>> Narrator: Live from Las Vegas. It's theCUBE, covering HPE Discover 2017. Brought to you by Hewlett Packard Enterprise. >> Welcome back everyone. We are here live in Las Vegas for SiliconANGLE Cube's exclusive coverage of HPE Discover 2017. I'm John Furrier with my co-host Dave Vellante. Our next guest is Justin Hotard, Vice President and General Manager of the Service Provider and OEM Solutions for HPE, Hewlett Packard Enterprise and Curt Belusar, Senior Director of Service Provider Engineering. We got the trends, we got the market leader, the go-to market leader, as well as the engineering. Guys, welcome to the CUBE. >> Thanks, great to be here. >> Thank you. >> So, obviously the service providers is an interesting marketplace. We've been covering it for a long time and we know how hot NFV is and all the great stuff going on with the network moving up the stack, applications over the cloud. You name it, it's a crazy world. But you look at the trends around smart cities, autonomous vehicles, and movie and media entertainment, smart home, Apple announcing a home pod. Internet of things. This is a right market for service providers, so my first question is, with 5G over the top, these kinds of trends, to power these transformative use cases. Is it really putting even more pressure on the service providers? So, what's the deal? Where are they at? What are you guys doing with the business? Give us a quick taste of the landscape and some of the forcing functions that are helping your business. >> Yeah absolutely, and I think you hit on a lot of the trends driving the growth in service providers. What we see is a very dynamic market where everybody is trying to figure out their business model and build their services and respond to all these changes. What we see is a lot of customers, our customers as service providers, need a lot of flexibility. They need to be able to respond to these changes. They also need to be able to scale. Globalization is a huge trend because I launched something in the U.S. and Uber or Lyft is a good example. I launch in the U.S. Everybody expects to have that service everywhere else in the world. >> And guess what, they say "Whoa, hold on." >> Exactly, exactly. Then you've got issues with data sovereignty, and security, and privacy, and you have to factor all of those things in. These businesses, our service provider customers, don't have time to wait. So, they really see us as a core partner to them, to enable speed and delivery. Curt, you probably can add a few points cause you've seen this market evolve over the last, almost decade. >> I think what we're seeing is a transition to where there's more data out at the edge, and so you're growing both edge data centers and you're growing central data centers at the same time. The percentage of operating expense that these customers are spending on their IT gear is just a very large percent, and so they are all trying to optimize their spend in that space. That means that they're looking at ways to optimize the gear. They're looking at ways to optimize how they deliver the gear out to the data centers. They're looking at reducing servicibility costs and trying to attack it across the board. >> Let's talk consolidation for a bit because early on everybody said "It's just going "consolidate to a few providers," and the exact opposite has happened. >> Yep. >> It's logical. Services have always been decentralized and local and that's exactly what you're describing. How do you look at the market? How do you segment it, and what's you're thinking in terms of the explosion or contraction of this market, in terms of number of players? >> A lot of what we see in the press or what's discussed is, we talk a lot about the infrastructure of service providers, and the largest service providers. The reality is that the market is fragmenting because more and more businesses are moving to an as-a-service model. There's business as a service, software as a service, and each of these customers has a unique business model. How they make money, where they extract value, how they respond to their customers. We really see that trend, and I don't think it's going to change. That's not to say that the largest players in the market won't continue to grow in scale. As we've seen, they've been doing that pretty consistently, but we're still going to see those different services and different values because it is local, it's customized. You think about autonomous driving. There's going to be, you brought that up earlier, right? There's the people that are going to provide autonomous vehicles for consumers. There's going to be people that provide it as a service. There's going to be people that provide services into those vehicles. >> Data services? >> Data services. Content services. We think all of those models will continue, and the economics of one-size-fits-all just don't work. When you look at our product strategy, our solution strategy, including point next and how we go to market. It's recognizing that. We have customers in Europe, for example, that buy what we might consider more traditional data infrastructure gear. A lot of the core products we have in market today. We have customers that want customized, we talk about white-box a lot, but customized solutions, the latest technology. Integrated, optimized for their workload, for their scale, and we run the gamut. A lot of that is because one size just doesn't fit all in this environment. Let alone what Curt was talking about with where they're deploying their technology. >> Yeah, I see the same trends. I think that both the large, public cloud providers are going to continue to grow, and then you're going to see the next tier down is also going to continue to grow. It's everything as-a-service is starting to explode. >> How are the requirements, are they dramatically different? I mean the large guys, they've got massive scale and gimme the stuff and get out of my way sort of attitude. But the second and third tier, there's a lot of customization required. Where do you see HPE being able to add value in that space? >> We're going to see customization at both ends. It's just going to be more customization with the top-tier customers. It's interesting, what you've seen is a lot of the IT skill-sets and people have migrated from some of the top-tier providers down to the second tier and so you see them wanting to employ a lot of the same techniques to go save cost and optimize their environment. When we say customize, there's a very good reason why they customize. They will customize to the extent that it allows them to go lower their total cost of ownership. >> Well that's a great point. Dave mentioned in an earlier segment that all companies are becoming technology companies. Jim Jackson was talking about the digital technology issues, so you have a power law going on. You're going to have it at the head and the long tail of the service providers. Some enterprises, you say enterprise market. You can almost say, okay there's a line. You guys are now the service providers, and the rest are traditional enterprises. In a way, they're SMBs from that old classical definition. The point is, the definition's changing. >> Yeah. >> How does that impact your business and your product offering? >> It's really interesting. I think your point is every company is a service provider, and so we also see this even within our Enterprise customers. They have workloads that are running on Enterprise. They run mission critical workloads, and then they run service provider platforms, and they're looking for that flexibility. They don't want to be bucketized. In order to compete, in order to have a service that might deliver content into their products or provide conductivity into their products for intelligence or AI, they need to have the same cost advantages, the same technology advantages, the same forward planning. Because a big thing we see in the service provider's space, is they buy ahead on technology because they're trying to run the life cycle of what they might need and get that return on investment. We see those same behaviors across our Enterprise customers that are buying as service providers. So there is a bit of a blending of the business. >> Is there a pattern that you can talk to in the marketplace? This is interesting cause if you believe that, which I do, and I think you guys would agree, that everyone's becoming a service provider. But service providers have had a legacy business that had completely different dimensions than say, a classic enterprise. A lot of online. A lot of hyper-scaler's upfront. Now you have data tsunami coming, so are there patterns that this is a little service provider like, that now the enterprises have to deal with. Can you share insight into some of the things that you guys are doing to solve that, and I mean I know the flexibility thing is a key message. Composability, I get that. What are the core customer problems that now look like service provider problems? >> Well, there are a lot of Enterprise customers that are going and starting to stand up environments that look like service provider environments. There's different reasons why they do that. They could need an internal cloud for some reason. They could actually be standing up a service now that they're offering out to the public. The answer is they are all looking for some of the same things in their cloud-like environment. They want consistency in the way that they want to go and deploy and talk to the servers. They want to have lowest cost, total cost of ownership, and that's both on a capital expense side, in terms of what they pay to go buy the actual equipment, but also on the operating expense side. The more that they can make their cloud or their grid look uniform, it becomes easier to service, it becomes easier to maintain. You're starting to see them on a smaller scale perhaps, but employ a lot of the same techniques that are used in the large clouds. >> The business model question too comes up. In the old days, the ones who were online, highly big procurers of gear, servers and storage. Financial services, healthcare, I mean, these are highly online, transactional businesses, and service providers also fell in that bucket, but now as everyone sassifies. Hello! Your revenue model is tied to those services. >> Yep, and it's interesting too because we put a lot of emphasis, I mean by virtue of being a technology company, we've put a lot of emphasis on the tech and making sure we've got the right systems and configurations we're delivering to the customer. The other thing is, it turns out that there's some laws around physics. So power matters, real estate matters, footprint matters. >> Distance? >> Distance. All those things for latency and proximity, and we talked about some of the other elements. But those are actually huge operating costs, huge value points for our customers. So, helping them make sure that they're balancing all those choice points. Because if we get the operating expense right on the tech, but then they can't handle the power, they can't handle the footprint, they've got a different issue. >> Scale's a huge issue. >> They can't scale, exactly. That actually puts a limit on their growth, so there's all these different things that we balance and where we bring value, and it's not just the technology, but that total solution. >> The service provider space has always been a harbinger for what's going to happen in the Enterprise. If you looked 10 years back it was virtualization, and then DevOps and containers, and all that stuff that's hitting the Enterprise now was being done years ago. What are the tech trends that are driving the service provider space now? What are you seeing there that might show us a glimpse as to what's coming in the future? Where are they focused? >> I think that we're seeing continuation and furthering of some of the technologies that we've seen the public clouds rolling out starting to happen with the Enterprise, but when I think from a technology trend standpoint, things that folks are looking at today. We're seeing alternate processors become available this year. ARM 64, we're getting into the second generation of that. We're seeing trends coming like NVMe drives, the ability to pull data off of a drive much quicker. If you're a financial services industry company that wants to transact data real quick, that's helping out there. We're seeing NVDIMM technology that's coming into play, and that's shifting everything. Storage and memory is starting to come together, and so the way that they move around and cache data is something that's going to change. Applications are going to have to change. >> John: Architectures are changing, big time. >> Absolutely. >> What are the drivers behind that? Because you brought up data and memory, and then also, we just had talking to the server, options, lead, and this is a big deal. Memory used to be a constraint that you have to program around. Swapping out, back in the old days, but now it's almost limitless, with the persistent SSDs, speed, and that gives app developers huge flexibility, so this should change the game on the service providers. >> It's all about the data. There is just more and more and more data being stored for different reasons, and the data sets that people want to operate on are just getting larger and larger. And to the extent that we can pull those in and operate on them in a faster way in memory, it helps. >> You guys have a very dynamic market, so I've got to ask the question, what is the biggest way that you guys are riding on the go-to market? And from a technology standpoint because if you believe this conversation we're having, what is happening is, a service provider, of a service provider, of a service provider, is going on because someone may be a specialist in say big data analytics service provider for cars. Or I am a healthcare service provider that's out of scale, so scale becomes now the new differentiation. >> Yep. >> That's the locked-in aspect, but I mean it's not really locked in, it's just they have scale. You can almost envision this channel of service providers. How would that play out, I mean, that would be certainly game-changing. How do you guys rationalize that trend? What is the wave that you're riding? >> I think it all goes back to our customers, and we're doing a few different things. So one is deep-direct engagement with these customers, especially the ones on the cutting edge. To have a early dialogue with them, make sure we're delivering the right solutions. The other thing is actually bringing value, so we do some things through it. We have a program called Partner Ready Service Provider. We bring in, actually from our service provider customers, and this is a global program. We actually then deliver those services cause we have certain customers that might, again back to that mix in a CIO's environment, they might look like an enterprise, they might look like a hyper-scale service provider customer, they may also look like they're a consumer of service providers. >> All three? >> Exactly. Actually being able to do all of that is really important, and we think when we wrap all of that with our service delivery, our global footprint, our supply chain, the ability to deliver products anywhere in the world. Those are all things that give us a solution advantage for our customers. >> Curt, talk about open, the cloud line server portfolio, fast grow in the cloud age is here, open infrastructure. I was just talking to some of the guys in the labs. You've seen some of the stuff at the network layer becoming open-source projects. You almost take the network stack and say, "Oh wow, there's like six open-source projects "that make up HP, Arista, Juniper, and Cisco." Core technologies, yet you have to build your own proprietary stuff around that to differentiate. How does open fit into all of this because at the end of the day, it's going to be an open-source driven software world with the cloud? >> I think there's open-source software pieces, and I think we will get to the point where we have more open standards around hardware too. You've seen OCP, you've seen Open19 launch a couple weeks ago and you're starting to see standards around the hardware as well. I think the open's critical. I think that it is the way of the future. In this space, I think that we, again back to the comment about what the large grids or large service provider customers need. They need uniformity in their data center to a certain extent. It makes it easier to manage and easier to operate. If you just start with that principle, that implies that we're going to have open standards. They're going to want open standards around the rack, they're going to want open standards around the gear, open standards around some of the options that go in the gear. There's going to be open standards from a software standpoint, and it's going to be the companies that go and sell that gear responsibility to make those bullet proof, to make them to the point where they're secure, to make them on the hardware side to the point where you can distribute it worldwide and service it. Open is here to stay. >> We've been predicting on the theCube, I know Dave's got a question, but I want to get this point out. We've been predicting, it hasn't yet come true, and most of our predictions come true, so we're kind of waiting for the signals. Since open compute, we're seeing a maker culture going on, where we believe there's going to be a hardware renaissance, and when I say open hardware, there's really a driver on that. Thoughts on that? Because, this certainly would change the game. You see people trying to do their own servers, but yet they can't get a fab plan opened up, they can't do this. Interesting trend. If software's eating the world, then data's going to eat software, which we believe. Then you might see a really big shift to soft, I mean the hardware. We had Microsoft's Ballmer say at the conference last week, we should have got in the hardware business earlier. I mean, what is that all about? So again, this points to a renaissance. Do you agree? >> Totally. I think you hit it dead on. We see the same thing, and it's a business model shift. It's a different business model than where we're been, but the opportunity to deliver value in open, around platforms, around making sure there's inter-operability, quality, security, exposing performance. Those are all things that are enabled through hardware, and they make a difference, and Curt talked earlier about some of these technology trends. They're very hardware centric because that's actually what delivers the difference in software and data. >> And systems too, and having systems experience is now the new IP. Not necessarily having the fastest board. >> Yeah. >> Yeah, that's right. Having that ability to integrate it and deliver an experience and performance. Those are things that make the difference. >> Curt, your thoughts. >> Like I said, I think that we are going to see more and more open standards around it, and I think it's going to help people scale. It's about putting the systems together, in a open-scalable way. It's also about getting more work done out of the systems. It's kind of a, if you think about through Capex and Opex, there's going to be a work per watt per dollar done. How can I get that best done in the most standard way? And standards are going to have to be there, to enable all these pieces to go together and come together with a uniform look in the data center, which is what anybody who's deploying the cloud needs. >> So Justin, put a bow on this segment. Summarize from your perspective Hewlett Packard Enterprise's cloud service provider strategy. Where can you add the most value? Where's the sweet spot, and where you going to make the money? >> I think what we add the most value in is being able to be a comprehensive provider for all of our customer's solutions, and that's not just the product. It's being able to deliver the specific product or that specific workload or application. Being able to provide that global footprint and supply chain, the services on top of it. So that a customer, when a customer makes a decision that they need help, they've got one partner to go to, and I think ultimately that's where we'll make the value. >> Justin Hotard, who's the VP GM Service Provider, of OEM Solutions, and Curt Belusar, Senior Director of Service Provider Engineering. Guys, thanks for this insight. Great conversation. We love it, we love hardware. We all love software too. All that machine learning out there, there's going to be more and more power available. This is theCUBE, bringing you all the action here at HPE Discover, doing our job delivering a bunch of great services around data and video. Of course, bringing you live stream here. I'm John Furrier with Dave Vellante. We'll be right back after this short break. (techno music)