>> Announcer: Live from San Diego, California, it's theCUBE, covering Cisco Live US 2019. Brought to you by Cisco and its ecosystem partners. >> Welcome back to San Diego, everybody. This is Dave Vellante and Stu Miniman. You're watching theCUBE, the leader in live tech coverage. Lisa Martin is also here. Stu, I actually did see Ron Burgundy in the street last night. He was out, he was shaking hands with all the CCIEs. This is day three of Cisco Live 2019, theCUBE's coverage. Joe Malenfant is here, the director of IOT marketing at Cisco. Joe, great to see you in from Colorado Springs. >> Thank you very much. >> First time at theCUBE, welcome. >> It is my first time in theCUBE, thankfully it's not actually just a box, because I have a little claustrophobia going on. >> (laughs) So, IOT, it's got all the momentum. Alisa Tony was up on stage this week, addressing 28,000 press people. What's driving all this momentum, other than the great marketing, what's really happening in the field? >> IOT has been a very nebulous thing for the last few years, and we're finally started to see some solidification and some convergence around what it means. And really for Cisco, we started on this path a few years ago, but Liz took over last year. We've established a new strategy, because customers, organizations and especially organizations that run operational technology, think of refineries in the oil and gas industry, in the electric utilities industry. They run a whole separate network called industrial control systems, and that OT side of the house has traditionally been very siloed. Well, as the economy moves forward, as we digitize, they're trying to connect back with their enterprise side of the house. Well, if you're going to connect your network with the IT side, why not use the incumbent leader in enterprise networking? We know who they are. We're all sitting here right now with Cisco. So they look back to the IT side to say, hey, please help us connect. That's really what's driving the market today. >> So how should we think about the difference between OT networks and IT networks? Are there any things we can learn from Tellco which also had some unique inner attributes to it? But share with us what you guys have learned there. >> So the OT network is very different, right? It's very time sensitive; latency is just something that they can't have. When you think of email going down, what's the worst that happens? You might get a nasty gram eventually. Well, when the power grid falls over, lives are at stake. So, those networks are very critical, they're very sensitive and they've always been kept separate. As they start to make that interconnection, we need to bring together networking technologies that are for that environment. As they make that connection though, there is a very number one concern for them is wait a second, if we're going to connect this stuff, we need to make sure it's secure. If you're a chemical processor for example, and you've got a secret recipe, you don't publish that. You don't patent it, because you don't want the word to get out or else somebody's going to rip you off. So, they don't want to have this side of the house get connected with that side of the house and expose the secret sauce. So security becomes very top of mind for them. Connected but do it securely. >> All right, so, Joe, I've actually been happy with how I've seen the solutions (mumbles) from Cisco, because when I first heard IOT, it was like, well we're the leader in networking. We're going to network everything, and I'm like, okay. But at the device edge, one of the challenges is, often I have limited or no connectivity. So sometimes, I'm going to need to do the processing there. There's lots of different protocol issues that I have there. So talk about some of those new solutions that Cisco's been doing at the edge that are more than just sending bits back and forth. >> That's a great question, Stu. So, of course, everything has to do with networking, right? But networking is merely the vehicle for connectivity, and so we realized very quickly if we're going to create new routers and switches for this environment, there's an opportunity to do a little bit more. So back in February, we did something at DevNet Create called the Hackathon. We have a new router. It's a ruggedized router called the IR1101. I think Liz showed it on stage the other day, and this has a specific module inside of it. So there's a module that can be swapped out. Well, at the DevNet Create Hackathon, one of the teams actually created a machine learning module. Why machine learning at the edge, right? If you have 700 sub stations, you don't want to deploy machine learning on each and every one of them. You want to get all that data back into a central place so you have more data to actually train your algorithms on. Why would you put ML at the edge? Because not everything needs to come back. There's stuff that you can do at the edge, number one, with that machine learning on traffic that doesn't have to go back. When you don't back all traffic, that means you don't have to pay costs over to your LTE carrier for more data. Other times, as well, though, you're looking at compliance as another reason. So, that's one use case, right? Let's look at the other one, which really comes down to, okay, if I'm connecting things, and you can actually do some computing at the edge, how are we going to do it? On all of our new switches and routers that have edge compute capability, they're using native docker containers, so now you can actually deploy your applications at the edge. Again, do the work at the edge as close to where it has to be as possible. Don't bring it back, you don't have to worry about any sort of violation of compliance with local laws, sovereignty clouds. You don't have to worry about costs of back hauling traffic. And then, if anything's time sensitive, it stays as close to the edge as possible. >> So one of the keys here to your strategy is clear, is to allow developers to build new applications at the edge. You're not OT experts; that's not your roots. And those developers, your ultimate clients, are. They're the domain experts, they know what's going on, they know these specialized areas, so talk about the importance of having programmable infrastructure at the edge, and specifically what your strategy is. Where does Cisco leave off? And you're not a pass vendor. You're going to bring that in through partnerships, but help us understand that strategy a little bit better. >> Our ecosystem is incredibly important to us. So we've got, DevNet is incredibly important to Cisco, because as you heard probably yesterday, Susie announced new certifications for IOT. Those certifications allow engineers, whether it's a control systems engineer, whether it's a network engineer, to actually get certified, be it specialist, be it professional, in writing their applications for the edge, for those specific environments. But more importantly, because, let's go back to the environment that we're working in, time sensitive, very critical, low latency networks. You don't want to go and push out something where you're not 100% certain, so IOT certifications that DevNet has created give those engineers a repository, a sandbox and all of the Cisco solutions to actually test with before they do the deployment and ensure, almost guarantee themselves success by pushing the production. >> And one of the key things theirs do is the ability to test things quickly and fail fast. >> Yeah, well one of the things that I was a little bit concerned about when I saw this wave of IOT is every customer's going to have different requirements, so it feels like we at least get some level of maturity and commonality if we can have certification. >> Joe: Exactly. >> What does somebody come out of? What skill set do they have in rank? Because you said from a manufacturing or healthcare, everybody's going to use IOT, but how we use it and where we use it is going to be very different. What's the base layer that we're learning about? >> So, ultimately, the engineer who's actually coding these things, kind of what you said. They're all going to be very vertical specific use cases. There's not a lot of horizontal stuff going on, so we're creating a baseline for the engineer to understand their environments better. They honestly know it better than we do, but we want to make sure that as they go to deploy these things that we give them the infrastructure to do it on, the application and framework within which to do it, and the tools to be able to do it. And so that's the docker, the modules, being able to do edge compute and then lastly having that certification within IOT to how do I code this thing? Can I guarantee that I'm going to be successful and push it out? >> Joe, what's the organizational dynamic like? You always hear the store's OT is not talking to IT. They're different animals. You've got some hardcore engineers that have hardened their infrastructure, and you got IT guys that are trying to build applications and support applications for the business. Those two constituencies don't talk. What can Cisco do? What's the strategy with regard to bringing those constituents together? Do you have to or is it sort of divide and conquer? >> I think the number one thing that we want to do is enable the collaboration between the IT and OT. It's not that people don't want to. They're just trying to figure out how to do it better. So if we can help them number one, connect their networks together, safely and securely, that's number one. Reliable and secure networking, what we're known for. But number two, from the OT side, back to what I said originally was around the security side. So, I don't know if you guys heard, we announced last week our intent to acquire a company called Sentryo. Now, why is this important? Because they do passive network detection, whether it's anomaly detection, but they do asset discovery as well. Now a big thing when you're connecting those OT networks into the IT world is what assets do I even have? Those assets are vastly different from anything IT actually knows so this acquisition will allow us to passively discover and tell them, here's your list of assets that you're going to be connecting. Here's what we need to secure, so they know in scope as they walk into this project, they've got a really good blueprint for what needs to be done and not surprises. And the reason that's important is about only 40% of all IOT projects make it from pilot to production. I mean that's kind of staggeringly low. I actually had an analyst tell me yesterday, I'm shocked you guys said 40%, because I only hear about 30%. >> Yeah, yeah, right. >> And when you're doing it in a lab, you know all the variables, but when you go out to a brown field environment, where you've got 20 year old systems that honestly was probably a system hidden underneath some guy's desk that nobody's actually known about. If it ain't broke, don't fix it. We're actually able to discover all those assets now. That's why we did the acquisitions, so it's really from an asset visibility and a security standpoint. >> And you're saying, Joe, that that discovery is specific to edge assets versus like a stealth watch. We heard a lot about stealth watch this week, which is they do discovery, but you say that's predominantly IT assets, servers, storage, networking, you know, switches, et cetera, routers. >> I mean, listen, so stealth watch is awesome, and I think eventually there's going to be a little bit of a merger between some of these things. But, the operational technology environment is very different. They're not native IP. They don't talk the same protocols. There's thousands of different protocols that exist in an operational technology environment, DMP3, Modbus, Profinet, Profibus. Just very few right there. (laughs) Those IT has never, ever talked them. They don't even know what they mean for the most part. Tell an IT guy, hey can you detect this DMP3 traffic? The answer's no. However, when we move into that environment, our networks need to be able to understand that traffic, and that's where Sentryo comes in with that operational technology expertise to help the IT and the OT really come together. Business all comes at the end of the day. >> So, Joe, give us a little spin around the show from an IOT standpoint. We've got the IOT takeover happening here in the DevNet zone. All the classroom seem packed jammed, as they've been all week for all the takeovers, but give us a little spin around. >> It's been amazing actually so far, this year. Having been at Cisco for a few years now, I walked into this and said, wow, we are definitely in the IOT world. We've got IOT plastered outside; we've got it inside. People are very interested in IOT. They're interested not just in what we're doing, but how they can take the knowledge and what they're going to learn here and really bring it back into a practical use case at their own organizations. So, from an IOT perspective, the world of solutions downstairs is jam packed. I mean, we've got a massive presence down there. We've connected the buses that are outside. If you look at the app, we've actually connected those buses to the app for real time data to say this is when the next bus is actually coming. I mean, what a pain in the butt is it to stand outside and go, where's the shuttle bus? We can tell you where the shuttle bus is. We can tell you when it's coming and how long you're going to have to wait. And yes, don't worry, you've got time to get another coffee. >> Just follow the line you'll find the bus. (laughs) >> You'll find the bus but how long is it going to take to get you there? >> (laughs) Okay, you were mentioning about some of the reasons for apps at the edge. I want to come back and explore that a little bit. You said compliance, I think you threw in cost. There's physics involved, as well. So the cloud guys would say, hey yeah, we know there's a lot of stuff going at the edge, but ultimately the heavy work is going to be done in the cloud and all the modeling. You've got others who are saying, hey, here's the blocks, going to put it at the edge instead of a top down approach. What's your scenario in terms of data at the edge? Why does data need to stay at the edge? You mentioned real time before, but let's double click on that a little bit. >> So I think there's really three key reasons that data and applications are going to be processed at the edge. Number one, compliance, right? So there's certain data that's going to come in that cannot be shipped back to a public cloud. That's part of the rules; you cannot do it. No public cloud for certain private data. Number two is cost, honestly, and this is a really big one. If you can reduce your overall cost, instead of back hauling all that traffic to HQ, to your data center, and you just keep it at the edge, you don't have to back haul it. LTE traffic, not the cheapest, and I can only imagine with 5G how much that's going to increase the cost. They're going to want to just back haul everything, right? Well, we can do that really quickly. We can take everything and put it back. Yes, but your bill every month is going to be monumentally more expensive. And then, lastly, as you mentioned was the time sensitive one. That's really going to be one of the bigger ones from a business standpoint. The engineers are now going to be able to write applications for processing data at the edge, so that they don't lose. In this environment, three seconds is the difference between life and death. I'm kind of exaggerating but kind of not. If you're missing an alert in a couple seconds where you can't shut down a gas-leak valve where there's potential for explosion, those seconds are the difference between boom, or we're all good guys, it was just an alert. >> Another classic example here is autonomous vehicles, as well. You can't run that from the cloud, right? You've got to do that locally. Last question, Joe, is Cisco differentiation. Obviously you come at it from a position of networking strength, you mentioned that in your opening comments but give us the bumper sticker on why Cisco. >> I think that the big reason why Cisco is unique in the IOT world is, number one, we're not trying to be everything to everybody. We're trying to create a safe and secure, reliable network. Number two, though, is our ecosystem. So we have a large partner ecosystem. We're expanding it into the OT world. We've got specific products for those OT partners where they can imbed our networking technology into their solutions and systems that they're putting together. (clears throat) Lastly is, honestly, what we're doing here with DevNet. Nobody in this world other than Cisco has DevNet with the network, with the ecosystem. When you put that trifecta together, it's unstoppable. And so being able to bring together IT and OT, only we can do that with those three things. >> So I think Susie said yesterday, Stu, 600,000 engineers that are trained on coding Cisco infrastructure. It's going to be interesting to see how the OT folks pick up on that, and what the adoption is there. Joe Malenfant, thanks so much for coming on theCUBE, it was great to have you. >> Thank you, gentlemen, I appreciate it. >> Really, a pleasure. Okay, Stu and I will be right back. Lisa Martin is also in the house. You're watching theCUBE. We're live from Cisco Live in San Diego. We'll be right back. 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>> Announcer: Live from San Diego, California, it's the cube covering Cisco Live, U.S. 2019. Brought to you by Cisco and it's ecosystem partners. >> Welcome to sunny San Diego. Lisa Martin with the Cube live at Cisco Live in the U.S. here. I'm here the next three days with Stu Miniman and Dave Volante. Gentlemen, great to see you. >> It is sunny. >> It is very sunny. >> Lisa, big 30th anniversary celebration here at Cisco live. Where were you in 1989, you don't have to answer that. >> But I thought about that this morning, I know exactly where I was. So the 30th year of them doing a customer partner event. Other 30 year anniversary notables this year, Tetris is 30, Seinfeld premiered 30 years ago. That's kind of scary when you remember exactly where you were. So we came from the keynote just a minute ago, not a lot of news here, but Stu, let's start with you. In terms of where Cisco is, you guys were in Cisco Live Barcelona just a few months ago, John and I covered Cisco DevNet about six weeks ago, lots of excitement around these waves of 5G, Wi-Fi 6, Compute architectures, your thoughts on Cisco where are they are today, where they are in their transition to becoming more software services? >> Yeah, so lately say a great place to start you. We've been watching the last two years that we've done theCube at their European and U.S. events, this transformation to become a software company. It's really interesting to see Chuck Robbins bring out this 30 year old box, and he's like, it's ribbon cables and multi-protocol routers and everything, and then most of the keynotes, most of the things that they're discussing, sure they had some boxes out there on display, I saw somebody on Twitter, they let all the cats out of the bag, 'cause they're all, Cat. 9000, Cat 6300, things like that, but it's software driven. The point they want to make is that cloud and software defined networking was going to destroy Cisco, well and here we are five or 10 years into some of these waves, and Cisco's still going strong. they have positioning in a lot of these environments. Cisco still does have a lot of hardware. When I look at how we track Cisco, it is more about the ports in the boxes than it is the software revenue, but they are climbing up the charts there, and they are being more software. They are showing up at all the cloud shows. When we were at Google Next, we talked to Cisco there. At AWS we talked to AppDynamics and many of the software pieces, and here in the DevNet zone, it's all about enabling developers which is at the core of so much of what's happening for that software transformation. So Cisco, making good measurable progress. Still a nice robust mix of hardware and software, and I personally, 30 years, I was actually at the 20 year reunion. I bumped into a friend of mine that we'd done a video with 10 years ago. We're comparing how we both have a little bit less hair than we did there, but amazing to think about the technologies we were looking at 10 years ago. Cloud was so early in some of these spaces, so a lot has changed in 10 years, and Cisco continually matriculating the ball down the field as they would say in the old analogy. >> And in terms of revenue, Dave, I was looking at their Q3 2019 report which was just a few weeks ago, sixth consecutive revenue growth quarter under Chuck Robbins, your thoughts on where they are from a revenue perspective? >> Well, Cisco's been doing very well. the Stock's been crushing it since 2011. After the downturn Cisco came out of the downturn as a stronger company. They're about almost 50 billion dollars in annual revenue. They've got a 250 billion dollar market cap, which as, Stu, you and I were talking about, it's almost a 5X revenue multiple, and that's software-like revenue multiples. Hardware companies don't typically get that. I mean unless you're like a pure storage, and your growing super fast. But so, this is a company with 60, almost 65% gross margins, it's got a 25% operating income. Again, that's like AWS. AWS is an incredibly profitable company. Just to put that into perspective, Oracle which is predominantly a software company even though it has some hardware, has operating margins in the low to mid 30s, and that's an extremely profitable company. Cisco's got a net of 10 billion dollars in cash on the balance sheet, actually more, but it's got some debts if you're talking about the net debt, and it's growing at 5 or 6% a year. For a 50 billion dollar company, that's quite impressive. So I think to answer your question Lisa, they're doin' quite well from a revenue standpoint. Chuck has done a great job with Wall Street. They obviously trust him. The stock's up. It's on a, I wouldn't say a rocket ship, but Cisco is a cashflow machine. Now where do they allocate that capital? Obviously they spend some on R and D and operations. they spent seven and a half billion dollars last year on stock buybacks, and dividends. So that's a big nut, and so Cisco's going to continue, in my opinion, to use it's funds to obviously fund R and D, but also do stock buybacks, dividends, prop up the stock. >> Stu: And acquisitions. >> And acquisitions. Is that a good move? Well, so balancing organic R and D with acquisitions is good. We talked about the Meraki acquisition earlier. Obviously Cisco's done a lot of growth through it's acquisition, but I would say this. Stock buybacks are a good idea when your stock is undervalued. Is Cisco undervalued, I don't know. Everything's up these days, hard to predict, but the concern that I have for companies like Cisco and Oracle, who do a lot of big buybacks is when the market sentiment flips, and shifts toward profit based companies like a Cisco or an Oracle, cashflow based companies, stocks tend to depress, and then the market sentiment shifts. So there might be some better buying opportunities ahead, but companies today who have a lot of cash, they have to do buybacks because they got to keep Wall Street happy. >> So as we look at these big waves of the explosion of 5G, 400 gigabit ethernet, GPUs, AI everywhere, one of the things that Chuck Robbins said this morning was that, and it made me think of the network as this common denominator in this changing architectural world we live in, hybrid multi-cloud. So going from their first show 30 years ago that was called Networker, what are your thoughts, Stu, we'll start with you, about where they're positioned with the network as really this common denominator in changing architectures, and the network that data that traverses it can be gleaned by organizations to extract insights, new value, new business models, where does Cisco sit in your opinion? >> Great question Lisa. So first of all we need to look at where does Cisco play, and where do they win? If you talk about the enterprise, switching and routing, they are dominant in that environment. We're going to be digging into some of the service providers. Service providers is not, Cisco is not nearly as dominant with service providers as they are in the enterprise. Then if you talk in the hyperscale players, they don't do as much gear, and that's where they're looking to have their software in there. Cisco wants to make sure that in this new hybrid multi-cloud world, wherever you live, there's going to be some piece of the stack that Cisco is part of. But there are opportunities for growth, but there are risks. Some of the traditional business, enterprises are not building as many data centers, and they're going to go to hosting providers, and therefore the network that most companies manage, most of what they're managing isn't under their purview. they don't touch it, they don't cable it, they don't put any of that together, and so Cisco needs to be extending who they work with, help with common interfaces across them. An area we spend a lot of time looking at is this multi-cloud management where Cisco is going up against some of their traditional partners. People like VMware and Microsoft used to just be the software pieces that ran on top of Cisco, now they're going for some of that same piece of the market because that is a control point, and Cisco needs to have leverage there, so can they be strong there? So it's interesting some of these waves that we have where Cisco plays, and where they will have a lot of competition. >> So guys, I think as Cisco moves from just a purely data center player to all these other opportunities, and they talk about the bridge to possible, I see it as Cisco's in a position to connect all the world's data sources. When you talk about multi-cloud, Cisco's got an opportunity and a challenge to convince the world that it's networks are higher performance, more cost effective, and more secure than everybody else, and you saw David Goeckeler today put up a slide, and he talked about 1, 2, 3, 4, 5, 6 things. He said, automated, secure, agile, cheaper, easier to manage, drives of business outcomes. Now easier to manage, cheaper, automated, those are all cost efficiency sort of plays. So Cisco is in a good position because it's such a huge piece of the market, you know two thirds of the market, and it's been able to maintain that. It doesn't have a monopoly quite, but it's been able to maintain that huge market share for a long time. >> And Dave, if I can, just a comment that number one is Cisco has not been known to have the simplest networks out there, nor in the past it was the best network I could do, I would buy Cisco only. Today, as you've said it many times Dave. Today's multi-cloud is the old multi-vendor. Cisco, sure they would do interops, and they would make sure to test it out, and they follow all the standards, and they drive all of the standards, but in today's world, if Cisco is not the dominant player in the market, will they win in those environments, and you look at something like 5G. Cisco's not the leader in 4G and LTE roll outs. they're working with the telecom providers, but they have a strong position with Meraki on the WiFi, so something like WiFi 6 and their strong connection between the WiFi 6 and the 5G to be able to make sure my indoor and outdoor can now work seamlessly, but there's areas where Cisco's trying to go into that have not necessarily been their stronghold in the past, and at the end of the day, it's frictionless and simplicity is what's driving a lot of these cloudways, and that's not Cisco traditionally. >> Well to that point, you know complexity means cash historically in this business, and so 25% of Cisco's revenue comes from professional services, and 60% from infrastructure, and then the balance is for other stuff. What's the point? The point is that Cisco is transitioning it's business to more of a subscription model. Now they talk about that they had huge growth in the subscriptions business, but they don't really tell you how much of their business is software. It's sort of opaque. You got to kind of dig through that, but it's clearly on a big upswing. So Cisco's got to transition it's business from, you know back in 1989 it was a lot of break/fix right, then it's become a lot more sort of consulting and other professional services. Now it's going more toward an as a service model, and maybe still some of the professional services to, how do I secure my network, how do I architect that, what about cloud, what about multi-cloud, a lot of opportunities there for services value add, but it has to transition. >> Speaking of security, wanted to kind of touch on that for a second, Dave. They just announced the intent to acquire Sentryo SAS, which is a cybersecurity company out of France for industrial control. Their cybersecurity's one of their fastest growing businesses. Is that an opportunity for Cisco to differentiate itself with respect to network security? >> Well, it's imperative. I mean their security business grew 21% last quarter which is what, triple, more than triple the overall company. What they set at around that acquisition, it made total sense to me, is that it used to be you would just invest in protecting the perimeter. That's where all the money went. Now with things like the Edge, and that's part of this acquisition, you've got to really secure the devices, and the applications that are out there, but also I think increasingly the big opportunity is how do we respond? So things like Stealthwatch, and other machine machine intelligence and analytics help organizations that are ultimately, we know they're going to get breached, but the question is how do they respond? >> Yep, excellent. Well guys, I'm looking forward to three days of wall to wall coverage with you, talking with Cisco folks, DevNet folks, customers, partners. It's going to be bright. I think we can guarantee that, but it's going to be good. >> Yeah, we should say that we're here in the DevNet zone, right? So stop by and see us. A lot of action here. there'll be a lot of takeovers, and we'll be coverin' it. >> Yes, the Sails Pavilion which feels just like that. All right guys, going to be a great week. I'm Lisa Martin for Stu Miniman and Dave Volante, you're watching the Cube Live from Cisco Live in sunny San Diego. Stick around, our guests lineup begins in just a minute. (upbeat music)