructure as well. I've always been searching for a company that I could describe at Thanksgiving. I've never succeeded, so I always end up saying that I'm in computers, and fixing somebody's printer. (laughing) But I guess if I were to describe Storj at Thanksgiving, I'd say it's basically the Airbnb of storage, or the Airbnb of disc drives. So Airbnb, people have lots of condos or vacation properties that aren't being used all the time, and so Airbnb brings them together with people who want to rent those, and they're the largest hotel company in the world, without owning a single property. And we're kind of doing the same thing with Storj, in that there is, first of all, this explosion in the amount of data that's getting created. It would fill a stack of CD-ROMs to Mars and back this year. Yet the price of cloud storage hasn't come down. And 90% of all the disc drives that are out there are only about 10% utilized. So seems like a problem that needs a solution. And that's what we've done. We've basically brought together a very large network of individuals and companies that have spare storage capacity and matched them up with people who need storage. The really cool aspect, there are many cool aspects about it, but one of them is that basically if you want to store on the Storj network, we take your file, you encrypt it, so we never hold the keys. You encrypt it, it's all scrambled up, we break it up into between 20 and 80 pieces, and we spread those out across 150,000 or so nodes that we have in our network. So it's super cheap, but it's also super secure. Great performance because the data's way out at the edge. And super available because there's no storm or power outage or idiot tripping over a power cord that can take out your storage. >> So, Ben, you touched on, first question I was going to ask, of course, trust and security. Storage I absolutely have to worry about, so it sounds like that's at the core, but there's a number of dynamics going on in the industry. Object storage was great, let's spread it out, let's make it more decentralized, but most of the core storage industry is speeds and feeds and latency's super important, and even when you start getting to distributed architecture, I worry about that latency. So what are kind of the use cases, what are some of the key customer issues? Is price a big piece of it? Or what solutions does Storj solve that others can't? >> I always said when I was at Cluster, which was a storage company that there were four things that mattered in storage. There's certainly price; there was security; as in I don't want anybody to be able to access it; there's availability, I never want to drop or lose files; and finally there's performance, how fast I can get it. And so for a huge range of use cases that involve files, basically everything that object storage is kind of used for today, the design of our system is actually much better because we've encrypted it locally and then spread it out, you really can't attack it. First of all, you'd have to figure out... So a would-be attacker who wanted to find one of your files in the storage network would have to figure out which of the 80 or the 20 nodes out of 150,000 it's located on. If they found one of those, and they got the small portion of the file that's there, they wouldn't be able to do anything with it 'cause it's encrypted. Even if they were somehow able to decrypt it by stealing the key from you, not from us... >> So encryption and immutability... >> And immutability, right. So you get all of that. So for the security piece, it's great. For the availability piece, I never lose a file. It's really, really good, because if you just look at the math, the chances that somehow... You can basically lose 10 out of 20 nodes and still be able to recover your files. And all of our nodes are run by different people, different power supply. >> So let's take a step back. How many nodes are on the network now, you said? >> 150,000 now, run by 70,000 farmers, is what we call them. They're not miners, 'cause they're not just solving that problem, they're just producing something of value. 70,000 farmers, and then we have on the network right now, over 50 petabytes of data, which is a really large amount, and yet, we don't run a single data center. >> Have you guys raised any venture at all, or is it all ICO proceeds? >> There was a small seed round that was done, before the ICO craze. But other than that, it's all-- >> And how many people are working on the company? >> 25. >> So you guys are a classic startup. The working product, how does that look now? Is it on the blockchain, is it off the chain, how's it working, Bitcoin? >> So I've described to you what the product does. So far nothing I've described to you involves blockchain. The way the economics work is that as a user, somebody who wants to store on our network, we quote a price in dollars. You can either pay us in dollars or in the Storj token, and as a farmer, you get compensated with a Storj token. And that's done, of course, using blockchain we're actually part of Ethereum. >> Is that ERC-20 token? >> ERC-20 token, yeah. There are also interesting things that we are working on using blockchain for things like you just mentioned, data integrity, so I can make sure that if I'm doing a snapshot of a database, and I want to make sure that it's exactly what it is, nobody can tamper with it, et cetera, then that's a perfect use of blockchain. But using blockchain for the stuff I was talking about before, like figuring out where the shards are and making sure that they're uptime and reliable, that's actually stuff where blockchain isn't the best answer. >> Ben, tell us a little bit about the customers that you find there, 'cause storage administrators, that role's been changing a lot, but the typical storage administrator, if you tell them, "Oh yeah, I'm doing some distributed thing, "somewhere else, and paying in crypto-currency," they'd be like, are you kidding me? I want this thing that I can lock and hold and guard with a gun. >> This is like anything else, there's an adoption curve, and right now it's clearly very much early adopters. And actually similarly to Docker and similar to the cloud in general, it's developers who are leading the way. Developers are saying, oh, wow, I can write to the storage network in the same way that I would have written to S3, only it's cheaper, for many use cases, more performing, and not centralized, so I'm not trusting one cloud provider. So for certain use cases, this is fantastic. >> Are there certain cloud native apps that you're finding have strong affinity here? >> Yeah, so basically what we have affinity with right now, and let's be clear, this is early days. I wouldn't recommend that people store their most sensitive data on this, but-- >> Not Oracle certified yet, is what you're saying? >> We're not Oracle certified, no. (laughing) Basically anything involving a large file that you're not writing to very frequently, but you're reading a lot, or that's getting read by lots of people around the world, we're a really good solution. It's one of the things I think I mentioned to you. So we've got 150,000 nodes. They're located in I think it's now 180 countries, and all over the U.S. So if you want to get your data close to the edge, the people who are consuming your data are really close to the edge, this is actually really good. And because it's spread across so many, you get the benefit of parallelism, so it's super fast, in addition to being super safe and super secure. >> How does it work for the farmers? Because we have video files, so we would love to spread our video files on the Storj network. So let's just say... >> I'd do a special deal for you, too, you know. >> Of course, yeah, get a little token action going on both sides, Cube coins. But the availability thing is concerning. Whose computers is it being stored on? Is it extra capacity? Is it servers? Is it people's home computers? What's the, is it that kind of model? >> Sure, so basically yeah, we, just as Airbnb measures reputation, we measure reputation, too. And so if you don't have a good reputation, certain characteristics, we won't send data to you. What it basically means is you've got to have dedicated hardware and a dedicated connection. So we do have people who are running things in their home, but it's not a laptop, it's not on your phone. But if you have a disc drive that's connected with reasonably high capacity and reasonably well connected, then you'll establish good reputation. But what we are seeing is we are seeing a lot of universities, a lot of small businesses, some data center operators who have spare capacity or just want to use us as like, be both a farmer and a user. So backup and get stuff on their capacity as a good idea. And interestingly enough, we also are getting a lot of people who were Bitcoin miners and bought equipment, which is good quality equipment, but there's such an arms race in doing that. >> So they abandoned, because it was too hard for them to get coins. >> It's too hard to make money, right, and very expensive, specialized equipment, and in our case, basically general high quality equipment works well. >> What's the profit model? How do the farmers make money? Take our Cube videos, as an example, so I'm paying you guys, and you're distributing those tokens? >> You're paying us and you're paying us either in dollars or tokens. And then farmers get compensated in tokens. Right now, about 60 cents on every dollar goes to farmers. And farmers get more storage based off of their reputation. We charge people based on both how much you're storing as well as how much bandwidth egress that you're doing, and we compensate farmers exactly the same way. >> It's handled through a consensus protocol that you guys have? >> Yeah, yeah, so the payment and assessing reputation we actually use good distributed blockchain as well there, right, so you're not counting on Storj to be in the middle there. Now, with the remaining 40 cents, which I think is actually the really interesting part, we keep some of that, we put some back into the network, but what I'm really excited about is that this is now a way for us to economically empower demand partners as well. The first thing we announced was FileZilla, but we have lots of other open source projects waiting in the wings, and we're happy to share with them. So as opposed to centralized cloud, where it's really hard to make money as an open source company, we're not an open source project in our case, right? We're happy if you're sending us users and data, to give you a really meaningful percentage. >> Any kind of freemium model you guys are playing with? I can imagine this being pretty interesting, because S3 democratized and lowered the cost barrier, obviously with cloud. >> S3 has been great for many things. >> How low are you in terms of the disruption? You guys are probably going to have to come in and undercut S3, is that the strategy? Or is that the price value? >> I think what I learned from my time in storage, is price is important but you have to be really safe and available and reliable, 'cause people's data is really important. But we looked across a pretty broad set of use cases, in comparing us to the traditional cloud providers we're probably a third. And we could go lower. What I think is really interesting in our case is that the economics just work really well. So from our perspective, if you're a farmer, you've already got, it's spare capacity, you don't need any more electricity to run this thing, you've got bandwidth, right? You don't need to hire any more people. So it's almost pure margin for a farmer, which is great for them. And so we can give economic value to farmers, we can give economic value to our customers, we can give economic value to partners. >> Any kind of economic models you can share in terms of what someone would make? Let's just say that I had this big music library that's not being used anymore, and I had a-- >> Well, as a customer of course, if you've got data that you want to store on our network, you'll save a lot of money, and it's probably a third of what you might pay. >> But is there any kind of, if I'm a farmer, I want to join the network? >> But if you're a farmer. >> How much am I going to make? >> It really depends on how much you're storing and how good your connection is, but as a farmer, I think you can make decent money. This could probably be I don't know off the top of my head, $20, $30 a month per drive, which isn't bad, and certainly much easier than making money-- >> So it kind of depends like the Airbnb model, depends how well you're using-- >> How well you're used. So some people earn less, some people earn more. And again, for most of the farmers, this is pure margin. >> Great, we got a couple back to back rooms, Stu. We should get some drives up there and get on board. We could pay for the cameras. >> And look, I think for videos, you guys would actually be a perfect use case with a lot of the stuff that's going to be coming out later this year. You get both storage and CDN like things for free, in the sense that because-- >> I'm really glad you brought that up, 'cause I want to ask you about Videocoin, 'cause Halsey Minor has Videocoin, another ICO, he raised $50 million. We covered that on Silicon Angle. But he's trying to democratize Acromi. Is that similar to what you guys are doing? >> I guess you could say yeah, we're further democratizing object storage, democratizing S3, but I think we can also democratize Acromi, we can democratize Isilon, there's certain other really exciting things that are-- >> What other services, you mentioned CDN, so it's not just storing the information, but that global dispersion, what does that enable? >> It used to be that people had a really big difference between archival which is slow, hard to get at, and CDN, right? And but actually, given the way that we're doing this thing, we can be pretty seamless. Pay archival for stuff that's staying in archival, but go up market if you're going to be having a lot of people read it. >> So I got to ask you about the, obviously, security. You're looking at it for additional services around redundancy, I can see that being a nice headroom for you. On a personal note, you've been involved in a lot of industry companies that have done very well, entrepreneurial success. >> Ben: Why am I doing this? (laughing) >> I can tell you're having fun. How could you not have fun, it's a whole 'nother generation of innovation, disruption coming, a whole 'nother price point. So what's it like, are you having fun? And if you could talk to your 22-year-old self right now, 'cause I wish I was 22 right now in this market-- >> Are you saying I'm not 22? >> How do you explain this? And when you go to parties, even in the Valley, and people say, "Man, you're crazy, it's a fricken' "scam out there," how do you explain to 'em this revolution? Because this is like a special, unique wave. How would you talk about that? >> Actually I describe it the same way to people in the Valley the same way that I described at the beginning, which is that blockchain is bigger than cryptocurrency, and decentralized is much bigger than blockchain. And Storj is first and foremost decentralized. It's about decentralized computing, decentralized storage, supporting decentralized apps, keeping the internet from ending up in the hands of just three people, three companies, which I think is really important. But also I feel very good that, to the extent that Storj does touch on cryptocurrency, that we've done it the right way. We had the service working first before we did the token sale. We raised what now appears to be a modest amount in the token sale, tried to be very transparent and at the forefront. >> You probably could've gotten more if you wanted to. >> Probably, right? But we were trying to be forefront in terms of governance and transparency, and I think that it'll probably be a good thing, just as it was kind of a good thing that the bubble burst in the late '90s and you got rid of a lot of such not great companies and not such great operators. I think that the current corrections, or whatever, in the crypto market I think will-- >> Like pets.com is gone, but DogeCoin still exists. (laughing) >> So I'm sure that somebody has a crypto base pets.com or webvan lurking in the wings somewhere. Kodak just did it. >> I got to ask you, you're super smart. You went to some really good schools, I think Princeton, Harvard Business School. So you got a good education, so I got to get your take on the whole token economics vision. 'Cause this is, if you look at outside the tech trends, there's actually new economic models that are coming out. Have you looked at token economics? New liquidity on the one side, you've got sovereignty, you've got consensus. These are not just tech issues, these are society issues. What's your vision around that? How are you viewing it? What's the upside? How is this shaping the future? >> Yeah, I think if you're a token network, you sort of have to have some central bank chops as well, right? And we actually have a central banker. >> John: So you have a chief economic officer? >> So we don't, no, we have an advisor-- >> John: Public policy. >> I actually had a degree in public policy at one point. But we need to think about the token supply in the same way you'd think about the money supply. We're backed by something real, so it's sort of like having currencies backed by gold. We need to make sure that the market grows and the network grows. And my fundamental belief is that the more the network grows, the more people use it, the more value that we're able to provide, that'll be good for token economics in the long run. In the short run, though, what we've done, is again, we price based off of dollars, and we compensate farmers based off the token based off of the spot price. So for farmers, we've tried to remove any need to worry about volatility or things like that. >> So I want your reaction-- >> Or the price. >> I've said on The Cube multiple times that in the old days of venture startups, the CTO was everything. You had to have a great CTO or VP of engineering and great senior executive team on the entrepreneurial team. Now it's almost like the chief economic officer is a critical piece, 'cause you've got public policy intersecting with economics. You've got new kinds of math that's not technical algorithm but it's kind of business algorithms. >> It is, business algorithms. Just like any economy, the money supply matters. And people's trust in that money matters. And the supply matters. All that stuff like that, and stability matters. So I think absolutely this new breed of network based token companies will have to worry about that, and probably should think about a chief economics officer, but it doesn't mean that you don't also have to have a great CTO and great technology, 'cause that's how you make the network valuable and grow. And one of the reasons that gave me both excitement and comfort about going to Storj is that the economic model works, fundamentally, even if the crypto's not there. >> John: 'Cause technology is decentralized. >> Decentralized storage makes sense even if you're buying and selling it with dollars or pounds or rubles, or whatever. >> Ben, great to see you, thanks for coming in and sharing the Ben Golub School of Economics, Public Policy for Tokens. You can give a class at Stanford on that soon, although that's the competition's school. >> Maybe, yes. Slightly different. We still like them. >> Great to see you, congratulations. Storj, pronounced storage. Great, successful ICO, hot startup, really, an example of the infrastructure opportunities of a new decentralized infrastructure that can be and will soon, we think, it will be critical infrastructure in a whole new way. Great to see you. >> Ben: Really good to see you, great to be back with you. >> It's the Cube Conversation, I'm John Furrier, Stu Miniman, thanks for watching. (upbeat music)

(bright music) >> Hello everyone, welcome to a special Cube Conversation here, in the Palo Alto studios, for theCUBE, I'm John Furrier, the founder of SiliconeANGLE Media and theCUBE, and cohost of theCUBE. My next guest is Adrian Scott, who is the CEO of Soma Capital and Head of Technology of decent.bet. You can get the idea of that going to be all about, but, industry legend-- >> Yeah. >> Star of the big screen, good to see you, thanks for comin' in. >> Thank you John, it's great to see you. >> I'm glad I wanted to talk to you, because I know you've been doing a lot of traveling, you've been living in Panama, and overseas, outside the US, mainly around the work you've been doing on the crypto side, obviously Blockchain and with the start of decent.bet, lot of great stuff, but congratulations on a successful initial coin offering! >> Thank you. >> Great stuff, but you're also notable in the industry, initial investor in Napster, our generation, first P2P, the first renegade, you know, break down the movie business, but the beginning of what we're now seeing as that decentralized revolution. But you've seen many waves of innovation. You've seen 'em come and go. But this one in particular, Blockchain, decentralized internet, decentralized applications, crypto. Pretty awesome, and lot of young guns are coming in, a lot of older, experienced, alpha entrepreneurs are coming in like yourself, and, we're lookin' at it too. What's your take on it? I mean, how do you talk people that are like, "Well, hey, this is just a scam on the ICS site, "is this real, is it a bubble?" Share your vision on what this is all about, this whole mega-trend, crypto, decentralized. >> And I'll also add, in addition to what you mentioned, the other neat thing here is just the global nature of it. Because we're so used to being Silicon Valley-centric, and having to dig around for funding here, and also, looking only at talent that would move here, whereas with this whole new industry, it's very global, there's global teams, international teams, and, some of the Silicon Valley folks are just struggling to stay relevant, and stay in the game, so that's a fascinating aspect to this new revolution as well. >> And also, the thing I love about this market, it's very efficient, it takes away inefficiencies, in venture capital right now, and private equity being disrupted, that's where the arbitrage is, hence the ICO bubble, but, there is real, legit opportunities, you have Soma Capital, you're an investment fund, that you're doing token investments on. The global nature is interesting, I want to just ask here about this, because, my view is, it changes valuation, it changes valuation mechanisms, it changes the makeup of the venture architecture, it makes up on how people recruit teams, the technology used, and with open source, I mean, this is a first-time view at a new landscape. You can't take a pattern match, model, to this, your thoughts. >> Agree completely, and the efficiency you mentioned, applied to teams, and surfacing engineering talent, and the mathematical minds that can handle crypto internationally, the formation of teams internationally online is actually something special as well, so, with Decent Bet, our team, our founding team includes folks from the US, Panama, Australia, as well, who met up, in a Facebook chat group! And that's how they initially connected, and they didn't know each other physically, before this connection online, and that led to this project, Decent Bet, and ICO, and so on. So it's-- >> You created value from essentially a digital workforce, but, I mean, it reminds me of, like in the old days, you'd chat, and it wasn't a lot of face-to-face, but then now there's video gaming culture, you know, you come in, "Hey, you want to play a game," people don't even know each other, and get a visual, and also an immersive experience with each other. This is now the application for entrepreneurial equations, so this kind of gaming, the game is startups! So how are you looking at this, and how are you investing in it, what are some of the things, and what can people learn from what we're seeing in this new game-ified, if you will, you know, world of starting companies? >> I think one of the things you alluded to there has really become visible, which is the importance of video, as a medium, and I'm still, absorbing and adjusting to that myself. For example, we do video communications, we do conversations at Decent Bet, of the founding team, and, it really connects to the community, and it's so important, and I'm still absorbing it, like I mentioned, 'cause I'm just so used to publishing articles that are very clearly written, and detailed, and so on. We just did an AMA video, an Ask Me Anything video, in Las Vegas, with the executive team, and it went for 80 minutes, answering the questions, that the community had all submitted! And I just try and imagine that five years ago, it's new way of relating-- >> 'Cause there was no blogging, link back, the only thing you could do in blogging. >> Yeah. >> And then write a perfect blog post, or white paper. >> Exactly. >> And that was who you were. >> Yeah. >> Not anymore, it's more community driven. >> Exactly, and that video as a piece of it, has become so, so important, as a way of communicating the character of the team, and-- >> Before we get into decent.bet, I want to drill those, I think it's a great use case, and again, congratulations on great work there. I want to ask you about something that I've been fascinated with, because I obviously, our generation, we grew up on open source when it was second-class citizen, now it runs the whole world, as first-tier, first-class citizen in software world. The role of the community was really important in software development, 'cause that kept a, it kept a balance, there was governance, was consensus, these are words that you hear in the crypto world. And now, whether it's content and or ICO, the role of the community, and certainly, areas that's out of control in the ICO site, people are cracking down on certainly, like you see Facebook and Twitter trying to do something, but you can't stop the wisdom of the crowd. The role of the community in this crypto, decentralized market, ICOs and whatnot, is super important. Can you share your thoughts, and color commentary on why the community's so important, how do you deal with it (laughs), any best practices, either through scar tissue, or successes, share your thoughts on this. >> Oh yeah, it's totally become a factor, and it's 24/7, right? So, when you are running a crypto project, you need your community management team to be there, in the community channels, 24/7, you need to have somebody there, and they need to be at a certain level that they can handle the challenging questions! And we've definitely had moments where, we have people who try to create FUD, potentially, you know, and bring up stuff, and bring it up again later and whatnot, and we need to be proactive, so when questions come up, we were there to be able to explain, "Okay, here's where you can see this on the Blockchain. "You can verify it yourself." And sometimes, it happens when the team is just about to get on a plane (laughs), and be out of internet communication for a while, so, it's a real challenge, and there's been the voice of experience, on that. >> So talk about how you guys connect, because obviously, being connected is important with community access, but also, with connection, increases the service area for hacks, are you guys carrying five burner phones each, how do you handle email, how have you guys dealt with the whole, you know, there is a lot of online activity, certainly, people trying to do some spear phishing, or whatever tactics there are. Telegram has been littered with a lot of spoofing, and what not, so, all this is going on, that you got to have access communication. But there's a safety component that could have really big impacts to these businesses, that aren't tokeners, because, hacking can be easy if you don't protect yourself. >> We really like Signal app, as a communications medium, there's a new one, starting to grow now, called Threema, which is pretty interesting. Telegram, is just a real challenge, and it's unfortunate, because it's now become this metric. >> How many people are active on your channels-- >> That investors like to look at the size of the Telegram group, but we don't actually have a Telegram group for Decent Bet. And we've used Slack, we are going to be rolling out a internally hosted Slack replacement soon based on Rocket.Chat, we really like Rocket.Chat. As you mentioned, there are spear phishing, we do see that, and, one of the nice things is, a few years ago, you had trouble convincing a team to take security seriously! But you know, when you have team members who may have lost $10,000 in a hack-- >> Or more! >> Or more, you know, there's no question that this needs to be a priority, and everybody buys in on it. So that is one net positive out of this. >> Well let's talk about Decent Bet, fascinating use case, it's in the gaming area, gaming as in like betting, my friend Paul Martino invested I think in DraftKings, one of those other companies, I forget which one it was. In the US, there was regulatory issues, but, you know, outside the US where I think you guys are, there's not as much issue. Perfect use case for tokens, in my opinion. So, take a minute to explain Decent Bet, what you guys are all about, and talk about the journey of conception, when you guys conceived it, to ICO. >> Yeah. Decent Bet was founded about a year ago, by the CEO Jedidiah Taylor, who developed an interesting idea, and plan, so, the neat thing about Decent Bet is, first of all, you have all the benefits of the Ethereum Blockchain, in terms of verifying, transactions, and verifying the house's take. Additionally, what Decent Bet does is distributes all the profits of the casino back to the token-holders. 95% goes as proportionally, and then 5% is awarded in a lottery, so there's no profit for any Decent Bet entity, it all goes back to the tokenholders. So you use the token to play, by gambling, but you can also use your token to convert into house shares, for a quarter, and participate in-- >> So the house always wins, that a good model, right? >> Yes. >> You could become the house, through the tokens. >> Exactly, so, the motto we use is our house is your house (laughs). >> Don't bet against the house. >> Yeah. >> Alright so, I love the gambling aspect of it, I think that's going to be a winner. Tech-involved, ICO process bumps, learnings, things you could share with folks? >> Yeah, so, on the technology, one of the neat things we are doing is, we do offer a slots game, which is a primary component of online gambling, and casinos, a pretty dominant piece of the action. But, if you are going to do a simple slots game on the Blockchain, and wait around for blocks to be mined, you're not going to have a great experience. 'Cause you're going to be waiting around, more than you're going to be clicking that button. So, what we use is a technology called state channels, which allows us to do a session, kind of on a side channel, so to speak, and through this state channel, at the end of the session, you post back the results. So you get the verifiability of the Blockchain, but without the delay. So that's a major difference. >> That's off chain, right? >> Yeah. >> Or the on chain is off chain. >> It's kind of-- >> So you're managing the league, to see the chain, so you still experience, and then get to preserve it on the chain. >> Exactly-- >> Okay. >> In terms of the ICO experience, we initiated the ICO end of September, ran for a month, raised more than 52,000 Ether, so very productive ICO process, but with actually some interesting details, so, the ICO structure limited the amount that a particular address could purchase, in the first phases, to 10,000 worth, and then 20,000 dollars worth, with the idea of getting the tokens into the hand of, of people who are going to potentially use them for betting, not just-- >> The more the merrier for you, not, no one taking down allocations, big players. >> Exactly. >> Or whales. >> Not just for the whales, take all, kind of thing. So, that was a interesting structure, and-- >> And that worked well? >> Yeah! >> Alright, talk about the dynamic of post-ICO, because now you guys are building, can you give an update on the state of where you guys are at with the product, availability, how that's going, 'cause obviously you raised the capital through the ICO, democratize it if you will through clever mechanism, which is cool, thanks for sharing that, now what happens? Now, what's going on? >> Yeah, I mean, I think we're doing pretty well in terms of hitting milestones, and showing progress compared to a lot of projects, we released our test net, with slots, and then sportsbook, at the beginning of January, and mid-January, for sportsbook. And, we also did some upgrades with our wallet, we released that, for some enhanced usability, and handling during high peaks on the Ether network, Ethereum network. And then, also, our moving to main net. So we did some newer versions of the test net-- >> When did the main net come in? >> Main net is coming out end of April, and we're on track with that. >> Great, awesome. Congratulations, congratulations on a great job, 52,000 Ether, great raise there, and awesome opportunity. Soma Capital. >> Mm-hmm. >> You're investing now, what do you look for for deals, there's more money chasing good deals now, as we can see, has been a flight to quality obviously. Great global landscape still, what are you looking for? And advice to folks who are looking to do a token, sale, what's your-- >> Big thing we look for are real projects, so (laughs), and they're not that many out there, so we do look for a real use case that makes sense, because, there's a lot of folks out there just sticking Blockchain tag onto anything. And it's not just-- >> Like Kodak for instance. >> Yeah. >> Kodak's the prime example. >> Yes. There are projects out there doing interesting things, Guardium is doing some neat things in terms of 911 response, and opening that up, and creating an alternative to government services. There's WorkCoin, which is-- >> Do you invest in Guardium? >> Yeah, in Guardium, yeah. >> I interviewed them in Puerto Rico. >> Okay, great. >> Great project. >> So very interesting, I was recently giving a talk at a university in Guatemala, and, the students there at business school, it really resonated, the message there, to them, about okay, government 911 is maybe not the ultimate solution for getting help when you need it. >> Well I think, there's a lot of this AI for a good concept, going to Blockchain for good, because, you're seeing a lot of these easy, low-hanging fruit applications around these old structural intuitions. And that's where the action is, right, I mean, do you agree? >> Yeah, yes. And the other thing we're looking at is not just Blockchain. So I really like talking about the field more as crypto, and, I have a little video I did on calling it kind of decentralized, crypto-enabled applications, or platforms. So, beyond Blockchain, we have DAGs, Directed Acyclic Graphs, one interesting-- >> Like Hashgraph. >> Yeah, Ha-- >> Hashgraph's a DAG, isn't it? It's kind of a DAG, Hashgraph? >> Yeah, so, I'm not a huge fan of Hashgraph, one that I do like is called Guld, G-U-L-D, which is, again, thinking beyond the Blockchain. 'Cause we get so tied into Blockchain, Blockchain, Blockchain-- >> What does beyond the Blockchain mean to you? Thinking beyond the Blockchain, what does that mean to you? >> So, the proof of work process, the mining process, the creating new blocks process, is one way of doing things. But we have all these other things going on in crypto, like the signing process, and so on, and so, you can use those in a DAG, a different architecture than just this mining new blocks, you know, mental model. And so, that can be used for different use cases, for publishing, for group consensus, and so on. And so, Guld is an example of a project where it looks like there is something real there, and that's a very interesting product. >> Advice for folks that are looking at tokeneries, because, again, we've said this on theCUBE many times, people know, I'm beating this drum, you got the startups, that see an opportunity, which is fantastic, and then on the end of the spectrum, you got the, "Oh, shit, we're out of business, "let's pivot, throw the Hail Mary, put Blockchain on it, "crypto, and get an ICO, and get some going." And then you've got these growth companies that are, either self funded and or growing, that have decentralized kind of feel to it, it has an architecture that's compatible with tokenization. >> Yeah. >> So we see those three categories. Do you agree, am I missing anything? In terms of the profile? And which ones do you like? >> Well, I think one thing that we need to look at, in each of those cases, is decentralization actually happening, in the project? And are people actually thinking about decentralization. Because, it can be scary for a traditional company! Because, if it truly becomes decentralized, you're not controlling it anymore. And so, that is-- >> If you're based on control, then it's incompatible. >> And that's the real Hail Mary, right? (laughs) When you give up that control, if you give it up, so, we have examples coming out, where, you know, Ripple is running just a few nodes, Neo's running a few more, and you know, things that are not really decentralized, and they're saying, "Well, we're going to be," (laughs) you know? >> Will they ever? >> Is it going to be in the future-- >> Yeah, that's always the question, will they ever be? They've already made their money, well certainly Ripple's done well, but, I mean, what's the incentive to go-- >> Yeah. >> Decentralized. >> Yeah, so if, if you are creating a new project, the benefit from this architecture, beyond the money, is to think about it in that decentralized way, and figure out token economics that work, in that context, in that paradigm! And that's really where the challenge is, but also really where some of the benefits can rise, because, that is what enables truly new ways of doing things. >> Talk about the dynamic, because I actually, I live in Silicon Valley, I've been here 19 years, going on 20, you know, I moved from the east coast, and basically, if you weren't here, this is where the action is. If you're in the sports of tech, this is where all the athletes are. That's now changed, as you mentioned earlier, when we started, it's everywhere. Now, also there's jurisdictional issues, I mean the US, one guy's told me, the US is turning into Europe, all these regulations, it's not as much free capital as you think, and then, we certainly know that. With FCC, and others are putting the clamp down. But, structuring the token, is a concern, right? Or consideration. >> Yes. >> And a concern, so, you know, US entrepreneur, what should they do in your opinion, and if someone's outside the US, what do they do? What's the play book, or, not play book, what's the best path right now? >> Leave the US (laughs). Move out of the US. >> Tell that, wife and four kids. See you later. Yeah, but that's real legit, that's-- >> Come and check out Panama, one of my friends is building a Blockchain incubator, crypto-incubator, I mean I think if you're-- >> What's it like to move out of the United States, I know you just recently went to Panama for this, but, what's it like? Is it scary down there, I mean, is it entrepreneurially friendly? What's the vibe, what's the scene like, take a minute to explain that. >> So I've actually been out there 12 years now, in Panama. One of the neat things, you want a place that has an international outlook, international perspectives, so, you want to think in terms of a Dubai, a Singapore, a Hong Kong. And so, Panama has some aspects of that, it's not perfect, but it does have that international perspective thanks to the Canal! So it has, you know, a hundred years! (laughs) >> It also has the Panama papers, which is a negative blowback for those guys, so it's a safe place to do commerce, in your opinion? >> Um, it is a nice geographic base to do international commerce. >> Got it. >> So, you don't necessarily want to rely on the local jurisdiction, but, in terms of a geographic base, that is US time zone, US dollar, no hurricanes, it's a very interesting place. >> Puerto Rico's got the hurricanes, we know that. >> Yeah. >> Final thoughts, just overall perspective, you've been around the block, we've been around the block, both of us have, I mean, I kind of have these pinch me almost like, "Damn, this is great time, "I wish I was 22," I mean, do you have those? What's it like, how you explain this environment? If people ask you, "Hey, what was it like in the old days?" You know, when you have to provision all your own stack, and do all the stuff, it's pretty interesting right now. What's your thoughts? >> Yeah, I mean, I think we're going through an interesting moment right now, where, we are getting to a point where the forces of centralization are coming against the forces of decentralization, and that includes from the regulatory, as well as the business side, and so, I think it is important, as we look where to dedicate our efforts to, to really find ways to increase the decentralization as a factor that encourages creativity, and entrepreneurship. >> Yeah, it really is a personal, I think it's a great environment. Decent.bet, bet, make your bets, any updates on how to get tokens, what people can expect, a quick plug-in for Decent. >> Yeah, check out our website, we've got links to exchanges, the token is currently listed on Cryptotopia, HitBTC, and a couple other exchanges, and, yeah! Please check out the test net, please check out the white paper, and just learn about how this protocol works, this platform works. I think it is very inspiring, as a structure. >> Adrian Scott here, inside theCUBE, Soma Capital, also experienced entrepreneur himself, technologist, and has been through the ICO process, head of technology at decent.net, we'll be checkin' it out, it's theCUBE Conversation, I'm John Furrier, here in Palo Alto, California. Thanks for watching. (bright 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)

>> Announcer: Live from Las Vegas, it's theCUBE, covering IBM Think 2018, brought to you by IBM. >> Welcome back to theCUBE. We are live on Day One of our three days of coverage of IBM Think, the inaugural single event from IBM. I'm Lisa Martin with Dave Vellante. We're at the Mandalay Bay in beautiful sunny Las Vegas, and we're excited to welcome to theCUBE for the first time, Steve Hill, the Global Head of Innovation at KPMG. Welcome. >> Thanks for having me here. >> So you are giving a talk Wednesday, you said, at the event. >> Yes. >> I want to get a little bit into your role at KPMG, as well as your session. So talk to us a little bit about what your role as the Global Head of Innovation. >> So Innovation is an overused word. I don't particular like the word innovation, but in the context of my role, it really is taking a look at our business and our clients, and saying what it is that our clients need for their futures. What's going to create relevance for our clients as we go forward, and how does our portfolio of services relate to that relevance? And if we have gaps where we see our services not serving them best, or not going to serve them best in the future, my job responsibility is to help for strategy purposes and for investment purposes, bring those points to bear, and to get either investment into those areas, right, or changes in the business as appropriate to make KPMG more relevant to our clients, and to their relevance to their clients, right, that's the whole idea. >> So, Lisa and I talk to a lot of people in theCUBE, and we talk lots about invention, startups inventing something or new technology that gets invented, but innovation to us, and I think KPMG is at the heart of this is taking an invention and actually applying it to effect change, getting it adopted, >> That's right. >> and changing a business, a societal change potentially, is that-- >> That's right, I mean, our short phrase for it is idea to cash for our clients, right. I mean at the end of the day, and I think this is profound in certainly corporate governance evolution, right. We've seen the advent of lots of escrow changes of how companies have been managed, enterprise has been managed, right. The Dutch started with the East Indian Trading Company, one of the first large global enterprises, and since that time we've seen the maturation, the new roles. The CIO role didn't exist much prior to 1950, right. Today we're starting to see innovation to be a very important skill and capability for all corporations, all enterprises, including government, right. And I think we're starting to see a maturation of corporate capability, I would say, in the innovation space, because the pace of change is so fast today, the political, economic, technological, social trends are so complex that you've got to get something in your muscle memory that helps you change your business as much as operate it effectively. >> I'd love to know who you're talking to within organizations. You mentioned CIO role, the CISO role, chief data officer. >> Steve: Right. >> Who are the minds that you're helping to bring together so that an enterprise that needs to digitalize to be competitive will survive, right, really survive these days? How do you help them really embrace a culture of innovation as really there's no other choice? How do you get these minds collectively agreeing, yes, this is the direction we need to go in? >> Yeah, I think, I mean first of all, this is a C-suite conversation and a board conversation in many cases, but the reality is when you start to look at the lack of innovation in an organization, right, and when the environment changes, competitors start to change, and the more complex it is, it's harder and harder for companies to pivot and to reinvent themselves. And we're seeing a lot of unbundling of businesses in today's environment, whether it's a company that moves packages, right, or a professional services firm, or a company that used to distribute videos, right. I mean things change and some of the irony is that sometimes the innovation in companies like Kodak, Steve Sasson invented digital camera, it took eight minutes to go from a snap to a picture, but they invented digital technology from cameras, and that the distribution of digital videos is that it actually would help to, further the demise of that organization. So that notion of how do you take change going on in the environment that you're working at, and more importantly your customers and clients, how does that convert into your business, that's a C-suite conversation, and I think innovation can be embodied in a person to help build process, meaning how do you take an idea, how do you look at the marketplace and get sensory input, convert that to ideas for strategy and for investment, and the investments have to be deployed to the field to the business, and that relationship, that whole lifecycle of innovation requires a lot of people from the enterprise to be involved in it. And I would argue the culture has to evolve because until recently most people, in fact, I would say, including current times, most people in organizations are rewarded for doing what they do well, not breaking what they do, not rethinking what they do. And the more you get into that operational mindset, that I want to wring all the efficiencies out of this process that I can. Right, the more you're wed to the status quo, the more somebody comes in from the side and takes you out. >> So I love this conversation 'cause Steve you're able to take the long view and then I want to sort of shorten it up, and then maybe put it into a longer term context. So over our, your guys 20-plus-year careers, mine a little longer, most of this industry has marched to the cadence of Moore's Law, that's where innovation came from. >> Yes. >> How do you take advantage of Moore's Law? How do you go to client server software, whatever it was, the innovation equation is changing now. It seems to be a function of, these guys have been hearing me say this all day but data that's not siloed, but data that you have access to, applying machine intelligence-- >> Yep. >> And then getting cloud, scale, economics and network effects, and then applying it to your business. >> Bingo. >> So talk about how you see the new wave of innovation in this world of digital or however you phrase it. >> Well, it's interesting, I mean, I don't hear a lot of people phrase it the way you do which I think is spot on which is, and my words are, ubiquitous access to technology which is cloud, data, and that's a huge question mark and a big C-suite conversation. Having a lot of data isn't the key, having the right lot of data is the key. Right so Dyson is moving into auto-making today, right. They have a lot of data and it's very different from what the incumbents have. Is it better or worse? We're going to see, right. And then of course smart computers which is the machine intelligence, right. Those three elements, I think they're fundamentally changing labor productivity. And what I would say is to your question is that innovation is really important here because if all you do is take those three elements and you just digitize a status quo process, you might get marginal benefits, you might get some labor productivity enhancement, you may get some marginal improvement, you may change an outsourcing agreement to an onshore RPA deal, but if that's all you do, you're setting yourself up for a disappointment because what's really going to happen with thinkers, i.e., those that have innovations, they're going to rethink the process. Most of our analog systems are created around people checking people, so you may have nine steps, I'm making it up, in a process, that in a digital world only requires one or two or zero when launching in some cases. And so if you can rethink that process to go from a nine-step to a zero-step process or a one-step that's a nano second long, that changes the dynamic of the process. In fact that's not even nirvana, right, the real nirvana is can you change your business model, right? And I would use IBM, since we're here, as an example of going from a big box with a lot of people running around it, called IBM of the past, Watson, to an API engine that David Kenny has helped to build that says, we're going to have a platform business model leveraging network effects, and I want to have a supply and a demand curve that are much faster growing than my sort of organic ways of growing a network could be, right, through people point clicking. That's innovation. >> IBM is an interesting company because it is a company with a lot of legacy, but I think gets, as you just described it, but you look at the top five companies by market value today, they're six, 700-billion dollar market companies, they are data companies not just with a lot of data, but they've put data at the core, so it's Amazon, it's Apple, it's Facebook, it's Google, et cetera. They've put data at the core whereas most organizations, I'm sure many that you deal with, they have human expertise built around other assets that aren't data. It might be factories, it might be the bottling plants, et cetera. So there's a gap, I don't know, machine, AI gap between sort of those that are innovating today, now granted the stock market can change and, >> Sure. >> Who knows, maybe the oil companies will be back involved, not to drop but how do you deal, how do you advice your clients on how to close that gap? That seems like a huge challenge. >> Well it is a huge challenge, and I think, going back to the three elements, it would be very easy for you to dive bomb into a transformation effort and say, I'm going to go and get some smart computers and hire a bunch of people that know machine intelligence and natural language process, and all that stuff, and put them in a room, and go create some applications, the bottom line is, that's not unimportant. You got to get your hand on the mountain and start climbing, but the data piece, I mean, if you don't understand how data is going to be relevant to your business and to your clients and their clients, right, in the future, you lose. And the reason why those five that you talked about earlier are so successful is they think a couple of steps ahead on the data strategy, right, and they're not thinking about, most organizations by the way, they'll say we want a data strategy and then they'll relegate the strategy thinking part to their businesses which are bifurcated, and they look at the world in silos. And they're doing exactly what they should do which is take care of those businesses, but when you step back into those five companies you've talked about, they step back from those silos and say, what is the enterprise implications, and how do I create new businesses with correlations of data that I didn't have before? I think that requires a whole different level of strategy. It's C-suite and board that has to guide those kinds of decisions. You don't see a lot of people really getting their hands dirty around intense forward-thinking data strategies at the enterprise level like we're talking about here. >> You believe we are entering or going to enter shortly a productivity renaissance. >> I agree, yes. >> That's sort of I'm talking about our off-camera conversation. Explain why you think that, compare it to sort of the Industrial Revolution. Take us through your scenario. >> Sure. So, I mean, when you think about labor, I mean, what are the things that I think those three elements will give us as a society, as a global community, is a pretty big S curve jump in labor productivity. In fact we have at KPMG some efforts to quantify what that might be, looking at what we call frontier firms, and applying those practices back to incumbents. 90% of most industry players is saying what are those differences that we can model. The fact of the matter is when you go back to the Mechanical Revolution, the Industrial Revolution, people did everything by hand prior, right. Equipment helped them do things whether it was, even the printing press saw changes in society and labor, but when you start to getting into heavy manufacture in the Industrial Revolution, productivity was enhanced dramatically, and instead of putting all of these people who were doing things by hand out of business and out of work, it actually created more jobs, a lot more jobs, and a lot more wealth for society. I think we're heading for a similar S-curve change with smart computers, cloud, and with data. And that the roboticism of people is going to be automated, and people are going to be allowed to practice and use what's between their ears a lot more. That's going to create value, insight, new questions to be asked. I mean, how many times have you ever heard this? Every time you answer a question on something that's very important, you want to understand there's two more questions to be asked. Medicine is that way for sure. But you're going to start to see massive advancement in areas where people have had to use a lot of cognitive skills, right. It's severely under-leveraged because they were doing so much roboticism and doing things that computers can start to do now. So I think you're going to start to see a renaissance, if you will, of people using their nogers in ways we haven't seen before, and that's going to change the dynamics of productivity and labor in a way that's going to create wealth for everyone. >> And it's going to change industry. So, okay, so I got a bunch of questions for you then. >> Steve: Yep. >> Here we go. And I asked this earlier but I didn't really get an answer. Will machines? >> Steve: From me or from somebody else? >> No, from somebody else. >> Steve: Okay. >> Will machines make better diagnoses than doctors and when? >> I mean, what's the regression line? I mean, the samples said, I think today you'll find machines giving better diagnoses than doctors in some cases. >> Dave: Okay. >> I don't know where the regression line sits today, but if you look at the productivity of doctors going a hundredfold, and the morals scattering around lung cancer, it's impressive. >> Dave: Yeah. >> And do you want a doctor involved? Yes, you do, because part of it is in an orthodoxy of trust which by the way ten years ago, you wouldn't put your credit card online to buy anything, right. It's the same kind of orthodoxy. But I do think that machines can read so much more data, interpolate so many more correlations than people that when you add that to an oncologist for example and cancer, you have a super oncologist capabilities which is really what you're looking for. We're not looking to replace the oncologist per se, what we're looking to do is get the productivity of the oncologist from two to 200. >> I was talking about diagnoses. So you would say yes, okay. >> Yep. >> Will large retail stores mostly disappear in your opinion? >> No, I think they'll change. I think that the customer experience is still, we're still people, we need physical space, and we need physical things to touch, smell, and feel. I think those things will change, but we'll still need experiences. >> I'm going to keep going 'cause Steve's playing along. Will driving and owning your own car become an exception? >> Yes. >> Okay. >> I can elaborate if you want. >> Please, yeah, go ahead. >> So, I mean, the first, I mean, we actually did at KPMG a study called islands of autonomy which modeled LA and San Diego, Atlanta and Chicago, and we modeled how do people move. And we did this for a reason because autonomous vehicles are often times amalgamated as one thing. Oh well autonomous vehicle is coming so you better sell your sports cars and your SUVs, not so fast. The reality is mobility is very different based on where you are. If you're in the middle of Kansas or something, you're going to need a truck to run around in your farm, but if you're in LA or Atlanta or Chicago, you're going to move with autonomy, with autonomous vehicles, and then you're going to really enable mobility as a service very clearly, but differently. The way people move in these cities is different, and if the US auto industry understands those differences, and extrapolates those to a global marketplace, they're going to be very advantaged as mobility as a service becomes real, but the first car that goes, I hate all of the viewers that love this category, but sedan is the first cars to go. I would say sports cars, I race cars, so I love sports cars. People still ride horses today but they don't need them for transportation. And SUVs, right, specialty vehicles that you may, it may not, the economies may not be there, but as we know transportation and car ownership, it's going to change fundamentally, and that's going to have a massive effect on FS, right, insurance companies, banks that are doing loans today. It's going to have a big effect on healthcare. Mobility as a service is going to transcend to healthcare, mobile healthcare in ways that we can't see. >> You got great perspective. I got one more for you, maybe a couple more. Do you think traditional banks will lose control over payment systems? >> Well, a lot of them are already nervous about that, wouldn't you think? >> Yeah, but it hasn't happened yet though. >> I understand, the bottom line is no 'cause I think the traditional banks are getting smarter and they're leveraging their own innovation horsepower to understand things like Blockchain, and how to incorporate those things into their business models. So the answer is I think the way they do, look, banks exist because of one reason, trust. They have trusted brands, right. As long as they can stay current enough to be relevant to your banking needs, you're going to stay with that trusted brand. I think the trick for banks is how do they move fast enough, leverage the technologies that make your life easier, and not waiting three or four days for bank clearing of a check, for example. >> That's they say if you're-- >> And get to that trust in a new way. >> Unless you're a Bitcoin millionaire or a billionaire. >> You still need a bank. >> Maybe somewhere down the line. >> Yeah. >> Okay, last one, I promise. Will robots and maybe even RPA reverse offshore manufacturing advantages? >> Yes. >> Can you elaborate and give us a sense of-- >> I think, first of all, if you really look at what RPA is doing in many ways, is disintermediating the value of geographic location in many ways, right. So where I may have had, again this is important that you understand, so I can still go offshore today and get labor arbitrage and get margin, but I'm not rethinking the business. What I really want to do is own, I want to have more control and I want to have more flexibility and growth in that back office function. So it would behoove when you think about our RPA, and bring in our RPA technology so I have it one onshore, two, leverage the data more securely potentially, and then leverage that data as part of my lake to say how do I use that data to correlate to get to what I really need which is customer relevance at the front office, right. So, look, I think that this whole notion of you're in a different country, and therefore the labor pools are different, and therefore their arbitrage will get benefits from that, those days are over. I mean, it's just a question of when does it die. >> Dave: The data value offsets that arbitrage advantage. >> Well, forget that. The arbitrage is dead itself because the machines, >> Yeah, yeah, right. >> You're talking about orders that have made it to a cheaper per unit cost for an RPA, for a bot to do something than it is for a person that has to eat, sleep, take vacation, and get sick, and all that stuff. And so no matter where they are in the world. So what I would say is that notion is dead. It's just not buried. And overtime we're going to migrate again to machines doing all that robotic stuff. But, again, those people, they're going to do different things. It's not like we're going to see hordes, hundreds of thousands and millions of people not be able to work, I think they're going to be doing different things using their heads in different ways. >> Lisa: I like that answer. >> That's a plan. >> Dave: It's good. >> There's a price somewhere? >> I'm absolutely wrong, I just don't know how wrong, right. >> Well, it's fun to think about, and you provided some context. It was very useful. So, thank you. >> And I imagine folks that are attending your session at IBM Think on Wednesday are going to hear a little bit more into that. So thanks for sharing. >> We going to see some specifics, yeah. >> Thanks for sharing your insights, Steve, and for joining us on theCUBE. You guys, the innovation equation is changing, and I thank you for letting me sit between a very innovative and informative conversation. >> Thank you both. It was fun. >> Thanks Steve. >> For Dave Vellante, I am Lisa Martin. You're watching theCUBE live on Day One of IBM Think 2018. Head over to thecube.net to watch all of our videos with our guests, and siliconanglemedia.com for all the written articles about that. Also check out Wikibon, find out what our analysts are saying about all things digital transformation, Blockchain, AI, ML, et cetera. Dave and I are going to be right back after a short break with our next guest. We'll see you then. (upbeat music)

(soothing music) >> Announcer: Live from the Javits Center in New York City, it's theCUBE. Covering Inforum 2017. Brought to you by Infor. (energetic music) >> Welcome back to theCUBE's coverage of Inforum 2017. I'm your host, Rebecca Knight, along with my cohost, Dave Vellante. We're joined by Debbie Krupitzer, she is the vice president at Capgemini based in San Francisco. Thanks so much for joining us. >> Thank you for having me. >> It's your first time on theCUBE, so we're going to-- >> It is, I'm excited! >> It's going to be great. >> Great. >> It's going to be great. So, Capgemini has had a longstanding relationship with Infor but this year, things got a little more serious. So-- >> Debbie: It did! >> So tell us, give us a status update. >> I think we both saw the writing on the wall, which is around, my space is digital manufacturing, that's where I play, and they see it to. Right, so we see such a great opportunity around connected factory and enterprise asset management, and all these really good things that are happening in the space, and so it sort of naturally came together. So we've always worked with them, but we really saw an opportunity for this year to say, hey, this is an investment piece, we both have a lot of energy, a lot of passion around it, let's go make this happen. And so it's been super fun, lots of fun this week. >> AI has been a really big theme at this conference with the introduction of Coleman. Can you tell us a little bit about where Capgemini is putting its resources when it comes to artificial intelligence? >> Absolutely, I mean, we know it's the future. We know it's where it's at. And you know, I had a quote from Elon Musk, which was saying AI, they're taking over the world, robots are going to take over the world in less than about 45 years. I don't know if that's so much true, but what we are really focused on is the business value of AI, not in the sort of trend, or what's the hype of AI. Where can you practically use it? So for us, artificial intelligence could be consumer feedback, or it could be around machines, it could be where are we getting machines to talk to us, to tell us what's wrong? We see a ton of opportunity around this, and it's really exciting for us, but always with a pragmatic what's going to make us money, what's going to save us money, and our customers, that's what we're always focused on. >> So it's the business value. >> Always the business value. The technology hype is just the technology hype, and I think that's what we really love about this conference is that there's a practicality about it. So there's not this sort of, hey it's trendy, it's cool, let's just go do it. There's a lot of thought behind it, there's a lot of thought behind what we want to do, what we want to achieve, and what we want to invest in. And we see this as a big investment. >> So let's talk about people, process, and technology. On theCUBE, everybody always says technology's the easy part, and I think it's generally true. I think technology's generally well understood, there's a lot of open source stuff, pretty much everybody has access to generally the same technology, it's how they apply it, the processes they put behind it, and the people that really make the difference. Okay, so when you think about digital manufacturing, help us understand it, it's surely not my wheelhouse. You bring in the IT and the whole OT thing, you're bringing the IT and the operations technology worlds together, and those are worlds that have never really collided, so wonder if you could talk about that a little bit-- >> Debbie: I would love to. >> Some of the challenges that brings? >> Oh, and there's a lot! Right, so we call it the IT OT Convergence. So there's actually a name for it. So that's Operational Technology and Informational Technology, and you're right, the plant has always been its own kingdom. So whenever you think of manufacturing, these plants are like we are the kings, we do it the way we want, and they never really wanted IT involvement. But what we're finding is that the CFOs, the people who are spending the money, have already seen the value of IT in terms of Cloud, cost savings, enterprise, infrastructure. How do you apply those to the plant to get the savings, and how do you replicate it? So what we're finding is that there's always again, there's a cost factor, right? So they're going is there a way for us to leverage technologies across multiple plants where we can get those savings, versus plants just going and buying whatever they want. And that' what we're seeing as the big change. Now, you're always going to get a shift, 'cause our plant guys and girls, they're used to doing it the way they want. But the thing that we see is that we're not coming in and totally putting robots to replace these jobs. What we're coming in is making their jobs easier. We're making it more efficient. We're seeing ways to save them money. And so the plants get incented when they have outcomes where they save money, so they're really pretty interested in doing this too. >> So give us some examples of a robot working along side of someone on a factory floor. >> So, you know it's funny, but I'd say 80% of the companies we work with don't have robots. Robots are sort of a sexy cool thing that everybody thinks is out there, and they are out there and they're really cool, but normally with the robots its already highly processed, it's a highly structured environment, usually around high tech or the car companies. I'll tell you what's more fun for me, when they don't have anything, where it's still paper-based. That's more fun, because what you're doing is you're going in and showing them how you can add a sensor to a machine to give you information you've never had before. How can this tell us how to do something differently? Is there a process issue? And when you talked about technology always being the easy part, it really is. When we go into a factory, it's normally a people challenge, that's operator, whether the operator's not doing something correctly, or in the right sequence. It's process, is there a process challenge? The technology is normally the easy part. So for me, I'm that person who likes the really immature factory, 'cause that to me is where you make the most change. Somebody's already got robots, you're already doing cool stuff. I'm probably not going to show you too much. It's the ones where they have that ah-ha moment, where they go wow. >> And we've been hearing this, that a lot of this stuff is change management. So how, from Capgemini perspective, how do you approach these challenges? >> You want to get always executive buy-in, right? So it's when it's coming from the top, I think that always is really valuable. But for us, we're plant floor people. I mean, I say you got to go talk to these folks and make them understand why you're doing it and what you're doing. Because there's always fear, right? Fear of anything, fear it's going to take your job, or fear you're not going to have a job, and what we're saying is it's a reallocation. The fact is this, in our space we've got an aging workforce. And aging workforce's going away. And the Millennials don't want to work a factory floor. And the reason they don't want to work a factory floor, it's dirty or they don't think it's the kind of work they want to do. We're trying to modernize that. Use an iPad, get IoT, get technology. You're not working the plant floor, you're working a dashboard. You're looking at data, you're driving data decisions, and so we call it From Shop Floor to Top Floor. How can we drive that so our Millennials, the ones who really do want to be the guys to take, and girls, to be taking these jobs, how can we make it more exciting for them, and we think there's good opportunity for that. >> So it really is all about the data, and when you think about the factory floor, a lot of analog data. And when you talk about process, a lot of process that's changing as a result of that analog to digital. So could you talk about the data, the data architecture that you're seeing and what the discussion is around data, data value, and how to get the value, how to monetize data, not necessarily by selling data directly but how it contributes to revenue generation or cost cutting? >> Well, we say data is the new oil, but I always tell my clients it's new oil, but it's not refined oil, and you've got to refine it. And refining the oil or refining the data is finding the business value out of that data. And you're right, there's a lot of data out there. The questions we get from the manufacturers are, what data is valuable, what is not valuable, what do I need, what do I not need, what can I aggregate up? I think the most interesting thing, and I love stories, is that when you look at a line, you've got machine number one to machine number 10. And before they would never know that something that was happening on machine number one, even a small configuration or change in a widget was actually impacting machine number 10. They never had that before. Now with that data, we're taking the data off of those singular machines, we're putting it up into the Cloud, we're aggregating it, we're able to see these anomalies and go, wow, that's the reason why. We never had that before. So you'd have engineers that would go, it must be machine number 10 or it must be machine number nine, or we don't really know what's going on. Now we're able to trace that; that's great. >> So I wonder if you could share with us any insights you have around discussions going on around IP, and data ownership? Because imagine, hypothetically for example, you've got some kind of programmable logic controller, and the PLC manufacturer is collecting data because they're trying to predict the maintenance, or whatever it is, and then of course the factory is the whole system and they're collecting data. So who owns that data-- >> Debbie: Oh that's a good question. >> And what's that conversation? >> Well, I'm no lawyer and so I'm not going to get into it. So I think what you'd find is that it depends. And that's a consultant answer, but I'm going to say it depends. If you're talking about the machine data, you have bought machines that are from a manufacturer. The manufacturers would love to have that machine data, 'cause they want to know what's going on with their machines. You want to know what's going on with the machine on the floor, very specific use case, which is what's happening in my space. The manufacturers want to know what's going on in a general way, how do we make our product better, how our are customers using it? In my mind, a plant shouldn't mind about that. A manufacturer wants to get that data to make better product, faster to market, make it cheaper, easier to buy, great, take it. I think where you get challenges is when there's outcomes that are coming out of data that people are leveraging to resell as business models. I think that's where people go, but that's our proprietary customer information about how we do a specific process, or how we do something. I think that's where people get a little iffy. And I don't really see that happening so much. So much, right, and I get everybody is really scared about the Cloud. I think the interesting thing is they'll say, well we don't want all of our data, our proprietary data in the Cloud 'cause it's not secure, and what I want to tell 'em, it's more secure in the Cloud than it is at your plant. >> So that's, I'm less concerned about the security of the Cloud, maybe it's different and you got to do some extra work to figure it out. I'm more concerned with our clients around the other thing you were talking about. I'll ask you specifically. If I'm using some kind of AI and I'm developing a model using machine learning and I'm training that model, maybe it's my data, but the model, my data's informing that model. How do I know that that model is not, somehow that IP of mine is not going to end up at my competitors, and is that going into discussions and contracts and agreements? >> Absolutely it is, and I think what you'll find is a lot of vendors that are out there that are dealing with AI and data are having to set clauses up that say you will not use this data to feed into any of your algorithms, into your IP. Like do not take my data. 'Cause everyone thinks, what we do is special, and some of it may be, do not take that and learn from us. That's very specific in clauses and contracts that we're seeing. >> Is it kind of like the honor system, or is there, is there a digital way to track that? >> Yeah, I think what's getting interesting is we get the data, like the companies aren't dumb. They're hiring their own data scientists, they're not letting us go to external parties. They're saying we're going to hire our own data scientists, and we'll start segmenting the data for you. They're very clever, you know, business people are in business because they know how to make money. They're not dumb. So what they're doing is getting a whole new set of roles. They're hiring data scientists. They're hiring data architects. They're hiring people in that understand the data structures so that they can keep track of what's valuable and what's not, don't worry about it. So, I think that's a smart thing to do. Because it used to be pretty rogue. I mean, five years ago, people would be like, well I don't care if you take the data off my machine. I think people have gotten a lot more clever, and also seeing that some of the vendors are repurposing some of this data for their own profit. Nobody wants that, don't take my stuff and use it to profit yourself. >> And you were talking about earlier, just the idea of what's valuable data and what'd not valuable data, and we find we are in this deluge of data. And we don't even really know, you can't say for certain, that data is not valuable, so don't worry about it. >> Exactly, and I think that's the challenge we get is that everybody thinks it's like a pile of money. Like, that's money, don't get rid of that money. >> Rebecca: It's oil! >> Oil, don't get rid of that, right? But what we find is you're getting so much data, some of the data is really not as valuable. And I'll give an example. An on-off switch telling me the motor is running on a machine is not valuable, it doesn't matter. It matters to that company because they need to know that the machine is working, so what we want to do is segment data, and we want to be able to give the business value, or have a hypothesis around what that data is bringing us. And sometimes, I'll tell you, a lot of times a hypothesis from my business users is wrong. So they'll say, what we think of A and B is super valuable, and then we'll go in and like, actually it's not A and B. It's E, E is actually the data stream that actually has the most value for you, and this is why. And so that to me is a really fun part, 'cause they have to have that moment where they go, oh, well we were wrong about that. It wasn't, I say, you're not wrong, it's just different. So I think having that data and then understanding what you're holding on the edge, what you're putting on Cloud, what you're putting on print, what you're able to share just makes people smarter about what they've got. >> So the accounting industry doesn't have standards as to how to value data on a balance sheet. We know that. But are there off-balance sheet discussions going on that you're having with your clients in terms of helping them understand the value of their data, quantifying that value? Everybody talks about the data is the new oil, you got to be a data-driven company and all this commentary, but how do you turn that into actionable, tangible results? >> That's the hard part, right? So that's the meat of the problem. And I think what we do is we really have to deep dive with our clients to understand what's the business model, or what do they think is going on? Because we've had lots of byproduct data that's come off of certain things that they had, and we were like, this is actually a more interesting tangent here, which is a byproduct of that data that you've got. Have you guys thought about selling that? So we'll come in and come up with business models, and so Capgemini has got, we've got Cap Consulting, we have these great acquisitions that we've just made where they'll come in and we've got people who do that. Who say, this is a new business model, have you thought of a resale, or this is something that's very valuable. And we'll go in and deep dive, a lot of times it's just discovery. We don't know either. So we'll go in and say, okay, this looks interesting, have you thought about this, and just new ways, it's just new business models. >> Do you see organizations and are you helping organizations actually apply maybe conventional financial measures, whether it's NPV or enterprise value, and are they beginning to track that, and what can you share with us? >> It's so funny you said that 'cause I just, when I just was coming here and I had a lead, I had a hot lead but I had to leave and come and do this interview, and he was asking me, and I said, the one thing we do is value map your processes and your data. And it was a thing that intrigued him. He was like, how do you do that? How are you doing that? I'm like, well, what we're doing is actually, we take all of your data from a historical standpoint, and we can see what's going on historically. Now the interesting part is how do you go forward with that? And so what we're finding is that you look at this data and you say what's the value mapping in terms of where you make money? And that's different for every company, and so we work with our customers. And so literally what I do is plot here's this process, there might be 15 processes that are going on. Here's the data outcome of that process. Now you talk to me about the value in terms of where you guys make the most money. >> You know, that's interesting, because data has unique value for different processes, obviously, so you have to understand it's not fungible like a dollar bill. And so that's what you can do is share this video with your hot prospect. (laughter) >> Debbie: Exactly! >> Maybe start a deeper conversation. >> I did, I told him, I have to go but I'll be back, so hopefully he's still warm over there. But I think people don't realize that the value mapping that you do is really a standard value, like you staid, standard financial models, the net present value, all those things, ROI, all those things we've always traditionally done on every project we do the same exact thing with this. For around digital manufacturing, because what we want to do is optimize. We want to optimize on what's going to save you the most money or make you the most money. And it's really that simple. Does it save you money, does it make you money. >> So you're applying sort of conventional measures to data, mapping that to processes, and then driving business outcomes, and then quantifying that over a lifecycle. >> You got it, that's exactly it. So you gave away my secret, so now you're going to start a technology firm. >> So that's high level, sounds good, but it's not trivial to do that, you need expertise, you need the main expertise. >> You do, and every manufacturer is different, right? So I work in discrete and process manufacturing, very different, very different processes, very different ways. Process manufacturing has a little bit more complexity, not that discrete doesn't, but it's interesting because what we do is find different things for different industries too, right? Now, there's some comparables, like food and pharma. Food processing, pharma is very similar, and people don't realize that, but it's very similar. And so we're always making comparisons. Pharma's a little bit more regulated, I think that might scare people, right, 'cause they want their food to be really, it is regulated, but maybe not as regulated as your drugs. And so what we find is the hypothesis or use cases that we can leverage and repurpose across industries. And I can't tell you how many times I've been in an industry and I just had one, and it was automotive, and I gave them a consumer packaging use case where they looked at me like I was crazy. And they said, I don't get it. And I connected the dots for 'em. And I said, do you see where if you've got this in consumer packaging, what they're looking at the quality of the packaging from start to finish, and I gave them the, you know, I won't go into the details. But they had this, they just went, oh yeah. And so I think what we're finding is industries that used to be like, if you don't know automotive, if you don't know mining, you don't know consumer packaging-- >> Dave: So true. >> You don't know us, you don't know us. >> And that's changed. >> And that's changed. So what they're seeing is they're going, you know what, 'cause they're seeing like the Amazons, they're seeing these companies, you know Amazon just bought Whole Foods. What? And they didn't buy Whole Foods for the grocery, they bought them for the data. And so I say like, guys, think of this in a different way. You've got to look at other industries, and so we're getting that more and more. We'll bring them out to have discussions about innovation or what's new, cool technology, and I bring it from every sector. Now, most of the time they'll go, show me how that's applicable? And I'll show 'em, and they go, wow. We get it. >> That's a great observation. Because digital means data, and data means you can traverse industries in new ways, so I love that CPG example. You would think, what? But you're getting people to rethink. >> You really are, and they're seeing, they're like, you know, they've got to reinvent themselves. Companies are having to reinvent themselves to this digital age, and they're scared. And they're saying, we sell a commodity, what can we do differently? How are we going to survive? I don't want to be the Kodak, I don't want to be the Blockbuster, I don't want to be that company. And so we're constantly pushing our product, companies that go what are you doing different, how are you going to the next level, is it data, is it services? >> Dave: What business are you in? (laughter) Right, I mean. >> Exactly. >> Well everyone's a software company. >> It's causing people to rethink that, I mean it sort of, we're back to the what business are you really in question. Like we were twenty years ago. >> It really is, it just cycles, right? And I say everything cycles around, we're doing the same thing, we're just repackaging, call it something else. So we all do the same thing over and over. >> Well, but there are some differences. >> There are, of course, more technology, better technology, cheaper technology. I think is what I'm finding is that the price of sensors and the price of technology is going down, that it's becoming more affordable. So, what I used to hear from the manufacturers is like, well I can't afford that, we can't do that. 'Cause there're very lean margins in manufacturing, I mean there's a lot going on. And we're being able to show them, hey, it's not a ton of investment, this isn't like a 20 million dollar ERP. Small increments of money that show you how to get the save. >> Well, 20 years ago, you were purpose-building specific technology stacks for your customers, and today you're leveraging. Whether it's Cloud, a security layer, a data layer, you pick it and you're building on top of this digital matrix. And really focused on the business models, more so than the technology. >> It is, and that's what we're seeing. And I say that's why, to get back to the first question about OT IT Convergence, that's what my CFOs see. They go, we get it. We get it, now let's apply it to the plant, so let's go see how we can scale this. 'Cause you're talking anywhere from companies having 20 plants to 200 plants, that's a lot. And they want to see how they can repeat in scale, and so that's what we love about it. It's turning into a business conversation. It's not a technology conversation, which I love. >> Debbie, thank you so much for joining us. >> Thank you! >> You made it! >> I did it, yay! I got it, thank you so much. >> I'm Rebecca Knight for Dave Vellante, we will have more Inforum just after this. (rippling music) (rippling music)

>> Narrator: Live from Dublin, Ireland. It's theCUBE, covering Hadoop Summit Europe 2016. Brought to you by Hortonworks. Now your host, John Furrier and Dave Vellante. >> Okay, welcome back here, we are here live in Dublin, Ireland, it's theCUBE SiliconANGLEs flagship program where we go out to the events and extract the signal from the noise, I'm John Furrier, my cohost Dave Vellante, our next guest is Emer Coleman who's with Disruption Limited, Open Data Governance Board in Ireland and Transport API, a growing startup built self-sustainable, growing business, open data, love that keynote here at Hadoop Summit, very compelling discussion around digital goods, digital future. Emer, welcome to theCUBE. >> It's great to be here. >> So what was your keynote? Let's just quickly talk about what you talked about, and then we can get in some awesome conversation. >> Sure. So the topic yesterday was we need to talk about techno ethics. So basically, over the last couple of months, I've been doing quite a lot of research on ethics and technology, and many people have different interpretations of that, but yesterday I said it's basically about three things. It's about people, it's about privacy, and it's about profits. So it's asking questions about how do we look at holistic technology development that moves away from a pure technocratic play and looks at the deep societal impacts that technology has. >> One of the things that we're super excited about and passionate about is this new era of openness going to a whole another level. Obviously, open source tier one software development environment, cloud computing allows for instant access to resources, almost limitless at this point, as you can project it forward with Moore's Law and whatnot. But the notion that digital assets are not just content, it's data, it's people, it's the things you mentioned about, create a whole new operating environment or user experience, user expectations with mobile phones and Internet of Things and Transport API which you have, if it moves, you capture it, and you're providing value there. So a whole new economy is developing around digital capital. Share your thoughts around this, because this is an area that you're passionate about, you've just done work here, what's your thoughts on this new digital economy, digital capital, digital asset opportunity? >> I think there's huge excitement about the digital economy, isn't there? And I think one of the things I'm concerned about is that that excitement will lead us to the same place that we are now, where we're not really thinking through what are the equitable distribution in that economy, because it seems to me that the spoils are going to a very tiny elite at the tops. So if you look at Instagram, 13 employees when it was purchased by Facebook for a billion dollars, but that's all our stuff, so I'm not getting any shares in the billion, those 13 people are. That's fantastic that you can build a business, build it to that stage and sell, but you have to think about two things, really: what are we looking at in terms of sustainable businesses into the future that create ethical products, and also the demands from citizens to get some value for their data back, because we're becoming shadow employees, we're shadow employees of Google, so when we email, we're not just corresponding, we're creating value for that company. >> And Facebook is a great example. >> And Facebook, and the thing is, when we were at the beginning of that digital journey, it was quite naive. So we were very seduced by free, and we thought, "This is great," and so we're happy with the service. And then the next stage of that, we realize what if we're not paying for the service, we're the product? >> John: Yeah. >> But we were too embedded in the platform to extricate ourselves. But now, I think, when we look at the future of work and great uncertainty that people are facing, when their labor's not going to be required to the same degree, are we going to slavishly keep producing capital and value for companies like Google, and ask for nothing more than the service in return? I don't think so. >> And certainly, the future will be impacted, and one of the things we see now in our business of online media and online open data, is that the data's very valuable. We see that, I'll say data is the new capital, new oil, whatever phrases of the day is used, and the brand marketers are the first ones to react to it, 'cause they're very data driven. Who are you, how do I sell stuff to you? And so what we're seeing is, brand marketers are saying, "Hey, I'm going to money to try to reach out to people, "and I'm going to activate that base and connect with, "engage with them on Facebook or other platform. "I'm going to add value to your Facebook or Google platform, "but yet I'm parasitic to your platform for the data. "Why just don't I get it directly?" So again, you're starting to see that thinking where I don't want to be a parasite or parasitic to a network that the value's coming from. The users have not yet gotten there, and you're teasing that out. What's your thoughts there, progression, where we're at, have people realized this? Have you seen any movement in the industry around this topic? >> No, I think there's a silence around... Technology companies want to get all the data they can. They're not going to really declare as much as they should, because it bends their service model a bit. Also, the data is emergent. Zuckerberg didn't start Facebook as something that was going to be a utility for a billion people, he started it as a social network for a university. And what grew out of that, we learned as we went along. So I'm thinking, now that we have that experience, we know that happens, so let's start the thinking now. And also, this notion of just taking data because you can, almost speculatively getting data at the point of source, without even knowing what you want it for but thinking, "I'm going to monetize this in the end." Jaron Lanier in his book Who Owns The Future talks about micro licensing back content. And I think that's what we need to do. We start, at the very beginning, we need to start baking in two things: privacy by design and different business models where it's not a winner takes all. It's a dialog between the user and the service, and that's iterated together. >> This idea that it's not a zero sum game is very important, and I want to go back to your Instagram and Facebook example. At its peak, I think Eastman Kodak had hundreds of thousands of employees, maybe four or five hundred, 450,000 employees, huge. Facebook has many many more photos, but maybe a few thousand employees? Wow, so all the jobs are gone, but at the same time, we don't want to be protecting the past from the future, so how do you square that circle? >> Correct, but I think what we know is that the rise of robotics and software is going to eat jobs, and basically, there's going to be a hollowing out of the middle class. You know, for sure, whether it's medicine, journalism, retail, exactly. >> Dave: It's not future, it's now. (laughs) >> Exactly. So we maybe come into a point where large swaths of people don't have work. Now, what do you do in a world where your labor is no longer required? Think about the public policy implications of that. Do we say you either fit in this economy or you die? Are we going to look at ideas which they are looking at in Europe, which is like a universal wage? And all of these things are a challenge to government, because they're going to have a citizenry who are not included in this brave new world. So some public policy thinking has to go into what happens when our kids can't get jobs. When the jobs that used to be done by people like us are done by machines. I'm not against the movement of technology, what I'm saying is there are deep societal implications that need some thinking, because if we get to a point where we suddenly realize, if all of these people who are unemployed and can't get work, this isn't a future we envisioned where robots would take all the crap jobs and we would go off to do wonderful things, like how are we going to bring the bacon home? >> It seems like in a digital world that the gap is creativity to combine technologies and knowledge. I find that it's scary when you talk about maybe micromanaging wages and things like that, education is the answer, but that's... How do you just transfer that knowledge? That's sort of the discussion that we're having in the United States anyway. >> I think some of the issue is that the technology is so, we're kind of seduced by simplicity. So we don't see the complexity underneath, and that's the ultimate aim of a technology, is to make something so simple, that complexity is masked. That's what the iPhone did wonderfully. But that's actually how society is looking now. So we're seduced by this simplicity, we're not seeing the complexity underneath, and that complexity would be about what do we do in a world where our labor is no longer required? >> And one of the things that's interesting about the hollowing of the middle class is the assumption is there's no replacements, so one of the things that could be counter argued is that, okay, as the digital natives, my daughter, she's a freshman in high school, my youngest son's eighth grade, they're natives now, so they're going to commit. So what is the replacement capital and value for companies that can be sustained in the new economy versus the decay and the darwinism of the old? So the digital darwinism aspect's interesting, that's one dilemma. The other one is business models, and I want to get your thoughts on this 'cause this is something we were teasing out with this whole value extraction and company platform issue. A company like Twitter. Highly valuable company, it's a global network of people tweeting and sharing, but yet is under constant pressure from Wall Street and investors that they basically suck. And they don't, they're good, people love Twitter, so they're being forced to behave differently against their mission because their profit motive doesn't really match maybe something like Facebook, so therefore they're instantly devalued, yet the future of someone connecting on Twitter is significantly high. That being said, I want to get your thoughts on that and your advice to Twitter management, given the fact it is a global network. What should they do? >> It's the same old capitalism, just it's digital, it's a digital company, it's a digital asset. It's the same approach, right? Twitter has been a wonderful thing. I've been a Twitter user for years. How amazing, it's played a role in the Arab Spring, all sorts of things. So they're really good, but I think you need as a company, so for example, in our company, in Transport API, we're not really looking to build to this massive IPO, we're trying to build a sustainable company in a traditional way using digital. So I think if you let yourself be seduced by the idea of phenomenal IPO, you kind of take your eye off the ball. >> Or in case this, in case you got IPOed, now you're under pressure to produce-- >> Emer: Absolutely, yeah. >> Which changes your behavior. But in Twitter's management defense, they see the value of their product. Now, they got there by accident and everyone loves it, but now they're not taking the bait to try to craft a short term solution to essentially what is already a valuable product, but not on the books. >> Yes, and also I think where the danger is, we know that their generation shifts across channel. So teenagers probably look at Facebook, I think one of them said, like an awkward family dinner they can't quite leave. But for next gen, they're just not going to go there, 'cause that's where your grandmother is. So the same is true of Twitter and Snapchat, these platforms come and go. It's an interesting phenomenon then to see Wall Street putting that much money into something which is essentially quite ephemeral. I'm not saying that Twitter won't be around for years, it may be, but that's the thing about digital, isn't it? Something else comes in and it's well, that becomes the platform of choice. >> Well, it's interesting, right? Everybody, us included, we criticize the... Michael Dell calls it the 90 day shock clock. But it's actually worked out pretty well, I mean, economically, for the United States companies. Maybe it doesn't in the future. What are your thoughts on that, particularly from a European perspective? Where you're reporting maybe twice a year, there's not as much pressure, but yet from a technology industry standpoint, companies outside the Silicon Valley in particular seem to be less competitive, why? >> For example, in our company, in Transport API, we've got some pretty heavyweight clients, we have a wonderful angel investor who has given us two rounds of investment. And it isn't that kind of avaricious absolutely built this super price. And that's allowed us to build from starting off with 2, now to a team of 10, and we're just about coming into break even, so it's doable. But I think it's a philosophy. We didn't want necessarily to build something huge, although we want to go global, but it was let's do this in a sustainable way with reasonable wages, and we've all put our own soul and money into it, but it's a different cultural proposition, I think. >> Well, the valuations always drive the markets. It's interesting too, to your point about things come and go channels, kind of reminds me, Dave and I used to joke about social networks like nightclubs, they're hot and then it's just too crowded and nobody goes there, as Yogi Bear would say. And then they shift and they go out of business, some don't open with fanfare, no one goes 'cause it's got different context. You have a contextual challenge in the world now. Technology can change things, so I want to ask you about identity 'cause there was a great article posted by the founder of the company called Secret which is one of these anonymous apps like Yik Yak and whatnot, and he shut it down. And he wrote a post, kind of a postmortem, saying, "These things come and go, they don't work, "they're not sustainable because there's no identity." So the role of identity in a social global virtual world, virtual being not just virtual reality, is interesting. You live in a world, and your company, Transport API, provides data which enables stuff and the role of identity. So anonymous versus identity, thoughts there, and that impact to the future of work? If you know who you're dealing with, and if they're present, these are concepts that are now important, presence, identity, attention. >> And that's the interesting thing, isn't it? Who controls that identity? Mark Zuckerberg said, "You only have one identity," which is what he said when he set up Facebook. You think, really? No, that's what a young person thinks. When we're older, we know. >> He also said that young people are smarter than older people. >> Yeah, right, okay. (John laughs) He could be right there, he could be right there, but we all have different identities in different parts of our lives. Who we are here, the Hadoop summit is different from what we're at home to when we're with friends. So identity is a multifaceted thing. But also, who gets to determine your identity? So I have 16 years of my search life and Google. Now, who am I in that server, compared to who I am? I am the sum total of my searches. But I'm not just the sum total of my searches, am I? Or even that contextualized, so I'll give you an example. A number of years ago I was searching for a large, very large waterproof plastic bag. And I typed it in, and I thought, "Oh my god, that sounds like I'm going to murder my husband "and try to bury him." (John and Dave laugh) It was actually-- >> John: Into the compost. >> Right, right. And I thought, "Oh my god, what does this look like "on the other side?" Now, it was actually for my summer garden furniture. But the point is, if you looked at that in an analytic way, who would I be? And so I think identity is very, you know-- >> John: Mistaken. >> Yeah, and also this idea of what Frank Pasquale calls the black box society. These secret algorithms that are controlling flows of money and information. How do they decide what my identity is? What are the moral decisions that they make around that? What does it say if I search for one thing over another? If I search constantly for expensive shoes, does that make me shallow? What do these things say? If I search for certain things around health. >> And there's a value judgment now associated with that that you're talking about, that you do not control. >> Absolutely, and which is probably linked to other things which will determine things like whether I get credit or not, but these can almost be arbitrary decisions, 'cause I have no oversight of the logic that's creating that decision making algorithm. So I think it's not just about identity, it's about who's deciding what that identity is. >> And it's also the reality that you're in, context, situations. Dark side, bright side of technology in this future where this new digital asset economy, digital capital. There's going to be good and bad, education can be consumed non-linear, new forms of consumptions, metadata, as you're pointing out, with the algorithms. Where do you see some bright spots and where do you see the danger areas? >> I think the great thing is, when you were saying software is the future. It's our present, but it's going to be even more so in our future. Some of the brightest brains in the world are involved in the creation of new technology. I just think they need to be focusing a bit more of that intellectual rigor towards the impact they're having on society and how they could do it better. 'Cause I think it's too much of a technocratic solution. Technologists say, "We can do this." The questions is, should they? So I think what we need to do is to loop them back into the more social and philosophical side of the discussion. And of course it's a wonderful thing, hopefully technology is going to do amazing things around health. We can't even predict how amazing it's going to be. But all I'm saying is that, if we don't ask the hard questions now about the downsides, we're going to be in a difficult societal position. But I'm hoping that we will, and I'm hoping that raising issues like techno ethics will get more of that discussion going. >> Well, transparency and open data make a big difference. >> Emer: Absolutely. >> Well, and public policy, as you said earlier, can play a huge role here. I wonder if you could give us your perspective on... Public policy, we're in the US most of the time, but it's interesting when we talk to customers here. To hear about the emphasis, obviously, on privacy, data location and so forth, so in the digital world, do you see Europe's emphasis and, I think, leading on those types of topics as an advantage in a digital world, or does it create friction from an economic standpoint? >> Yeah, but it's not all about economics. Friction is a good thing. There are some times when friction is a good thing. Most technologists think all friction is bad. >> Sure, and I'm not implying that it's necessarily good or bad, I'm curious though, is it potentially an economic advantage to have thought through and have policy on some of those issues? >> Well, what we're seeing here-- >> Because I feel like the US is a ticking time bomb on a lot of these issues. >> I was talking to VCs, some VC friends of mine here in the UK, and what they said they're seeing more and more, VCs asking what we call SMEs, small to medium enterprises, about their data policies, and SMEs not being able to answer those questions, and VCs getting nervous. So I think over time it's going to be a competitive advantage that we've done that homework, that we're basically not just rushing to get more users, but that we're looking at it across the piece. Because, fundamentally, that's more sustainable in the longer term. People will not be dumb too forever. They will not, and so doing that thinking now, where we work with people as we create our technology products, I think it's more sustainable in the long term. When you look at economics, sustainability is really important. >> I want to ask you about the Transport API business, 'cause in the US, same thing, we've seen some great openness of data and amazing innovations that have come out of nowhere. In some cases, unheard of entrepreneurs and/or organizations that better society for the betterment of people, from delivering healthcare to poor areas and whatnot. What has been the coolest thing, or of things you've seen come out of your enablement of the transport data. Use cases, have you seen any things that surprised you? >> It's quite interesting, because when I worked for the mayor of London as his director of digital projects, my job was to set up the London data store, which was to open all of London's public sector data. So I was kind of there from the beginning as a lobbyist, and when I was asking agencies to open up their data, they'd go, "What's the ROI?" And I'd just say, "I don't know." Because government's one and oh, I'm saying that was a chicken and egg, you got to put it out there. And we had a funny incident where some of the IT staff in transport for London accidentally let out this link, which is to the tracker net feed, and that powers the tube notice boards that says, "Your next tube is in a minute," whatever. And so the developer community went, "Ooh, this is interesting." >> John: Candy! >> Yeah, and of course, we had no documentation with it because it kind of went out under the radar. And one developer called Mathew Somerville made this map which showed the tubes on a map in real time. And it was like surfacing the underground. And people just thought, "Oh my god, that is amazing." >> John: It's illuminating. >> Yeah. It didn't do anything, but it showed the possibility. The newspapers picked it up, it was absolutely brilliant example, and the guy made it in half a day. And that was the first time people saw their transport system kind of differently. So that was amazing, and then we've seen hundreds of different applications that are being built all the time. And what we're also seeing is integration of transport data with other things, so one of our clients in Transport API is called Toothpick, and they're an online dental booking agency. And so you can go online, you can book your dental appointment with your NHS dentist, and then they bake in transport information to tell you how to get there. So we have pubs using them, and screens so people can order their dinner, and then they say, "You've got 10 minutes till the next bus." So all sorts of cross-platform applications. >> That you never could've envisioned. >> Emer: Never. >> And it's just your point earlier about it's not a zero sum game, you're giving so many ways to create value. >> Emer: Right, right. >> Again, I come back to this notion of education and creativity in the United States education system, so unattainable for so many people, and that's a real concern, and you're seeing the middle class get hollowed out. I think the stat is, the average wage in the United States was 55,000 in 1999, it's 50,000 today. The political campaigns are obviously picking at that scab. What's the climate like in Europe from that standpoint? >> In terms of education? >> No, just in terms of, yes, the education, middle class getting hollowed out, the sentiment around that. >> I don't think people are up to speed with that yet, I really don't think that they're aware of the scale. I think when they think robots or automation, they don't really think software. They think robots like there were in the movies, that would come, as I say, and do those jobs nobody wanted. But not like software. So when I say to them, look, E-discovery software, when it's applied retrospectively, what it shows is that human lawyers are only 60% accurate compared to it. Now, that's a no-brainer, right? If software is 100% accurate, I'm going to use the software. And the ratio difference is 1 to 500. Where you needed 500 lawyers before you need 1. So I don't think people are across the scale of change. >> But it's interesting, you're flying to Heathrow, you fly in and out, you're dealing with a kiosk. You drive out, the billboards are all electronic. There aren't guys doing this anymore. So it's tangible. >> And I think, to your point about education, I'm not as familiar with the education system in the US, but I certainly think, in Europe and in the UK, the education system is not capable of dealing even with the latest digital natives. They're still structuring their classrooms in the same way. These kids, you know-- >> John: They have missed the line with the technology. >> Absolutely. >> So reading, writing and arithmetic, fine. And the cost of education is maybe acceptable. But they may be teaching the wrong thing. >> Asynchronous non-linear, is the thing. >> There's a wonderful example of an Indian academic called Sugata Mitra, who has a fabulous project called a Hole in the Wall. And he goes to non-English speaking little Indian villages, and he builds a computer, and he puts a roof over it so only the children can do it. They don't speak English. And he came back, and he leaves a little bit of stuff they have to get around before they can play a game. And he came back six months later, and he said to them, "What did you think?" And one of the children said, "We need a faster CPU and a better mouse." Now, his point is self-learning, once you have access to technology, is amazing, and I think we have to start-- >> Same thing with the non-linear consumption, asynchronous, all this, the API economy enabling new kinds of expectation and opportunities. >> And it was interesting because the example, some UK schools tried to follow his example. And six months later, they rang him up and they said, "It's not working," and he said, "What did you do?" And they said, "Well, we got every kid a laptop." He said, "That's not the point." The point was putting a scarce resource that the children had to collaborate over. So in order to get to the game, they had figure out certain things. >> I think you're right on some of these (mumbles) that no one's talking about. And Dave and I are very passionate on this, and we're actually investing in a whole new e-learning concept. But it's not about doing that laptop thing or putting courseware online. That's old workflow in a new model. Come on, old wine in a new bottle. So that's interesting. I want to get your thoughts, so a personal question to end this segment. What are you passionate about now, what are you working, outside of the venture, which is exciting. You have a lot of background going back to technology entrepreneurship, public policy, and you're in the front lines now, thought leading on this whole new wide open sea of opportunity, confusion, enabling it. What are you passionate about, what are you working on? Share with the folks that are watching. >> So one of the main things we're trying to do. I work as an associate with Ernst & Young in London. And we've been having discussions over the past couple of months around techno ethics, and I've basically said, "Look, let's see if we can get EY "to build to build an EY good governance index." Like, what does good governance look like in this space, a massively complex area, but what I would love is if people would collaborate with us on that. If we could help to draw up an ethical framework that would convene the technology industry around some ethical good governance issues. So that's what I'm going to be working on as hard as I can over the next while, to try and get as much collaboration from the community, because I think we'd be so much more powerful if the technology industry was to say, "Yeah, let's try and do this better "rather than waiting for regulation," which will come, but will be too clunky and not fit for purpose. >> And which new technology that's emerging do you get most excited about? >> Hmm. Drones. (laughter) >> How about anything with bitcoin, block chains? >> Absolutely, absolutely, block chain. Yeah, block chain, you have to say, yeah. I think, 'cause bitcoin, you know, it's worth 20 p today, it's worth 200,000 tomorrow. >> Dave: Yeah, but block chain. >> Right, right. I mean, that is incredible potentiality. >> New terms like federated, that's not a new term, but federation, universal, unification. These are the themes right now. >> Emer: Well, it's like the road's been coated, isn't it? And we don't know where it's going to go. What a time we live in, right? >> Emer Coleman, thank you so much for spending your time and joining us on theCUBE here, we really appreciate the conversation. Thanks for sharing that great insight here on theCUBE, thank you. It's theCUBE, we are live here in Dublin, Ireland. I'm John Furrier with Dave Vellante. We'll we right back with more SiliconANGLEs, theCUBE and extracting the signal from the noise after this short break. (bright music)

live from Las Vegas Nevada it's the kue covering knowledge 15 brought to you by service now hello and welcome back live here in Las Vegas is the cube our flagship program we go out to the events and expect to see them from the noise I'm John Ford the founder silicon atoms on my coach Dave vellante co-founder Wikibon calm and our next guest is Dave right chief strategy officer at servicenow great to see you again congratulations the keynote this morning I do you feel I'm pretty pumped it was good fun I mean I've known I've know Fred for 20 years and I've watched him do these type of things for 20 years so to be on stage with him yeah it was it was big balada a lot of people happy in the key know first of all packed house great crowd congratulations but really a lot of who odds on the UI I and the clean interface work a lot of cooler than me a lot of really big cheers on the private instances right which really sets the table for a developer run so you know I think you guys are going to see my prediction is via rocket scientists predict this but do developer it's gonna get some significant traction certainly sold out here yeah Howie your Creator con so yeah we've got like the the 1200 people are crazy going which was a sellout but I think you're right the whole the ability now to get an instance that's obviously what's going to drive the developer community in the past it was really easy to develop something if you're a customer but coming in from the outside not so easy now the fact people can get an instance by signing up to the program so amazon has been very successful we follow those guys will do all their events cuban one things that I'm really impressed with Amazon is their ability to just unleash new stuff machine learning as a service last year was canisius redshift fastest-growing piece of their business they keep on adding on to their core building blocks with raji c 2 s 3 and a variety of the stuff they are queuing messaging alaska p so all the great stuff developers have been building that integrated stackin for agility more performance i got to ask you what's your plan because you guys are really building out that platform we talk to them in our in our office when you came by there's some core building blocks right what is the new blocks that you're announcing here and what's the vision and strategy that you get to take nasi developer enablement is one one of those court building blocks day what are the new building blocks and and are you going to take that same approach like amazon and just it's a tsunami of releases and being yeah so so what we'll do is we'll we'll take the platform that we've got now and obviously we see this community now starting to build out in the platform wheels from a features perspective what we're looking to do is get anyone to build anything that's managing anything to do with what that's the that's the main driver if you're giving someone a task that they need to do this should be the place where people go to do it now the the drive around this is is to try and get people to just not waste as much time as they are wasting in the past so we'll continue to innovate in the platform you'll see there's some new products that you can see they've already been built as modules that we haven't announced at the keynotes but they're actually down at the booths so you can go down and you can see some of the analytics stuff some of the security incident management stuff but what we've I think what we've realized as a company is we can we can never build everything you know there's there's just certain areas where people come in and go I've got the expertise just give me a platform let me build on us and that's why you see people going out there into areas that we didn't expect that's why you've got people doing medical asset management while you've got people there are pharmaceutical type apps so so really for a vertical ization perspective I'm hoping that we see a lot of independent developers or partners coming up for this because when you get people coming up this is what really excites me on the platform you get people coming up saying hey we want to we want to build on your platform I'm we don't access to your Salesforce because we're going to sell to a completely different set of people we just want to be able to build in your platform have your availability levels have your recovery levels that's where the big citing side is from you guys are doing it but i think is really the holy grail unintended given we had money python on last night in john cleese but you got the disruption and you're also innovating which is a really rare thing to see in the business by friday know you guys winning in amazon has that same thing they're disrupting the market in some say raise to 0 when put the shift values shifting somewhere else but they're also innovating so at the same time you guys are a little bit different the sense that you're in the enterprise so you have enterprise-grade mindset and building a born in the cloud like platform so I want you to comment on where you see the disruption and the innovation you can share the audience that dynamic and how you guys view that a are you aware of it is it a flywheel for your grow than what your comments on this so what I think the disconnect is now is it's the fact that software that you use outside of the enterprise is better than the software that you use inside of the enterprise now that's that's created a kind of a generation gap where people just arrived and look at enterprise software and go why are you doing it this way well in a way why haven't we got the same experience we have with other applications that link requesters with providers so you'll see what you mean why haven't i got the uber experience why haven't i got the Airbnb experience that that's the same process I want something you provided give me something that connects yes okay sure is between yeah so so why couldn't we why couldn't we reinvent the way that people interact with enterprise software and why couldn't we make it a more immersive experience and that was all that was what a lot of the stuff you saw today around the mobile side of it a lot of that's trying to drive towards getting people into this type of mode of working and way of thinking but yeah we want to get to the point where you can you can join a company as a 22 year old and you log onto the system for the first time you go this is cool as opposed to like phony your dad and say and dad I'm on some system can you tell me how it works and with the innovation I'm amazon is example they say okay pay by the drink but you're up and running you're standing up stuff quick it's a cloud term what's your equivalent corollary to that innovation so actually be on the innovation type of service now what is your core innovation when you go to flow say wait what's your innovation message to the customers is it standing up stuff quick redefining processes workflows so I think I think it's I think it's actually creating processes so it's crazy sorry I'm screwing up on accents now I almost went processes processes that news been in mind what it is is about being able to the innovation is to be able to give something structure that didn't have structure so the best example I always used as you you go around different areas of business and you talk to people and you say use the 80 example you say hey you know I see spends all its money being as good as it was last year and everyone laughs at it but the US then well how how do you perform what are your guys do every day they haven't really got an answer so it's being able to take some kind of unstructured work format and being able to say well I can give you a system everyone engages in the same way where everyone gets to manage work in the same way or when you get to understand exactly what your business is doing so it's that I think the real innovation is to be able to create a true system of engagement that sits on top of a system of record that's that's what it's all about so David struck by your keynote today you and Fred were sort of taking us back in time 2004 2006 eight the downturn 2012 the IPO and you did a great job of saying okay remember what the world was like back then there was Facebook really didn't have any users at least that weren't college students right right Google had an IPO dan just sort of took us through the the litany of innovations that have occurred and everybody talked about the consumerization of IT as the chief strategy officer do you basically look at what's happening in consumer tech and say okay we can do that as well you guys used to use the Amazon example right or do you have a different methodology how do you predict sort of where things are going I think it's I think kind of like the eraser change becomes very hard to predict I talked about the razor change at the start but the his figures that we didn't use when we started to extrapolate it around adoption you just get things moving moving so quickly now I think but the challenge is to try and not necessarily emulate what everyone else is doing but you need to be able to some move ahead of us and I think the rather than rather than directly copying something is looking to the themes that you see happening at that level so you could have gone back to 2 2004 and and said well we've already got these type of social media solutions this is the way people are going to work but then it took whatever it was three and a half years for Google to get 50 million users now most companies aren't going to wait that long for an adoption curve even though that's a really fast curve so so it's been able to predict what technology exists now in the consumer world that you think is going to end up having a major lead in place going forward so how are people going to interact you see a lot of startups coming up now where people start to do work in different ways which one of those that you think is going to be successful so one of the ones we took a gamble on is the visual dashboard concept we've seen more and more people integrate in different ways I think the way you see you see companies like slack and click doing doing different work around how they get people to integrate together a lot of people have got got good ideas and it's seeing how people want to interact with those I think a big driver of big influence was looking at what developers use how what tools are developers using to develop because that kind of influence is what they develop and that kind of influence is where they'll end up being and what about your developer story obviously is a 1200 people come in a greater con the other private private instances which is great for DevOps like mindset cloud guys who love to see in boxing probably pushing code and testing and doing all that on the fly work which is the new normal um developers are worried you know that they you know for example Twitter as a problem with the developer ecosystem by putting developers out of business the balance is you guys have a roadmap yeah and you don't want to put it up with a business but up there in the in the in the lane of your swim lane is behind as you balance that to be honest if it if we build an application it does something and someone else builds an application that does the same thing I don't really care I mean I just want customers to choose which the best one is for them it really it really doesn't make that much difference to us I mean there might be a mine of financial impact on on which license it consumes but fundamentally at the end of the day it's still building that community it's still getting people on the system because the I think the great thing about service now is what once you're in the system it's the capability of whereabouts you can go from that point on so someone I mean think there's already multiple HR products out there there's already multiple products doing a mobile asset management that I'm fine some areas we don't play in some areas we do but yeah for me I don't see it as a competition I I think it's it was plenty of beach head out there so yeah you guys have been able I mean fred was on the queue earlier and one of the things I thought was really insightful that he mentioned among this whole interview was that when he asked them about the future he actually brought up Internet of sins and he said the use cases are emerging because the capabilities weren't there right in the past yeah I use the thermostat example they correlate the nest which is kind of like a mainstream but that brings up the point there are new use cases emerging that are potentially worth a lot of money maybe his lifestyle business for developer or full on venture back business by innovating a workflow that's now new and relevant yeah and you guys are on that you agree with that I mean that's how you guys see hundred percent ok so I'm a developer I'm an entrepreneur what's what's what's your message to me like how do I do that what advice would you give me and doing that so there's plenty of I mean there's plenty of material out there and I was to actually develop on the platform the first thing and I'm I'm not a developer have encoded for years the first thing the first thing i do once i had an instance is I try and start off the process of looking for a looking for something that I do on a daily basis that frustrates me so I can pull this up easy because I do this almost every other day checking into a hotel so check into a hotel I do something online I booked the room and then I get there and you get questions like well do you want a high room in my room do you want to smoke in room no smoking to embed what why can I just select it at the front when it gets there why doesn't it know of previous histories what my preference would be why do I have to still give a credit card to be swiped when you find something that you do on a daily basis or an interaction that you do or you're you're asking someone for a service my focus would be how could I find a better way of doing that because yeah because they're the things that people are going to buy so also you know Fred also mentioned the whole email thing and you know as a lot people trying to crack the email code IBM's doing some stuff around new way to work and email his business trying to crack this code for years i hate's email but we still use it certainly our kids my kids don't use email or voicemail for that matter but the new way to do this is to actually have messaging in and mobile app so i want you to comment on this as a lead-in to the question of productivity you get put on a survey how is the ServiceNow value proposition impacting the productivity piece but fred is teasing out is this is a productivity raffle right you know you're going into the email as an example but this other way other productivity opportunities you guys are eliminating or process improvement here so that i think it's i think what it's more about is it's uh it's about the delivery of information at the right time so it's kind of the the equivalence i always used to explain it is it's it's the difference between constantly going to your mailbox to see if you've got mail or a telephone ring I mean when cell phone rings yet you've got to do something but the amount of time you can spend just checking if there is something for you to do is pointless I think I think it adds it had structure around being able to prioritize things I mean that's what people that's what people can't really do at the moment you get a request yeah okay how am I going to do the request the the innovation around driving things out of out of email is one thing but I think the the process of being able to bring other systems potentially onto a single system is something else that drives a lot of benefits but i would say at the moment people use email because emails ubiquitous and that is the main focus and I I don't think to say to people who don't live an email living service now that's never going to happen that's why we needed to get that whole mobile app out in place because you you need something where you're getting work delivered like a telephone ringing why ups saying hey it's going to be there in 20 minutes that's that's what you want is your case pattern that you see from a pro to be standpoint crush your broad customer base out there is it onboarding here the kpmg a pretty solid yeah what is the consistent pattern that rears its head over and over again we say yeah we're killing it there a productivity we're so great work so it tends to go it still tends to start off in a teak and then I T we tend to see the next move through is is hey char the next moves are after that tends to be facilities and the other sides of the company other parts of the businesses legal finance marketing they have an interest in it as well but that tends to be the flow that we see people going through and it can be it can be multiple things I mean people people first of all start to look at the the onboarding situation but then they start to look at well how do we do candidate management so how we can actually handle the recruitment side and then people come in with the kind of 10 gentle things as I'm the conversation the other day about some about someone at a university but someone at a university saying well what I need to do is I need to handle student recruitment so so when when a company comes in on campus and wants to recruit people how do we communicate to people that they're on campus and then how do we actually track people coming in and applying at that level so people come up with solutions like that we get a lot of things around hospital management where there's productivity issues where people are saying well how can we actually start to manage things more effectively from a medical perspective be at Medical assets be a hospital beds any area like thats it is the problem I have and this is why the platform so good in the partner markets so good if you could sit and write down use cases all day I mean you feel the scrolling anything as a service that that's what it feels like sometimes I want to ask you about the innovation curve so you know it's interesting at the micro level we're talking about all the waste that goes on in organizations but at the macro level productivity numbers actually look pretty good productivities going up employments not following productivity which is you know a concern yeah and you guys potentially are going to add to that problem right in theory the so it seems to me that the opportunity is to replace that that that gap between things that we're doing they're wasting our time and apply that to new innovation prize will bethe bend the innovation curve that if you will so I'm wondering do you have examples of that starting to occur in your customer base or do you as a visionary do you have a vision as to how that might occur so I I think this kind of two elements to this you you look at the survey that we probably still Monday and we're saying that that other the thousand managers we surveyed in America in the US the spend around 15 hours out of a 40-hour week doing this type of administration SAS now I think there's there's two ways to look at that one is the benefit to the business of being able to drive productivity the others the fact that those 15 hours that you're wasting on admin you're probably doing it in your own time you've probably got some kind of knock on and work life balance around this but I I look at examples that I've had from a perspective of how I've worked with things before and this is uh this is another good use case example so before strategy when I was running all the engineer the pre-sales engineering team here if someone wanted a resource they come to me hey Dave we need a resource in this company at this side and it email me and i would spend ages basically re roots in emails to the manager to say hey if you got anyone in England have you got anyone the Netherlands so it took like two days and we wrote a full system where someone could just come in and request the resource it got recent to the right manager in the right region my emails probably went down around eight hundred a week where I wasn't getting requests coming into production of 800 800 emails a week because people just weren't asking me for real there's a dude up in the right place you can work work your Anakin reassign it if I if I go away for a week I can just say so my next manager down hey can you look after it this week but I'm damned if I'm gonna give my inbox Yeah right yeah i'll go through Drogo's rewrite it works faster that's the line in your inbox it's gone dropped off the end okay so example of one how did you use that time that you freed up think I might be how I ended up where I am NOT okay so but but this is a good example yeah because you look again a lot the the big thinkers worried that you know Instagram and Facebook have way more photos than right eastman kodak ever had and they employed far fewer people yet they're worth a lot more you know so so it's people like you that have the freed up time and the vision to create these new you know ideas and you get me get more time to focus on things and look at how things it done so are you seeing that within the customer base yet because a lot of what you're doing is sort of cleaning up messes alright are you seeing it's been a there's enough time now I would think you're starting to see glimpses of oh yeah sort of shifting it's not so easy to say okay I got to take somebody who's a whatever mid-level manager doing X and albums that put them on innovation so you see you see the shift now if people people started to move outside of IT into general service the interesting drive is a lot of people who are nit who would drive an IT service the company on the side okay we want to move this further we see the vision for where we could go with service management a lot of times what they do is they move that person outside of IT and they'll say okay we're going to crease global business services or global shared services and actually put you make it happen run enough division when they do happen and everyone says everyone to a letter says it's easy it's a it's easier to let the vision flow down sometimes it is to try and push it up from 80 because a lot of people I'll say let's say I t go to legal legal sitting there saying your IT what are you buddy bugging me for but if someone comes through from the toppling goes we want to redefine like how service is consumed by your group people are okay yeah that sounds interesting show me he'll show me what you've got so in our last minute here I want to get the chessboard out Dave and I always like to do the chessboard of the market you're doing strategy see you're going to run the chessboard you know okay that with the team so what's on the chest boy what moves are you making what's your key strategy right now how would you describe it to how you guys how do you describe to analysts customers and what are the key things that you're focused on in terms of the big moves you're right so so kind of think of it in three directions so think of it the first direction we're focused on is the extension of service management how does it get service management out across the enterprise the second area will focused on what can we do to complete the 80 stay so if you think of the ATT stack is a LM a Tom 80s m.a.c financial management what can we actually build out in that stack beer through building or beer through acquiring this year we spent a lot of time on item because I some hasn't changed in 25 years so probably worth changing it the third elements is is innovation so what do we focus on around how people interact with the system how they engage with the system what their experiences with the system and I think the interesting thing now is looking at how many of those elements in the in the IT staff actually expand out across the rest of the business unit so initially we came up with a concept of IT financial management's to be honest your major will scrap that it may as well it may all be dealing with service financial management because once you've got that data you can then track it across any business unit that you're doing so though kind of the three vectors we okay so let's talk about the API economy as the workdays a big system you guys have customers have work day but you guys have an HR appt is that to build connectors I mean is connectors a way for customers to deal with the data portability is the end of the day the systems of engagements interesting right so there are many systems of Records out there yeah I mean there's different approaches people take some people say well my first move is going to be sir modernized the front end bill the single friends and where everyone goes through to all these other systems and where it were a workday customer interface to work day but the a lot of the drive cases just to to be able to to just manage the work that comes into the system so we we focus on let's say the HR example we focus on knowledge case and request that that's kind of it you know you come in and you're processing one of those type of orders and then it might be that in order to complete that case that comes in the HR fulfiller is actually living the life and work day to do it and they're doing the work and work done and it gets updated and pass back so as ours is more defining how you actually engaged to generate that works estas and the customers just not a lot of heavy lifting on the customers and they don't have to rip and replace work day in this case they can come in and get a point solution with all the goodness of service now behind it and I mean as they go if they quantity family in service now we front-end rsap system with its surf you raise of a helmet request you do it now it is he confronted a lot of systems yet you know instead of having a lot of front ends but you do not many people have to use all the front ends then and no for productivity perspective you get someone in siege from one UI that's it they're done across the board so the platform goodness there is it's flexible you guys have an enablement model that developers now onboarding you got customers getting the ability to rapidly deploy stuff fast nit which is a good problem space to work right and then as you go to adjacent he not really have to do a lot of medieval activities in the platform just to grow right I mean you wouldn't believe the speed we turned around the whole security incident system that was that was amazing well this is awesome congratulations certainly we're certainly impressed with the software and we saw our up there in your keynote great you i love the real-time synchronous stuff you know and getting stuff pushed to you as a will be the future that's certainly greater coding angular you get bootstrap all the stuff going on real cutting-edge stuff that we've been playing with so we we were super impressed and congratulations on your success they've right chief strategy officer in charge of the chess board with it with the management team up at servicenow making it all happen this the cube sharing all the data with you we right back after this short thank you you

but cute at servicenow knowledge 14 is sponsored by service now here are your hosts Dave vellante and Jeff Creek we're back hi everybody this is Dave vellante with Jeff Frick we're here live at knowledge 14 this is service now it's big customer event about 6,600 people up from about four thousand last year as we've been saying it's kind of tracking the growth of service now which has been pretty meteoric we heard from Mike scarpelli the CFO Frank's loot men they're really doubling down and it's exciting to see we're here in San Francisco where all the action is Jeffrey Moore is here author consultant pundits all-around smart guy cube alum greatly again thank you here so um so you're speaking at the CIO decisions i love the fact that they got so many CIOs here who real CIA a lot of times these conferences you get to you know the infrastructure guys but so what's the vibe like over there well you know it's kind of cool because if you think about service now and you go back to say 10 years this was all about how to make IT more productive around the ITIL model and you know and you'd use these automated services to do this stuff what's happening and Frank nailed it in the keynote he said look this infrastructure can be turned inside out and you can service enable the entire enterprise not just IT need a service enterprise you know HR you can decision a marketing eight-day any other shared service you can turn into a bunch of services that you can sort of call in and use service now as a platform so so the cios it was all about well that that's a different that's a different vision and so how do we map from the old way of sort of thinking about this is an internal productivity facility to this new way of saying no this is an enterprise enablement platform that's a big that's a big move a little bit like Salesforce going to force calm that same flavor yes sir frank's keynote was talking about how the CIO has to become you know more business savvy and of course we've heard that a lot for years and years and years but in fact a number of the folks that we've had on here at the service now are actually of that hill maybe they came from the business but most CIOs didn't necessarily come from the business they weren't P&L managers they weren't running sales do you see that changing yeah I think what happened in the 20th century was IT was sufficiently complex that frankly you had to be a technical person to do it it just it was just really hard and and yes you needed business consultants but the end of the day you needed ten percent business consultants and ninety percent technical people I think we've come a long way since then in the next generation of stuff is more around systems of engagement these things that that communicate with each other as opposed to systems of record and so the profile the winning IT strategy is migrating from help us run information about our business in the back office to help us actually re-engineer the dynamics of our business in the world in the present and that's like going from from data to behavior them it's a big we call it going from systems of record to systems of engagement it's a big show and is that that transition in your mind is very disruptive so what happens to all those purveyors and buyers of systems of engagement to they morph into obsessive record do they morph into systems of engagement do they just get blown away no it's interesting so so so first of all you're never going to get rid of your systems of record but at the margin we've probably extracted most of the lifetime value from that investment already so you need to maintain them and so the industry is consolidating a round of an anchor set of vendors who we trust to do that but the growth is going to be like if you look at systems of engagement we might have gotten five percent of the lifetime value there so at their margin if you have a dollar to spend people want to spend it in there so the challenge of being an incumbent is I'm not going to lose my base but man the growth is happening over here so the real challenge for that for the incumbent vendors is how can i participate in the new world and still maintain my relationships in the old world whereas the new guys are just coming and saying i don't i'll leave the old world of you guys i just want to play over here i can get your take on the structure of the IT business is you've observed as have i sort of these disruptions and these changes over time so obviously we went from being framed at pc you saw that the competitive line started to get more disintegrated yes i could use that that term a competition occurred on those I see that Intel's ascendancy in Microsoft and Oracle the best database companies the emc was the storage company and everything was sort of you know siloed and but leadership the leadership matrix has largely stayed intact I mean even IBM and okay HP said its ends up and down but it's largely stayed intact do you see the cloud changing that fundamentally changing the economic yes I think yes I think what happened is so in the client server error we did we built the stack what you're just described and every layer of the stack had a leader now I think since 2000 y2k that stack is being compressed meaning there are fewer and fewer vendors that are still in the in that in that leadership cadre and as we go to like cloud and computing the service you start saying well yeah i still have cisco in there i still have IBM in there but maybe i'm buying them as a service rather than as a set of equipment so you kind of can feel that world just I think compressing this look is the right word and where is the experimentation the opportunity to sort of find new places to go to it's very much in this world outboard of the IT data center where it it is about engaging engaging with your customer engaging with your employee engaging with your supply chain and using mobile things and social and you know analytics and cloud and all these new technologies the freedom to do that is is actually outboard of the of the old style I show you what you described as sort of an oligopoly and you've got these big whales and I've always asking you know guys who follow this it are we going to see somebody to disrupt that Amazon is the obvious you have to go to them a three billion dollar you know company growing at sixty percent a year with marginal economics of services that look like software yep but at the same time it's okay they've got this huge lead but it doesn't just make sense to me that it's sustainable I mean because hardware economics never will go to 0 so you would think that somebody was almost like the IBM early pc days remember IBM heavily yep we're domin to play that's kind of what kind of way amazon is now do you do you see that you see more competition from amazon why is it that they don't have direct competition so the less of the last book i wrote in the last the thing i've been working on most recently is around why is it so hard for the established incumbents to catch the next wave and the problem is so you look at why amazon's why is Amazon so unopposed in many of its initiatives well their business model in the economic model is completely divorced from the incumbent model and so you look at the incumbent in there going it's not that I don't see what the guys are doing I get what they're doing I just don't see how I can get my investors or my my whole infrastructure on to that new place in my example that was code at so you know Antonio Perez came from HP he knew what he was getting into he understood digital everybody at Kodak understood digital but they couldn't get to the other place so in this it would call it escape velocity how do you free yourself from your own paths and you you really do have to take a pretty dramatic approach to it and I think by the way i think i'm looking at microsoft in particular i think it I think Microsoft's going to give a very very big run at doing it and but I think that they're still more the exception than the rule you would wish that every one of those vendors would say look you know because every CIO here if any of those vendors came to him and said hey we're going to really try to play here will you help they'd say yes they don't want to change their relationships but but we get trapped in these business models and then you sort of grind and you grind and grind and after a while it's like well man you've just ground yourself to do I owe the classic label Christensen right individuals dilemma and it also makes a question is d said David's been the same characters kind of changing companies had not Jeff Bezos and Amazon come in with a completely different model to drive cloud with the other people who still has to transfer so they want to give credit to you want to bet it to be so so you want to give credit to Benioff by the way Benioff has been has been the kind of prow of a ship that brings in the illusory at work day brings in netsuite brings in service service now you know so the software-as-a-service thing is coming in at one level and remember if you were an on-premise guy it's very very how many years did did SI p commit an enormous amount of money to say we're going to have a great cloud offering and it just it's so hard so so it is so and then you're looking now at this sort of this next layer of collaborative IT and you're seeing box and octant hang all these cool thing and analytics and splunk consumer logic and all these companies going really I mean I you know I mean if your fear of my age is like okay you have a t-shirt they got love to you think I'm a teacher but but but the point is this free space and they're saying there's these cool problems to solve we're not encumbered by any of the legacy we're going to race ahead and so if you're a CIO well we spent most of our time with the cios today was ok i have established set of relationships here i'm not going to abandon them but at the margin i need them to help me think about the future I thought these really start sparkly new startups some i'm sure not going to exist next year but some are going to be the leaders so how play that game right now and and the pressure it's putting on the IT organization is the people I know that are good at this are not the people that are good at this and so how do I so we had to talk about talent and how do you manage and how do you create career paths and and is it or do you have a infrastructure officer vs an innovation office I'm it was all around that same prob right and then oh by the way there's Hadoop and mobile and big data and some of these other just open source innovations that are being just thrown all these guys played it is so from a technology plate from a technology play if you're technologists it's like bring it on right but I think the interesting thing is and most of my career aighty was about the business so you ran a business and you had IT systems which gave you information about your business what's happened in the last 15 years is that more and more sectors of the economy i T is becoming the business so you saw what happened the newspapers in facilitate with IT isn't about the newspaper business IT is displacing the newspaper business Google is displaced in the media business amazon is displacing retail you know mobile banking is displacing banking Airbnb uber I mean this so there we have the taxi guys are worried them it and so you start saying it isn't IT isn't about the business it's a digital world and and so all of us and that was it i think that was probably at the core of the discussion so which cio am i what do I have permission to be would do my colleagues get this you know am I competent to do it if they do I mean you've talked about this a lot and you've given a number of examples so so was nicked car just dead wrong in 2003 or just to a narrow it is to keep what he was saying I believe is that systems of record okay are dead I think at that time by the way it wasn't obvious there was anything else because it no serious i can remember to you know the whole venture community kind of abandoned itv4 about researcher ivan on 101 yeah it was and even in the end even in the physical infrastructure there's still the idea is the basis of the competitive and about the reporting system yeah and i think this issue about so i think there's still a few businesses we're really IT still is about the business and you know what you can kind of stick with whatever you were doing you'll be okay but if your business is under an existential threat meaning the new IT model eviscerates your business model which arguably you could say all those both those incumbent stack vendors you know I mean cloud does eviscerate the on-premise hardware data center business model which was the fundamental foundation of IT as I knew it for all my business career and now all this it's like holy how do i how do i how do I deal with it so we talk about Amazon as a potential you know new you know big whale Salesforce is obviously he's got it but they've been around since 99 there's going to be exception mm-hmm proves the rule I don't maybe a service now or a workday you know we'll see if this market is big enough it looks like it it might be what often happens is they these guys let's get gobbled up or Larry Ellison writes a check you say these to denigrate people who write write checks not code I think the biggest matter and they got such mass never was afraid to reinvent himself change the game change the dynamics of the industry so do you think we will see a another big player and where will that comfort will it be the SAS guys will it be the sum of the guys out of the hadoop world what I don't think it will so here here's what I don't think will work I don't think you can be an established incumbent vendor under this compression power and write a check and get yourself back I think what happens when you write a check if you just bring a hot property into cold molecules and it loses its exactly exactly so I don't think that will work I think if you want to be one of these incumbents and succeed over here you have to actually pull part of your own DNA and capability and we literally just jump and then I think you can acquire it to it to build a thing there but what Larry did was he consolidate he basically was the first guy to figure out Nick Carr is right I need to buy up all the properties yep and brother George ball and run a maintenance business which by the way came to read and Georgia computer associates had that play up in the eighties it's the same play with this is a different plan well I love what you say in emc is an interesting one to watch the way to chi is setting up this Federation with pivotal and VMware you know who see we'll see what happens with the quarry NC and I think VI 3 of 8 yeah I think that that is I mean VMware's one of the wonderful examples of think we're a company did not cause the hot molecules become the cold molecules the thing you wonder there though is it feels a little bit like a like a holding company if you will and so and by the way vmware is in a curious tweener right like they kind of were the most they made the old stack incredibly productive so in some sense they can feel like they're part of the old world right they're probably the newest kid on the old world but then you think well yeah but I want to look at their plan now they want to be into software-defined networks they wanted me to software-defined data centers they definitely want to play over here and what it's in this case so state partners Wow one could argue that that was it because of what big in the cloud virtualize computing absolutely absolutely so what're you working on these days that's exciting well so that I think this issue of working with management teams to say okay look this is a self-imposed exile that we're putting ourselves under you know we get it i'll call it the Kodak problem because I don't want to talk about anybody in high tech specifically at the moment but the point is every management team in the established vendor group puts itself on a self imposed discipline to make you know certain kinds of eps things certain kinds of growth you know whatever it is the expectations of their investors and you look at the situation you say guys that is a slope glide path to extinction we all know that and by the way off the record they know it's no it's not that that is this is not a failure of it like this is a failure of will so then the question is well so how do you negotiate a different path and part of it is you have to make you have you have to be able to tell a story of your investors part of it is you have to negotiate a different operating model inside the company and what they've done so far is they said well okay we've got our established businesses and we've got our innovative businesses and we know enough to keep them apart so that part is not the problem and they actually come up with cool stuff the the moment of truth is when can you scale any of these innovative businesses to compete to actually be a material part of your historical portfolio meaning in my terminology at least ten percent of your total revenue going to twenty percent in what happens in that journey is it a key point you have to draw on the resources of your established business and all the people that make their living and they're compensated on getting the next quarter in the next quarter go guys I can't make the quarter and do this and you've got it you've got to find a way to say you know if we don't figure out a way to pull some of that resource over here and play our next hand will invent everything in the world but we'll never get it to scale and so there's there's a bunch of stuff around business model planning and then Investor Relations organizational development it's all around saying and the key there's two key ideas idea number one is it's a go-to-market problem not an RD problem you do not have an innovation problem you can't get your thing to market and the second cool idea is you can only do one of the time and everybody says well but give have the risk to so high you got a three or four or five of these things maybe want to work it's like know the sacrifice is so great if you put two or more horses in the race people people won't even run so the other one that's a focus and don't it's ok not to make the quarter that's like on American looking like michael dunn right i mean that's obsessively what he's hoping to be able to do and i think one of the reasons you see people go private is to say i can't play this game bye-bye normal public company protocol i mean i like to but i can't get there from here now i actually don't think every company ought to have to go private to do this but i think they do have to change their playboys all right Jeff we have to leave it there hey great to see you thank you very much me feel smarter just hanging out with you right there buddy we'll be right back after this is the cube you