>> Narrator: Live from Munich, Germany it's the CUBE, covering Dataworks Summit Europe 2017. Brought to you by Hortonworks. >> Okay, welcome back everyone here at day two coverage of the CUBE here in Munich, Germany for Dataworks 2017. I'm John Furrier, my co-host Dave Vellante. Two days of wall to wall coverage SiliconANGLE Media's the CUBE. Our next guest is Raj Verma, the president and COO of Hortonworks. First time on the CUBE, new to Hortonworks. Welcome to the CUBE. >> Thank you very much, John, appreciate it. >> Looking good with a three piece suit we were commenting when you were on stage. >> Raj: Thank you. >> Great scene here in Europe, again different show vis-a-vis North America, in San Jose. You got the show coming up there, it's the big show. Here, it's a little bit different. A lot of IOT in Germany. You got a lot of car manufacturers, but industrial nation here, smart city initiatives, a lot of big data. >> Uh-huh. >> What's your thoughts? >> Yeah no, firstly thanks for having me here. It's a pleasure and good chit chatting right before the show as well. We are very, very excited about the entire data space. Europe is leading many initiatives about how to use data as a sustainable, competitive differentiator. I just moderated a panel and you guys heard me talk to a retail bank, a retailer. And really, Centrica, which was nothing but British Gas, which is rather an organization steeped in history so as to speak and that institution is now, calls itself a technology company. And, it's a technology company or an IOT company based on them using data as the currency for innovation. So now, British Gas, or Centrica calls itself a data company, when would you have ever thought that? I was at dinner with a very large automotive manufacturers and the kind of stuff they are doing with data right from the driving habits, driver safety, real time insurance premium calculation, the autonomous drive. It's just fascinating no matter what industry you talk about. It's just very, very interesting. And, we are very glad to be here. International business is a big priority for me. >> We've been following Hortonworks since it's inception when it spun out of Yahoo years ago. I think we've been to every Hadoop World going back, except for the first one. We watched the transition. It's interesting, it's always been a learning environment at these shows. And certainly the customer testimonials speaks to the ecosystem, but I have to ask you, you're new to Hortonworks. You have interesting technology background. Why did you join Hortonworks? Because you certainly see the movies before and the cycles of innovation, but now we're living in a pretty epic, machine learning, data AI is on the horizon. What were the reasons why you joined Hortonworks? >> Yeah sure, I've had a really good run in technology, fortunately was associated with two great companies, Parametric Technology and TIBCO Software. I was 16 years at TIBCO, so I've been dealing with data for 16 years. But, over the course of the last couple of years whenever I spoke to a C level executive, or a CIO they were talking to us about the fact that structured data, which is really what we did for 16 years, was not good enough for innovation. Innovation and insights into unstructured data was the seminal challenge of most of the executives that I was talking to, senior level executives. And, when you're talking about unstructured data and making sense of it there isn't a better technology than the one that we are dealing with right now, undoubtedly. So, that was one. Dealing with data because data is really the currency of our times. Every company is a data company. Second was, I've been involved with proprietary software for 23 years. And, if there is a business model that's ready for disruption it's the proprietary software business model because I'm absolutely convinced that open source is what I call a green business model. It's good for planet Earth so as to speak. It's a community based, it's based on innovation and it puts the customer and the technology provider on the same page. The customer success drives the vendor success. Yeah, so the open source community, data-- >> It's sustainables, pun intended, in the sense that it's had a continuing run. And, it's interesting Tier One software is all open source now. >> 100%, and by the way not only that if you see large companies like IBM and Microsoft they have finally woken up to the fact that if they need to attract talent and if they want to be known as talk leaders they have to have some very meaningful open source initiatives. Microsoft loves Linux, when did we ever think that was going to happen, right? And, by the way-- >> I think Steve Bauman once said it was the cancer of the industry. Now, they're behind it. But, this is the Linux foundation has also grown. We saw a project this past week. Intel donated a big project to the Linux now it's taking over, so more projects. >> Raj: Yes. >> There's more action happening than ever before. >> You know absolutely, John. Five years ago when I would go an meet a CIO and I would ask them about open source and they would wink, they say "Of course, "we do open source. But, it's less than 5%, right? Now, when I talk to a CIO they first ask their teams to go evaluated open source as the first choice. And, if they can't they come kicking and screaming towards propriety software. Most organizations, and some organizations with a lot of historical gravity so as to speak have a 50/50 even split between proprietary and open source. And, that's happened in the last three years. And, I can make a bold statement, and I know it'll be true, but in the next three years most organizations the ratio of proprietary to open source would be 20 proprietary 80 open source. >> So, obviously you've made that bet on open source, joining Hortonworks, but open is a spectrum. And, on one end of the spectrum you have Hortonworks which is, as I see it, the purest. Now, even Larry Ellison, when he gets onstage at Oracle Open World will talk about how open Oracle is, I guess that's the other end of the spectrum. So, my question is won't the Microsofts and the Oracles and the IBM, they're like recovering alcoholics and they'll accommodate their platforms through open source, embracing open source. We'll see if AWS is the same, we know it's unidirectional there. How do you see that-- >> Well, not necessarily. >> Industry dynamic, we'll talk about that later. How do you see that industry dynamic shaking out? >> No, absolutely, I think I remember way back in I think the mid to late 90s I still loved that quote by Scott McNeely, who is a friend, Dell, not Dell, Digital came out with a marketing campaign saying open VMS. And, Scott said, "How can someone lie "so much with one word?" (laughs) So, it's the fact that Oracle calling itself open, well I'll just leave it at, it's a good joke. I think the definition of open source, to me, is when you acquire a software you have three real costs. One is the cost of initial procuring that software and the hardware and all the rest of it. The second is implementation and maintenance. However, most people miss the third dimension of cost when acquiring software, which is the cost to exit the technology. Our software and open source has very low exit barriers to our technology. If you don't like our technology, switch it off. You own the software anyways. Switch off our services and the barrier of exits are very, very low. Having worked in proprietary software, as I said, for 23 years I very often had conversations with my customers where I would say, "Look, you really "don't have a choice, because if you want to exit "our technology it's going to probably cost you "ten times more than what you've spent till date." So, it a lock in architecture and then you milk that customer through maintenance, correct? >> Switching costs really are the metric-- >> Raj: Switching costs, exactly. >> You gave the example of Blockbuster Camera, and the rental, the late charge fees. Okay, that's an example of lock in. So, as we look at the company you're most compared with, now that's it's going public, Cloudera, in a way I see more similarities than differences. I mean, you guys are sort of both birds of a feather. But, you are going for what I call the long game with a volume subscription model. And, Cloudera has chosen to build proprietary components on top. So, you have to make big bets on open. You have to support those open technologies. How do you see that affecting the long term distance model? >> Yeah, I think we are committed to open source. There's absolutely no doubt about it. I do feel that we are connected data platform, which is data at rest and data in motion across on prem and cloud is the business model the going to win. We clearly have momentum on our side. You've seen the same filings that I have seen. You're talking about a company that had a three year head start on us, and a billion dollars of funding, all right, at very high valuations. And yet, they're only one year ahead in terms of revenue. And, they have burnt probably three times more cash than we have. So clearly, and it's not my opinion, if you look at the numbers purely, the numbers actually give us the credibility that our business model and what we are doing is more efficient and is working better. One of the arguments that I often hear from analysts and press is how are your margins on open source? According to the filings, again, their margins are 82% on proprietary software, my margins on open source are 84%. So, from a health of the business perspective we are better. Now, the other is they've claimed to have been making a pivot to more machine learning and deep learning and all the rest of it. And, they actually'd like us to believe that their competition is going to be Amazon, IBM, and Google. Now, with a billion dollars of funding with the Intel ecosystem behind them they could effectively compete again Hortonworks. What do you think are their chances of competing against Google, Amazon, and IBM? I just leave that for you guys to decide, to be honest with you. And, we feel very good that they have virtually vacated the space and we've got the momentum. >> On the numbers, what jumps out at you on filing since obviously, I sure, everyone at Hortonworks was digging through the S1 because for the first time now Cloudera exposes some of the numbers. I noticed some striking things different, obviously, besides their multiple on revenue valuation. Pretty obvious it's going to be a haircut coming after the public offering. But, on the sales side, which is your wheelhouse there's a value proposition that you guys at Hortonworks, we've been watching, the cadence of getting new clients, servicing clients. With product evolution is challenging enough, but also expensive. It's not you guys, but it's getting better as Sean Connolly pointed out yesterday, you guys are looking at some profitability targets on the Ee-ba-dep coming up in Q four. Publicly stated on the earnings call. How's that different from Cloudera? Are they burning more cash because of their sales motions or sales costs, or is it the product mix? What's you thoughts on the filings around Cloudera versus the Hortonworks? >> Well, look I just feel that, I can talk more about my business than theirs. Clearly, you've seen the same filings that I have and you've see the same cash burn rates that we have seen. And, we clearly are ore efficient, although we can still get better. But, because of being public for a little more than two years now we've had a thousand watt bulb being shown at us and we have been forced to be more efficient because we were in the limelight. >> John: You're open. >> In the open, right? So, people knew what our figures are, what our efficiency ratios were. So, we've been working diligently at improving them and we've gotten better, and there's still scope for improvement. However, being private did not have the same scrutiny on Cloudera. And, some would say that they were actually spending money like drunken sailors if you really read their S1 filing. So, they will come under a lot of scrutiny as well. I'm sure they'll get more efficient. But right now, clearly, you've seen the same numbers that I have, their numbers don't talk about efficiency either in the R and D side or the sales and marketing side. So, yeah we feel very good about where we are in that space. >> And, open source is this two edged sword. Like, take Yarn for example, at least from my perspective Hortonworks really led the charge to Yarn and then well before Doctor and Kubernetes ascendancy and then all of a sudden that happens and of course you've got to embrace those open source trends. So, you have the unique challenge of having to support sort of all the open source platforms. And, so that's why I call it the long game. In order for you guys to thrive you've got to both put resources into those multiple projects and you've got to get the volume of your subscription model, which you pointed out the marginal economics are just as good as most, if not any software business. So, how do you manage that resource allocation? Yes, so I think a lot of that is the fact that we've got plenty of contributors and committers to the open source community. We are seen as the angel child in open source because we are just pure, kosher open source. We just don't have a single line of proprietary code. So, we are committed to that community. We have over the last six or seven years developed models of our software development which helps us manage the collective bargaining power, so as to speak, of the community to allocate resources and prioritize the allocation of resources. It continues to be a challenge given the breadth of the open source community and what we have to handle, but fortunately I'm blessed that we've got a very, very capable engineering organization that keeps us very efficient and on the cutting edge. >> We're here with Raj Verma, With the new president and COO of Hortonworks, Chief Operating Officer. I've got to ask you because it's interesting. You're coming in with a fresh set of eyes, coming in as you mentioned, from TIBCO, interesting, which was very successful in the generation of it's time and history of TIBCO where it came from and what it did was pretty fantastic. I mean, everyone knows connecting data together was very hard in the enterprise world. TIBCO has some challenges today, as you're seeing, with being disrupted by open source, but I got to ask you. As a perspective, new executive you got, looking at the battlefield, an opportunity with open source there's some significant things happening and what are you excited about because Hortonworks has actually done some interesting things. Some, I would say, the world spun in their direction, their relationship with Microsoft, for instance, and their growth in cloud has been fantastic. I mean, Microsoft stock price when they first started working with Hortonworks I think was like 26, and obviously with Scott Di-na-tell-a on board Azure, more open source, on Open Compute to Kubernetes and Micro Services, Azure doing very, very well. You also have a partnership with Amazon Web Services so you already are living in this cloud era, okay? And so, you have a cloud dynamic going on. Are you excited by that? You bring some partnership expertise in from TIBCO. How do you look at partners? Because, you guys don't really compete with anybody, but you're partners with everybody. So, you're kind of like Switzerland, but you're also doing a lot of partnerships. What are you excited about vis-a-vis the cloud and some of the other partnerships that are happening. >> Yeah, absolutely, I think having a robust partner ecosystem is probably my number one priority, maybe number two after being profitable in a short span of time, which is, again, publicly stated. Now, our partnership with Microsoft is very, very special to us. Being available in Azure we are seeing some fantastic growth rates coming in from Azure. We are also seeing remarkable amount of traction from the market to be able to go and test out our platform with very, very low barriers of entry and, of course, almost zero barriers of exit. So, from a partnership platform cloud providers like Amazon, Microsoft, are very, very important to us. We are also getting a lot of interest from carriers in Europe, for example. Some of the biggest carriers want to offer business services around big data and almost 100%, actually not almost, 100% of the carriers that we have spoken to thus far want to partner with us and offer our platform as a cloud service. So, cloud for us is a big initiative. It gives us the entire capability to reach audiences that we might not be able to reach ringing one door bell at a time. So, it's, as I said, we've got a very robust, integrated cloud strategy. Our customers find that very, very interesting. And, building that with a very robust partner channel, high priority for us. Second, is using our platform as a development platform for application on big data is, again, a priority. And that's, again, building a partner ecosystem. The third is relationships with global SIs, Extensia, Deloitte, KPMG. The Indian SIs of In-flu-ces, and Rip-ro, and HCL and the rest. We have some work to do. We've done some good work there, but there's some work to be done there. And, not only that I think some of the initiatives that we are launching in terms of training as a service, free certification, they are all things which are aimed at reaching out to the partners and building, as I said, a robust partner ecosystem. >> There's a lot of talk a conferences like this about, especially in Hadoop, about complexity, complexity of the ecosystem, new projects, and the difficulties of understanding that. But, in reality it seems as though today anyway the technology's pretty well understood. We talked about Millennials off camera coming out today with social savvy and tooling and understanding gaming and things like that. Technology, getting it to work seems to not be the challenge anymore. It's really understanding how to apply it, how to value data, we heard in your panel today. The business process, which used to be very well known, it's counting, it's payroll, simple. Now, it's kind of ever changing daily. What do you make of that? How do you think that will effect the future of work? Yeah, I think there's some very interesting questions that you've asked in that the first, of course, is what does it take to have a very successful big data, or Hadoop project. And, I think we always talk about the fact that if you have a very robust business case backing a Hadoop project that is the number one key ingredient to delivering a Hadoop project. Otherwise, you can tend to boil the ocean, all right, or try and eat an elephant in one bite as I like to say. So, that's one and I think you're right. It's not the technology, it's not the complexity, it's not the availability of the resources. It is a leadership issue in organizations where the leader demands certain outcomes, business outcomes from the Hadoop project team and we've seen whenever that happens the projects seem to be very, very successful. Now, the second part of the question about future of work, which is a very, very interesting topic and a topic which is very, very close to my heart. There are going to be more people than jobs in the next 20, 25 years. I think that any job that can be automated will be automated, or has been automated, right? So, this is going to have a societal impact on how we live. I've been lucky enough that I joined this industry 25 years ago and I've never had to change or switch industries. But, I can assure you that our kids, and we were talking about kids off camera as well, our kids will have to probably learn a new skill every five years. So, how does that impact education? We, in our generation, were testing champions. We were educated to score well on tests. But, the new form of education, which you and I were talking about, again in California where we live, and where my daughter goes to high school and in her school the number one, the number one priority is to instill a sense of learning and joy of learning in students because that is what is going to contribute to a robust future. >> That's a good point, I want to just interject here because I think that the trend we're seeing in the higher Ed side too also point to the impact of data science, to curriculum and learning. It's not just putting catalogs online. There's now kind of an iterative kind of non-linear discovery to proficiency. But, there's also the emotional quotient aspect. You mentioned the love of learning. The immersion of tech and digital is creating an interdisciplinary requirement. So, all the folks say that, what the statistic's like half the jobs that are going to be available haven't even been figured out yet. There's a value creation around interdisciplinary skill sets and emotional quotient. >> Absolutely. >> Social, emotional because of the human social community connectedness. This is also a big data challenge opportunity. >> Oh, 100% and I think one of the things that we believe is in the future, jobs that require a greater amount of empathy are least susceptible to automation. So, things like caring for old age people in the world, and nursing, and teaching, and artists, and all the rest will be professions which will be highly paid and numerous. I also believe that the entire big data challenge about how you use data to impact communities is going to come into play. And also, I think John, you and I were again talking about it, the entire concept of corporations is only 200 years old, really, 200, 300 years old. Before that, our forefathers were individual contributors who contributed a certain part in a community, barbers, tailors, farmers, what have you. We are going to go back to the future where all of us will go back to being individual contributors. And, I think, and again I'm bringing it back to open source, open source is the start of that community which will allow the community to go back to its roots of being individual contributors rather than being part of a organization or a corporation to be successful and to contribute. >> Yeah, the Coase's Penguin has been a very famous seminal piece of work. Obviously, Ronald Coase who's wrote the book The Nature of the Firm is interesting, but that's been a kind of historical document. You look at blockchain for instance. Blockchain actually has the opportunity to disrupt what the Nature of the Firm is about because of smart contracts, supply chain, and what not. And, we have this debate on the CUBE all the time, there's some naysayers, Tim Conner's a VC and I were talking on our Friday show, Silicon Valley Friday show. He's actually a naysayer on blockchain. I'm actually pro blockchain because I think there's some skeptics that say blockchain is really hard to because it requires an ecosystem. However, we're living in an ecosystem, a world of community. So, I think The Nature of the Firm will be disrupted by people organizing in a new way vis-a-vis blockchain 'cause that's an open source paradigm. >> Yeah, no I concur. So, I'm a believer in that entire concept. I 100%-- >> I want to come back to something you talked about, about individual contributors and the relationship in link to open source and collaboration. I personally, I think we have to have a frank conversation about, I mean machines have always replaced humans, but for the first time in our history it's replacing cognitive functions. To your point about empathy, what are the things that humans can do that machines can't? And, they become fewer and fewer every year. And, a lot of these conferences people don't like to talk about that, but it's a reality that we have to talk about. And, your point is right on, we're going back to individual contribution, open source collaboration. The other point is data, is it going to be at the center of that innovation because it seems like value creation and maybe job creation, in the future, is going to be a result of the combinatorial effects of data, open source, collaboration, other. It's not going to because of Moore's Law, all right. >> 100%, and I think one of the aspects that we didn't touch upon is the new societal model that automation is going to create would need data driven governance. So, a data driven government is going to be a necessity because, remember, in those times, and I think in 25, 30 years countries will have to explore the impact of negative taxation, right? Because of all the automation that actually happens around citizen security, about citizen welfare, about cost of healthcare, cost of providing healthcare. All of that is going to be fueled by data, right? So, it's just, as the Chinese proverb says, "May you live in interesting times." We definitely are living in very interesting times. >> And, the public policy implications are, your friend and one of my business heroes, Scott McNeally says, "There's no privacy in "the internet, get over it." We interviewed John Tapscott last week he said "That's unacceptable, "we have to solve that problem." So, it brings up a lot of public policy issues. >> Well, the social economic impact, right now there's a trend we're seeing where the younger generation, we're talking about the post 9/11 generation that's entering the workforce, they have a social conscience, right? So, there's an emphasis you're seeing on social good. AI for social good is one of the hottest trends out there. But, the changing landscape around data is interesting. So, the word democratization has been used whether you're looking at the early days of blogging and podcasting which we were involved in and research to now in media this notion of data and transparency and open source is probably at a tipping point, an all time high in terms of value creation. So, I want to hear your thoughts on this because as someone who's been in the proprietary world the mode of operation was get something proprietary, lock it dowm, build a fence and a wall, protect it with folks with machine guns and fight for the competitive advantage, right? Now, the competitive advantage is open. Okay, so you're looking at pure open source model with Hortonworks. It changes how companies are competing. What is the competitive advantage of Hortonworks? Actually, to be more open. >> 100%. >> How do you manage that? >> No absolutely, I just think the proprietary nature of software, like software has disrupted a lot of businesses, all right? And, it's not a resistance to disruption itself. I mean, there has never been a business model in the history of time where you charge a lot of money to build a software, or sell a software that you built and then whatever are the defects in that software you get paid more money to fix them, all right? That's the entire perpetual and maintenance model. That model is going to get disrupted. Now, there are hundreds of billions of dollars involved in it so people are going to come kicking and screaming to the open source world, but they will have to come to the open source world. Our advantage that we're seeing is innovation now in a closed loop environment, no matter what size of a company you are, cannot keep up with the changing landscape around you from a data perspective. So, without the collective innovation of the community I don't really think a technology can stay at par with the changes around them. >> This is what I say about, this is what I think is such an important point that you're getting at because we were started SiliconANGLE actually in the Cloudera office, so we have a lot of friends that work there. We have a great admiration for them, but one of the things that Cloudera has done through their execution is they have been very profit oriented, go public at all costs kind of thing that they're doing now. You've seen that happen. Is the competitive advantage that you're pointing out is something we're seeing that similar that Andy Jasseys doing at AWS, which is it's not so much to build something proprietary per se, it's just to ship something faster. So, if you look at Amazon's competitive advantage is that they just continue to ship product faster and faster and faster than companies can build themselves. And also, the scale that they're getting with these economies is increasing the quality. So, open source has also hit the naysayers on security, right? Everyone said, "Oh, open source is not secure." As it turns out, it's more secure. Amazon at scale is actually becoming more secure. So, you're starting to see the new competitive advantage be ship more, be more open as the way to do business. What do you think the impact will be to traditional companies whether it's a startup competing or an existing bank? This is a paradigm shift, what's the impact going to be for a CIO or CEO of a big company? How do they incorporate that competitive advantage? Yeah, I think the proprietary software world is not going to go away tomorrow, John, you know that. There so much of installed software and there's a saying from where I come from that "Even a dead elephant is worth a million dollars," right? So, even that business model even though it is sort of dying it'll still be a good investment for the next ten years because of the locked in business model where customers cannot get out. Now, from a perspective of openness and what that brings as a competitive differentiators to our customer just the very base at which, as I've said I've lived in a proprietary world, you would be lucky if you were getting the next version of our software every 18 months, you'd be lucky. In the open source community you get a few versions in 18 months. So, the cadence at which releases come out have just completely disrupted the proprietary model. It is just the collective, as I said, innovative or innovation ability of the community has allowed us to release, to increase the release cadence to a few months now, all right? And, if our engineering team had it's way it'll further be cut short, right? So, the ability of customers, and what does that allow the customer to do? Ten years ago if you looked for a capability from your proprietary vendor they would say you have to wait 18 months. So, what do you do, you build it yourself, all right? So, that is what the spaghetti architecture was all about. In the new open source model you ask the community and if enough people in the community think that that's important the community builds it for you and gives it to you. >> And, the good news is the business model of open source is working. So, you got you guys have been public, you got Cloudera going public, you have MuleSoft out there, a lot of companies out there now that are public companies are open source companies, a phenomenal change over. But, the other thing that's interesting is that the hiring factor for the large enterprise to the point of, your point about so proprietary not updating, it's the same is true for the enterprise. So, just hiring candidates out of open source is now increased, the talent pool for a large enterprise. >> 100%, 100%. >> Well, I wonder if I could challenge this love fest for a minute. (laughs) So, there's another saying, I didn't grow up there, but a dying snake can still bite you. So, I bring that up because there is this hybrid model that's emerging because these elephants eventually they figure it out. And so, an example would be, we talked about Cloudera and so forth, but the better example, I think, is IBM. What IBM has done to embrace open source with investing years ago a billion dollars into Linux, what it's doing with Spark, essentially trying to elbow its way in and say, "Okay, "now we're going to co-opt the ecosystem. "And then, build our proprietary pieces on top of it." That, to me, that's a viable business model, is it not? >> Yes, I'm sure it is and to John's point with the Mule going IPO and with Cloudera having successfully built a $250 million, $261 million business is testimony, yeah, it's a testimony to the fact that companies can be built. Now, can they be more efficient, sure they can be more efficient. However, my entire comment on this is why are you doing open source? What is your intent of doing open source, to be seen as open, or to be truly open? Because, in our philosophy if you a add a slim layer of proprietariness, why are you doing that? And, as a businessman I'll tell you why you increase the stickiness factor by locking in your customer, right? So, let's not, again, we're having a frank conversation, proprietary code equals customer lock in, period. >> Agreed. And, as a business model-- >> I'm not sure I agree with that. >> As a business model. >> Please. (laughs) We'll come back to that. >> So, it's a customer lock in. Now, as a business model it is, if you were to go with the business models of the past, yes I believe most of the analysts will say it a stickier, better business model, but then we would like to prove them wrong. And, that's our mission as open source purely. >> I would caution though, Amazon's the mother of all lock in's. You kind of bristled at that before. >> They're not, I mean they use a lot of open source. I mean, did they open source it? Getting back to the lock in, the lock in is a function of stickiness, right? So, stickiness can be open source. Now, you could argue that Horonworks through they're relationship with partnering is a lock in spec with their stickiness of being open. Right, so I come back down to the proprietary-- >> Dave: My search engine I like Google. >> I mean Google's certainly got-- >> It's got to be locked in 'cause I like it? >> Well, there's a lot of do you care with proprietary technology that Google's built. >> Switching costs, as we talked about before. >> But, you're not paying for Si-tch >> If the value exceeds the price of the lock in then it's an opportunity. So, Palma Richie's talking about the hardened top, the hardened top. Do you care what's in an Intel processor? Well, Intel is a proprietary platform that provides processing power, but it enables a lot of other value. So, I think the stickiness factor of say IBM is interesting and they've done a lot open source stuff to defend them on Linux, for example they do a (mumbles) blockchain. But, they're priming the pump for their own business, that's clear for their lock In. >> Raj wasn't saying there's not value there. He's saying it's lock in, and it is. >> Well, some customers will pay for convenience. >> Your point is if the value exceeds the lock in risk than it's worth it. >> Yeah, that's my point, yeah. >> 1005, 100%. >> And, that's where the opportunity is. So, you can use open source to get to a value projectory. That's the barriers to entry, we seen 'em on the entrepreneurship side, right? It's easier to start a company now than ever before. Why? Because of open source and cloud, right? So, does that mean that every startup's going to be super successful and beat IBM? No, not really. >> Do you thinK there will be a red hat of big data and will you be it? >> We hope so. (laughs) If I had my that's definitely. That's really why I am here. >> Just an example, right? >> And, the one thing that excites us about this this year is as my former boss used to say you could be as good as you think you are or the best in the world but if you're in the landline business right now you're not going to have a very bright future. However, the business that we are in we pull from the market that we get, and you're seeing here, right? And, these are days that we have very often where customer pool is remarkable. I mean, this industry is growing at, depending on which analyst you're talking to somewhere between 50 to 80% ear on ear. All right, every customer is a prospect for us. There isn't a single conversation that we have with any organization almost of any size where they don't think that they can use their data better, or they can enhance and improve their data strategy. So, if that is in place and I am confident about our execution, very, very happy with the technology platform, the support that we get from out customers. So, all things seem to be lining up. >> Raj, thanks so much for coming on, we appreciate your time. We went a little bit over, I think, the allotted time, but wanted to get your insight as the new President and Chief Operating Officer for Hortonworks. Congratulations on the new role, and looking forward to seeing the results. Since you're a public company we'll be actually able to see the scoreboard. >> Raj: Yes. >> Congratulations, and thanks for coming on the CUBE. There's more coverage here live at Dataworks 2017. I John Furrier, stay with us more great interviews, day two coverage. We'll be right back. (jaunty music)

>> Narrator: Live from Las Vegas, it's the Cube. Covering Interconnect 2017. Brought to you by IBM. >> OK, welcome back everyone. We're here live in Las Vegas. I'm wearing the Blockchain Revolution hat right here. Of course, I'm John Furrier with the Cube, and my co host Dave Vellante, we're excited to have celebrity author, thought leader, futurist and fill in the blank on the title Don Tapscott, who's the author of the Blockchain Revolution. Legend in the industry, thought leader, you and your son a compelling new book, but you've been on the fringe of all the game changing technologies going back with social media, we've been following your work, it's been great. Now we're at the front range of Blockchain, OK? Now it's becoming pretty clear to some of the innovators like IBM and others that it's not about Bitcoin alone, it's about the Blockchain Revolution, the Blockchain itself. Welcome to the Cube and what's going on? What is Blockchain? (laughing) >> Well, it's great to hear, be here. The one thing you didn't mention is I play keyboards in a rock band. So. >> The most interesting man on the Cube right now. >> We used to do a concert every year whether our public demanded it or not, but no, we're a charity event. We've raised a few million dollars for good causes. Anyway. I think, along with my son Alex, we figured this out a couple of years ago that this is the second era of the internet. For the first few decades, we've had the internet of information. And if I send you some information, PDF, PowerPoint, E-mail, even with the website, I keep the original. I'm sending you a copy. That doesn't work so great for assets. Like money, stocks, bonds. Identities, votes. Music, art. Loyalty points. If I send you $100, it's really important I don't still have the money, and I can't send it to you. So this has been called the double spend problem by cryptographers for a long time. And Blockchain solves this problem. We've had the internet of information, now we're getting the internet of value. Where anything of value, from money to votes to music can be exchanged peer to peer. And where we can transact, keep records, and trust each other without powerful intermediaries. Now that doesn't mean intermediaries are going to go away, but they're going to have to embrace this technology or they will be toast. >> I mean, this is clear, you see the distributive computing paradigm, I mean, we're all network guys and by training, you can follow this revolution. But now when you start thinking about trust and value and you talk about digitizing the world. So, if you go to digital transformation, that's the thesis, that we're in this digital transformation, you're digitizing money, you're digitizing transactions. Explain more on the value piece because now if everything's going digital, there now needs to be a new model around how to handle the transactions at scale, and with security problems, hackers. >> Yeah, OK. Well that gets to a couple of really good points. First of all, what is digital? You know, you think, "Well, I tap my card at Starbucks "and bits go through all these networks and different "companies with different computer systems and three "days later a settlement occurs." But that's actually a bunch of messages. It's not money. Money, cash, is a bare instrument. If you have cash in your pocket, you are the bearer of that instrument, which means that you own it. And what we're talking about is something very different here, of creating digital cash. That's stored on a global ledger. So, rather than there being a three day settlement period, there's no settlement period because you're just making a change in the database. And this is a very revolutionary concept. And as for security, I mean, think about, I don't know, you're right, it's not about Bitcoin. But if we took the case of the Bitcoin Blockchain. If I wanted to hack that, I'd have to hack that 10 minute block that has all those transactions, which is linked to the previous block and the previous block, I'd have to hack the entire history of commerce on that Blockchain, not just on one computer, but simultaneously across millions of computers, all using the highest level of cryptography, while the most powerful computing resource in the world, the minors are watching me to make sure I don't mess around. Now, I won't say it's impossible, just like I suppose it's not impossible to take a Chicken McNugget and turn it back into a chicken, but it's really hard to do. A lot, and so these systems are way more secure than our current systems. >> Yes, it fundamentally impossible, and you don't have a third party verification system that's also an exposure area, it's globally distributed, right, so let's go back to what is Blockchain? What's the Blockchain 101? >> Well, Blockchain is a distributed ledger where anything of value, from money to votes, and music can be stored, transacted, managed, in a secure and confidential way, and where trust between parties is established, not by a big intermediary, but by cryptography, by collaboration, and some clever code. >> So, talk about the premise of the book. Sort of why you wrote it and what the fundamental premise is. >> Well, three years ago, three years and five weeks ago, at a father son ski trip, over a large piece of beef, and a very nice bottle of wine, Alex and I started thinking about what all this means. And we decided to work together. And he wrote a very cogent paper about how this new ecosystem could govern itself and my publisher got wind of it and said, "That sounds like a book." So we launched a dozen projects, couple of years ago, on how this technology changes, not just financial services, how it changes the corporation and the deep structure and architecture of the firm. How it changes every industry. How it changes government. Democracy, there's an opportunity to end the crisis of legitimacy of our democratic institutions. But what it means for culture and so on. And then we wrote the book. And it was published in May 10th last year, it's been a big best seller, it's the best selling book on Blockchain. It's actually the only real book on Blockchain. In some countries it was ridiculous. For a while, in Canada, it was competing with Harry Potter and an adult coloring book, as the best selling book in the country. >> That's the state of our culture right there. (laughing) >> What is an adult coloring book, anyway? (laughing) >> That's the million dollar question right there. >> There are a lot of geeky books on Blockchain, but this-- >> Well, actually, there aren't, there are books on crypto currency, on Bitcoin. >> Yeah, absolutely. >> And but the only real book on Blockchain is Blockchain Revolution. >> So, but you're really focusing on the business impact, organizational impact, even societal impact, so explain the premise. >> Well, where do we start? Let's start with the firm. Corporation, foundation of capitalism, based on double entry accounting. That's what enabled capitalism. Well, with Blockchain, you get a third entry onto the ledger, so you have triple entry accounting, so you don't need, say, audits. Every year, because there's an annual audit. That's just the beginning. Because the reason that we have firms, according to the Nobel Prize winning economist Ronald Coase, is that the transaction costs in an open market, like the cost of search, finding all the right people and information, the cost of contracting, for every little activity we're contract prohibitive. The cost of coordination, getting all these people to work together, didn't know each other. The cost of establishing trust, all of that in an open market is prohibitive, so we bring that inside the boundaries of a firm. Well, Blockchain will devastate those transaction costs. So we're talking about a fundamental change in how we orchestrate capability, in our economy, to innovate, to create goods and services. And for that matter, to create public value. So this is not some interesting little technology. This is the second era of the internet. I think it's going to be bigger than the first era was. >> So the internet, I mean, the value creation side. So let's take that additional asset side. So assume everything's digitized, got IOTs out there, industrial IOT, wearables, smart cars, smart cities, smart everything, but now you've got to create value as a firm, so let's roll that forward, we have the now somewhat frictionless transactional environment in an open market, how do firms create value out of those digital assets? >> Well, they'll create value in some ways that are radically different than today. So let me give you an example. Who are the big digital value disrupters today? Well, you can start with the so called sharing economy. You know, Uber, Airbnb, Lyft. >> The Cube. >> Sorry? >> The Cube. (laughing) We're disrupting the world right now. >> Well, you're actually not a sharing economy company in the sense that I think. >> In the traditional sense. >> Actually, I don't think they are, either. I mean, the reason that Uber's successful is precisely because it doesn't share. It's a service aggregator. So, why do you need a $70,000,000,000 corporation to do what Uber does? It could be done by a distributed ledger with some smart contracts and autonomous agents. Everything that the corporation does could be done by software. Airbnb. You know, how about, we'll call it B Airbnb, Blockchain Airbnb. So, you go onto your mobile device, and you're looking for a place, and you're going to be in Vegas, and all the hotels are booked because of IBM, and then you find a place, you book it, and then you show up, you turn your key that starts a smart contract payment to the owner of the apartment or the room, and you check out, you turn your key, it's closed. The software has a payment system built into it. So the renter of the room gets paid. You enter a five star on your device. And that's immutable, and it's a five star rating on a Blockchain. Everything that Airbnb as a company does could actually be done by this software. So, Bob Dylan, there's something going on here and you don't know what it is, I mean, people are all locked in an old paradigm about what's disruption. Get ready for this. >> So what's the impact, I mean, not the impact, what's the inhibitor, so, obviously, any new technology you see all the naysayers, so obviously this is a great vision, what's going to be the impediment? >> Well, they are all kinds of impediments and inhibitors, and there are all kinds of ways that this can get messed up. A big one is that we're overcoming now is that people think, well this is about Bitcoin, well, it's not. The real pony here is the underlying technology of Blockchain, and that's the biggest innovation in computer science in a generation, I think. But also, you know, I wrote this 1992 in Paradigm Shift, I said, when you get a new paradigm, it's a new mental model, and these things cause dislocation and disruption and uncertainty, and they're nearly always received with coolness. I mean, you guys know what it's like to be received with coolness as you introduce a new idea as do I, going back to the '70s. But, and vested interests fight against change. And leaders of old paradigms have great difficulties embracing the new. So you think about a company like Western Union that can charge 10% for remittances that take four to seven days. Well, with new tools, they don't take four to seven days, they take minutes, and they charge, based on Blockchain, they charge a point and a half. So, it's the old-- >> The inhibitors, they got to get their solutions out there so that they could go after and eat some of the lunch of the older guys. >> Well, they have to eat their own lunch, that's-- >> Western Union could be disrupted by a new entrant, right? So you got a new entrant coming in, they got to cannibalize themselves-- >> And at that point, it tips, there are enough disruptive entrants, right? >> So, it's all those inhibitors to change and for the IT people that are at this event, this is an exciting opportunity, but you do need to learn a new kind of knowledge base to function in this distributed ledger environment. You need to learn about hyper ledger, for starters, because that's the real enterprise platform. >> All right, so folks watching, like my son who helps us out sometimes as well, you have a father son relationship, which is super inspirational. He's, say he wants to get involved in Blockchain. He wants to jump right in, he's kind of a hacker type, what does he do? How does he get involved? Obviously read the book, Blockchain Revolution, get the big picture. Is there other things you'd advise? >> Well, buying the book in massive volume is always a good first step, no. Seriously. Well, one thing I always say to people is personal use is a precondition for any kind of comprehension. So just go get yourself a wallet for some crypto currency and download it and you'll learn all about public key encryption and so on. But I think in a company there are a number of things that managers need to do. Need to start doing pilots, sandboxes, developing and understanding use cases, and our new Blockchain research institute is going to be a big help in that. But also, for an IT person, is your son an IT guy or he's more an entrepreneur? >> No, he's 21 years old. >> He's 21. >> He doesn't know anything about IT. >> He's a computer science guy. >> He's born in the cloud. IT, can't spell IT. >> Well. (laughing) >> IT's for old guys like us. (laughing) >> We're telling him what he should do, he should be here telling us what we should do. >> John: That's why we hired him, he's a little guinea pig. >> Digital natives, you know, we're digital immigrants, we had to learn the language. But, for the IT people, it's all about not just experimenting, but about moving towards operational systems and about architecture. Because our architectures are based on traditional computing environments and this is something from Paradigm Shift, you remember, I interviewed Max Hopper who invented the Sabre Reservation System for American Airlines, and he says, "The big problem, Don, "is that if I don't have a target architecture, "every time I spend a dollar, I'm building up my legacy "and making it worse by investing in IT." And so that's where I came up with this formulation, yeah, God may have created the world in six days, but he didn't have an installed base to start with. (laughing) So, what we need to do is to start to think about architectures that embrace Blockchain. And this is an historic new opportunity for anybody who cares about IT. >> Is the disruptive enabler for Blockchain the fact that we're now fully connected as a society, or is it something else that we don't see? What's your view on, what's the real wealth creating disruptive enabler? >> Well, you can sense that the rate of change is a lot faster for the second generation than the first. 1993, '94, when I wrote the Digital Economy, it was dial-up. Ebay. >> 14 four. >> Amazon didn't exist. >> Actually 98 I think it was. >> When I wrote that book. Google was five years away. Facebook was 10 years away, so but now we've got wireless, we've got IP everywhere. We've got mobility. We've got the cloud, we've got all the preconditions for this new innovation to happen a lot faster. And that's why, I mean, a year ago, there wasn't a lot of talk at this event about Blockchain. Today it's the big buzz. >> I wonder if you could talk about other applications. You talk about hyper ledger, it's a great place for a starting point, especially for IBM, but one of the areas I'm excited about is security. You know, like the MIT Enigma Project, and there are others, you know, security is such a problem. Every year we look back, John and I, we say, do we feel more secure? And no, we feel less secure. What about the application of Blockchain in security use cases? >> Well, Blockchains are more secure in a number of ways. One is they're harder to hack than traditional servers. And people say, "No, our company, we're bulletproof." Right, tell that to JP Morgan and Home Depot-- >> Target fidelity-- >> The Democratic National Convention, but also tell it to the CIA. I mean, if the CIA can be hacked, then any of these traditional server technologies can be hacked. So that, alone, is a huge case to move towards hyper ledger and these other type platforms. But you said, "I feel less secure these days." And that's a really interesting statement. Because I think that, in many ways, the security of the person has been undermined by the internet of information, as well. That, first of all, we don't own the data that we create. That's a crazy situation. We all create this massive new asset. It's a new asset class. Probably more important than industrial plant, in the industrial age. Maybe more important than land in the agrarian age. We create it, but these data frackers, you know, like-- >> Facebook. >> --Facebook. Own it and that's a big problem. The virtual you is not owned by you. So we need to get our identity back and to manage it responsibly, and people who say to me, "Well, Don, privacy's dead, get over it." This is foolishness. Privacy is the foundation of freedom. And all these things are happening in our world today that undermine our basic security. Our identity's being taken away from us. Or the fact that things happen in this digital world that we don't know, what are the underlying algorithms? If I take this, and I drop it, that's called gravity. I know what's going to happen. But if I go onto Facebook and I do certain things, I have no idea what are the algorithms that's determining what's happening with that and how the data is used. So-- >> Hello fake news. That's how fake news came about. >> Well, yeah, totally. >> People don't know what to trust and it's like, wait a minute. >> Exactly, and well, this has led, also, to a total fragmentation of public discourse, where we've all ended up in these little self reinforcing echo chambers where the purpose of information is not to inform us, it's to, I don't know, give us comfort. >> Divide people. >> Yeah. So, I'm not saying that Blockchains can fix everything, in fact, they can't fix anything, it's humans that fix things. But the key point that Alex and I make in the book is that once again the technology genie has escaped from the bottle, and it was summoned by this person that we don't even know who they are. At a very uncertain time in history. But it's giving us another kick at the can. To sort of fix these problems. To make a world where trust is embedded in everything and where things are trustworthy, and where people are trustworthy, and maybe we can rewrite the whole economic power grid and the old order of things for the better. And that's really important. >> My final question for you, and this is kind of a thought provoking question. Every major revolution, you see, big one, you've seen a counter culture, '60s, computer revolution, PC revolution, are we on the edge now of a new counter culture developing? Because the things you're kind of teasing out is this new generation, is it the '60s version of tech hippies or is there going to be a, because you're getting at radical reconfiguration, radical value creation, this is good evolution, and fast. So you can almost see the young generation, like my son, you're talking about, teaching us how to do it, that's a counter culture. Do you see that happening? >> Well, first of all, I see this change in culture profoundly, so artists can get fairly compensated for the work they create. Imogen Heap puts her song on a Blockchain platform, and the song's inside a smart contract that specifies the IP rights. And you want to listen to it, maybe it's free, you want to put it in your movie, it costs more. The way she describes it is the song acts as a business, and it has a bank account. So, we can profoundly change many aspects of culture, bringing more justice to our culture. But I'm not sure there'll be a counter culture in the traditional sense because you've got people embracing Blockchain that want to fix a bunch of problems, but also people who want to make large organizations more competitive and more effective. The smart banks are embracing this because they know they can cut their transaction costs in half, probably. And they know that if they don't do it, somebody else will. >> And IBM's embracing it because they write software and they service all those firms with technology. >> Well, IBM, the case of IBM is really interesting, and I'll end on that one. That if you think about it, and I go back, I mean, there were only main frames when I started, and IBM was the leader of the bunch, right? And then all the bunch died, but IBM somehow reinvented itself and it got into mini computers and then we saw the rise of the PC and IBM invented the IBM PC, and then we got into the internet, and once again, all these companies died off but somehow IBM was able to find within itself the leadership to transform itself. And I'm, I won't say I'm shocked, but I have to tell you, I'm really delighted that IBM has figured this one out and is driving hard to be a leader of this next generation of the internet. >> And they're driving open source, too, to give IBM a plug, Don Tapscott, great to have you on the Cube. Good luck with your speech today. A legend in the industry, great thinker, futurist. Amazing work. Blockchain is the next revolution, it will impact, it's an opportunity for entrepreneurs, this is a disruptive enabler, you can literally take down incumbent businesses. Changing the nature of the firm, radical economical change. Thanks so much for sharing the insight. >> Nice hat, too. >> I got a nice hat. I got a free bowl of soup with this hat, as they say-- >> Don: It's all about the Blockchain, baby. >> It's all about the Blockchain. >> It's all about the Blockchain. >> More Blockchain Cube analysis as we disrupt you with more coverage, I'm John Furrier, Dave Velante, stay with us. (musical sting)