>> (Narrator) Live from Madrid, Spain it's theCUBE. Covering HP Discover Madrid 2017. Brought to you by Hewlett Packard Enterprise. >> We're back in Espana. theCUBE, the leader in live tech coverage is here covering HPE Discover Madrid, day one. I'm Dave Villante with my cohost, Peter Burris. Well, it's all coming into focus, Peter. >> It is, it actually is. >> It is, I mean, it better be after five or six years. It's taking longer than I had hoped. But, the story is consistent now. The last four Discovers, despite some of the distractions of spin merges and so forth the story of hybrid IT, the Intelligent Edge, bringing automation is somewhat new to the data center. Services lead starts to actually make sense. >> Peter: Through private cloud. >> Yep, and you know, we talked about at the top of the show today, the spectrum. We're running AWS re:Invent, we got a big presence there. Obviously its affected the entire industry, and then you've got HPE, the likes of HPE, Dell EMC, to a certain extent IMB basically not given up, say wait a minute, these are our customers, they want Cloud on prem, we're gonna deliver to them. They want Cloud in the Cloud, we'll help them get there. >> Peter: Oracle. >> Oracle as well. Oracle, different strategy. We should talk about that a little bit. But, summarize, you know synthesize your take on the day, and where we're at with HPE. >> So I would say that the... What we talked about this morning was, when Meg first took over the reins, she stopped a whole bunch of stuff, and HP stopped spending and behaving like a company that believed that it had to get scale as fast as possible because that was the only way to win. And she ended up going back to, look, lets focus on the customers and what the customers are trying to do, and not how we're trying to leverage our assets. And it kind of took a pause, and for a while you could kind of see them start putting things back together, and you kind of had a sense of where it was all gonna go. But this has been kind of the coming out party for what the last five years have been about. As you said, I think we've seen the three core messages that certainly line up, you know, with a little bit of cavat here. Their story is very much aligned with what we think the industry needs to see right now. At least, our research suggests. Gonna need true private Cloud, the ability to put the Cloud service where your data requires, and not force your business to move it's data to some Clouds location. You're gonna need increased automation within your IT organization, because you're not going to be able to support these more complex workloads if you don't find ways to increase the productivity of your people, and even more importantly, dramatically reduce even the possibility of a failure, and that's what AI inside IT's all about. And very importantly, the idea that you gotta put more intelligence at the Edge, that that interface between the real world and the digital world is really what's gonna drive the dynamic in the computing industry over the next few years. And HP has shown up and they're not just talking about it, they're showing it. And it's nice to be there. >> Well it's interesting, Meg Whitman came by and was talking to us, and we were talking about the Aruba acquisition. She said, look, we bought this because it was a nice business, it could show some growth. And it was, you know, a way to compete with Cisco and differentiate, because, hey were trying to compete head to head with Cisco and it was going okay, but not great. Aruba gave them a clear differentiator. And then all of the sudden, the Edge became this tailwind. And it kinda got them there early. >> Well, lets remember what Mark Hurd talked about. He said, well, why are you going after the network world. I like their 67% gross margins. Okay, so... >> Dave: Talking about 3Com. >> He's talking about 3Com, he's talking about all the things that HP did as it tried to get into the networking business. >> Dave: Cisco, right, yeah. >> It was purely driven by gross margin. They didn't quite have the customer story down. Aruba has always been a great customer story. They've always say, look, this is your business challenge. You know, are you sick and tired of dropping your connection as you go from one conference room to another. This is your security issues. On, and on, and on. They had three or four concrete value propositions that just worked for customers. That acquisition at that time it happened, it happened about the same time that HP was starting to rededicate itself back to thinking about it's customer base. So, it's not surprising to me that that integration, or that merger has been one of the more successful that HP's undertaken. >> So again, the spectrum. You know, you got Andy Jassy on one end who started this whole thing, and you got the likes of HPE on the other end. And you're right, it does align with a lot of things that we've been saying around true private cloud and so forth. Jassy doesn't buy it. He flat out says, this is old guard thinking trying to hang on to the past. But, our analysis suggests it's not just old guard thinking. It's customer thinking because they can't just move their business into the Cloud. Thoughts. >> Totally agree. So I'd say there are a couple of things about it. It's customer thinking based on the realities of the data assets that they're trying to leverage as they transform into a digital business. Data is real, and it has, it's gonna weigh in on how your infrastructure looks. And the Edge is gonna have characteristics that mean you're gonna have to do automation right there, right where the action is. You're not gonna be able to send it up to the Cloud all the time. There's gonna be a lot of business events that take place in that core, in that second tier. So, it's not that it's... It's not that it's old versus new guard. And here's why I say that, Dave. It's because in many respects, we're giving some props to HP right now, which is great. But, in many respects, the story that HP is telling today is a story that is still being largely, has largely been told, largely fashioned by what AWS has done over the last 10 years. And that is, here's what the Cloud experience is. And now HP's adding, "And you want that Cloud experience whatever your data demands." The difference, therefore, between the old guard and and the new guard, or the old way and the new way, on premise, is that it used to be, it was pretty clear to me, and I think it was pretty clear to us, that the old, that the talk about private Cloud was simply a way of thinking about how to put new marketing spin on the enhancement, upgrade, replacement cycle for servers and storage. And that did not work. It just flat out didn't work. >> Well it worked in the sense that it froze the market a little bit. >> Eh, it froze the market a little bit. But, overall, for the past five or six years our growth has been slowing down pretty dramatically. So, I would say, that the data is pretty unassailable. You're not gonna move everything to a central location. But, you're gonna want that Cloud experience. And so, the question is, are we gonna see great Cloud experience where the physics, the legality, and inertia property governance demands that you put your data. >> Well, I thought Jesse St Laurent was gonna talk about the next wave. He mentioned Multi-Cloud. >> Peter: He's CTO of... >> Of SimpliVity, now HPE Hyperconverged. >> Peter: Right. >> I thought he was talking about, he said the next wave is Hyper-V. Okay, check. I mean, like, that's like to me a feature of the product. And then he sort of talked about Multi-Cloud. And that really where I thought he was gonna go, because when you look at what AWS is doing, and I've always contended, they're years ahead, we can debate how many. Five, seven, three. Probably closer to five than three. But where they're headed is serverless, you know, functional programming. Stateless, new programming models. It's all about the developer to those guys. And that's the parlance that they speak in. The Hyperconverge guys all talk in VM terms. And that's not how Amazon talks or thinks. So, you know, the question is, is that a next wave, and can the Enterprise guys >> Peter: Talk developer? >> Yeah, can they catch that wave? >> So, I think... Look, lets be honest. AWS is a great company. There's no question about it. They've done things that a lot of old style infrastructure jocks thought couldn't be done. And they did it. And they continue to, they continue to demonstrate that they are really engaging their customers and turning that insight and knowledge into great services. So, this is not, this is not a knock on AWS. But what ultimately has to, and I think AWS is recognizing this as well, because they're starting to talk a lot about IoT and their approach to IoT, recognizing that not all the data is gonna be sourced up in the Cloud. The data is gonna be generated in a lot of other places and they have to participate there as well. So, from our perspective ultimately, we would say that Multi-Cloud, the ability to, the ability to naturally place your data where the data needs to be placed, which is increasingly is gonna be closer to the event that needs to be automated, that needs to have that high quality experience, is gonna be the way, is gonna be the dominant factor in determining the characteristics of the application infrastructure that you put in place. And, we'll see what happens. Serverless, yeah, serverless is great. You can do a lot with it. But, you can also still build junky applications with serverless. Microservices are great, yeah. But you can still build junky applications with Microservices. >> A lot of those services aren't so micro as Neil Raden would say. >> That's exactly right. So you can still do bad stuff in the Cloud. So, at the end of the day, the whole point is to get a new compact between business who have the vision of the digital services and digital capabilities they want, IT professionals and developers who are gonna generate, create that value, and then infrastructure people who are not who are allowing the data and the workload to fall where is naturally should fall, and then making it possible for the industry to work together, because that's what users want. >> Okay, so let me ask the question differently. You agree that the Cloud guys generally, Amazon specifically, is ahead of the Enterprise guys when it comes to infrastructures and servers. >> Peter: Yeah, there's no question there. >> Okay, is the lead extending, or is it dwindling. Amazon's lead in your view. >> Well, so look, you have Amazon's lead, first of you have to think about Amazon's lead relative to Microsoft, Oracle, and others. And, they're not as far ahead as, they're not that far ahead of Microsoft. >> Dave: Right. >> So there's a real battle raging there. Google has at least as good a relationship with a lot of developers as Amazon does. When you think about what a lot of developers are building in the Cloud experience, they're using Kubernetes, they're using TensorFlow, they're increasingly going to use Istio. I mean, so, it's not, There's gonna be increased energy being put forward to try to talk about how that Cloud innovation's gonna happen. >> So those are the three Hypercloud guys. >> Those are three Hypercloud guys. And, as we talked about, they are increasingly defining what the Cloud experience is. I think what we're seeing now, is the Enterprise guys stepping back and saying, you know what, we have to define our roll in the Cloud experience, and not presume that we're gonna tell everybody what the Cloud experience is. Which is what they were doing for many years, and they failed at it. >> And you could make an argument that HPE as a smaller company with less assets to encumber them, can actually deliver that through partnerships, maybe not as profitably, most definitely not as profitably, but actually can deliver that outcome for customers as a more agile customer. >> We'll see, we'll see, because... >> Dave: You could make that argument is all I'm saying. >> Well, you could make that argument, but remember, we're moving from, and even HP announced some stuff today with Greenlake, moving from a product orientation increasingly to a service orientation. And there's demonstration that you can do things with your business model that may allow you to do things in different levels of profitability at somewhere, you know, when you take more of a services approach to things. So, I think the most important message that we can leave from today is that, our observation on that notion of a spectrum, from, you know, public put it on public, to a true private orientation which is hybrid where an on premise play is gonna be essential. That spectrum seems to be real, number one. Number two, however, it doesn't mean that AWS in particular is not going to be successful at driving the definition of the Cloud experience, and number three, we're now seeing at least one company, but we're also starting to see indications of others, acknowledge that their roll in all of this will be to take whatever the leaders in Cloud are talking about and make it possible, that experience possible where the data requires and that will include on premise. >> So, and I agree with you, AWS is defining that Cloud experience. So, as Ana Pinczuk was speaking, I just wrote down, I jotted down, AWS Cloud experience, which they've defined, and HPE Cloud experience. So I've got pay as you go, you know this kind of flex capacity, kind of. I mean it's as close as you can probably get. >> Peter: Greenlake. >> Yeah, Greenlake Kind of. >> Something we all need to learn more about. But, it's getting there, it's getting there. >> But it will never get there entirely, right? Because, they're gonna require to be, you know, buy a years worth of capacity, thresholds, you're gonna have thresholds above and threshold below. >> Except, we also heard, again I think there's more, I don't wanna, I think you're right. >> It's nuanced, it's not 100% of the way there. >> You start throwing the balance sheet and finances in there and how you're gonna do it. >> We'll come back to that. So, elastic? Again, kind of. You know, to a point. Integrated services? Like tons of them, like thousands a year? Some of those, but as I was saying before, HP's ecosystem play, allows them to pick and choose. >> Yeah, but remember Dave, okay keep going, keep going. >> Security, sort of, let's call it the Amazon way. Here's our security, it's good. But take it or leave it. And then, the HP approach is your way. HPE, you have security your way. If that's the edict of the organization, we can map to that. One Cloud versus Multi-Cloud. Obviously, HPE has a Multi-Cloud strategy, Amazon doesn't. They don't care about managing Multi-Clouds. They care about managing their Cloud. And then services as a service. HPE can deliver that and, Amazon I got a question mark, it's their ecosystem that's delivering those services. So I guess the point is, that I'm making is, maybe it's not the exact replica of the Amazon experience, but there are attributes of it, which appeal to Enterprise IT. >> Peter: That's right. >> Which Amazon is really not interested in delivering. >> Peter: Right. >> Ergo, the assumption is, my assumption is that, that business, that on prem business will be here for a long, long time. >> Peter: Absolutely. >> Indefinitely. >> And we would agree with that. In fact we think, ultimately, that there's gonna be enough uniqueness about how businesses use their data and treat their data that we expect to see this notion of true private Cloud actually be a bigger overall piece of the marketplace than the one size fits all, with a degree of customization possible, that Amazon's providing. But, again, this is, we have to be careful here. Because as analysts, we're sort of naturally falling into this trap of setting up AWS and HPE or any of these folks in opposition. There are companies that have very, very different opposed visions of how this is gonna play out. Specifically, we can talk about Amazon saying it's all gonna be IaaS, we're gonna out paths in there. And then, increasingly obviously, Microsoft and Oracle saying, oh no, we're gonna have application Clouds. You're gonna buy and application Cloud, and you're gonna do a whole bunch of stuff in that. What we see today is not in opposition, >> Dave: Right. >> to the AWS vision, it's not. It is a, okay, great. But for this type of work, this type of data, this type of workload, this type of reality, chances are, you're gonna need to put this type of stuff here, and have it fit into the overall motion of Cloud experience, and it doesn't have to be a complete substitute. It just has to work for that class of workload. >> Well, but, bringing it back to HP, and we gotta wrap, is HPE does not have an application Cloud, right? >> Peter: They don't. >> And as a result, it's going to be in a knife fight. With Amazon, with Dell EMC, and with China. >> It's gonna be in a knife fight with companies that are like it. China, you know, Huawei, Dell EMC, Cisco. >> You're right, you're right. Amazon's setting the pricing tone and the business model tone. >> Look, right now it's Amazon and Microsoft, are helping to set the stage of what this is all gonna look like. >> So, again, bottom line is, it's not a 60% gross margin company, Mark Hurds vision of going to compete with Cisco. It's a 25 to 32% gross margin business. >> Peter: That's really focused on customer problems. >> Focus on customer problems throws off a couple billion dollars of cash, it can eke out a little bit of growth. You know, that's what it is. >> Not a bad business. >> No, it's a great business, actually. Alright, Pete, thanks the wrap on day one. We'll be back tomorrow 8:30 am local time, right? >> Man: Sure. >> Roughly. >> Man: 8:45. >> 8:45 local time. Check out theCUBE.net, where you'll see this show, you'll see the other shows that we're doing including re:Invent John Furrier and the crew are over there today. That's a wrap for day one, this is theCUBE. We'll see you tomorrow. (upbeat music)