>> Narrator: Live from Las Vegas, it's the CUBE (light electronic music) covering Interconnect 2017. Brought to you by IBM. >> So, my first question for you is, as we digitize our worlds with business, the value chains and all the processes are changing, there's a new value equation model around digital business. What's your view on the digital business value creation equation? >> Sure, John, thank you for having me here, today, and Dave, as well. Thank you for having me. So, I think that automation in combination with cognitive computing, AI, machine learning, is really going to revolutionize the way we work, the way we interact, and it's going to create new experiences for people, experiences that we don't even know that exist in the future. They're going to be real value, and that value is not just about cost take-up, that value's going to be around innovation, that value's going to be around the combination of block chain, machine learning, ubiquitous computing, and I think that this is going to create new industries, new business models, that we could take really advantage of in many different industries. >> One of the cool things that's happening that I like in the computer science, and how society in general now is seeing cloud computing, which has been around for awhile getting full-steam ahead, big data industry evolving very rapidly, and what's kind of pulling them together in this gravity is machine learning, data, cognitive, iterative things, and AI is kind of the over-arching, you know, sizzle, if you will. So, the sci-fi aspect of AI. Everyone can relate to some sort of mental image of AI. You know, robots taking over the world, to automated things just make us smarter, augmented reality, what-not. But iterative things, and data science, that's connecting the power of the cloud with data is changing the game. So, one little change in a value equation, in a company, could change their business model. >> Absolutely. >> How do you rationalize that with your customers (laughing)? Hey, you know, full steam ahead, or slow down, it depends. What's your perspective on that? >> So, it's interesting you mention about science fiction, right, because science fiction inspired robots and automation for centuries, now. But, the reality, today, is that we are already using automation. You know, it's been used ubiquitously across production lines, manufacturing, logistics. So, we've started this journey, already, for many, many years. I think, quite rightfully, like you described in the cloud world, what we're seeing now, in automation, you're combining Artificial Intelligence, you're combining cognitive computing, and what that will do is it will create new value for companies out there, right. That new value is going to be about creating new industries, creating new data, and in the IOT space, it's going to create a new level of intelligence for us that's really going to change the experience that we could deliver. >> So, I've said this before, the greatest chess player in the world is not a machine, it's not a supercomputer, it's a combination of humans and computers. And, so to the point, we were talking off camera, machines hae always replaced humans. It's now cognitive functions are being augmented. And so, it seems like the scarce resources, the creativity to combine innovations. For decades, we've marched to the cadences of Moore's Law. >> John: Yeah. >> Right. The innovation is not coming from Moore's Law anymore. You know, whether or not it's tapering. We can argue, let's assume it is for a moment. >> Reinventions. >> So, where's the innovation coming from? Clearly the innovation curve's not slowing down. >> Dave: So, what's IBM's point of view on that innovation and where it comes from? >> So, you started by talking about robots and machines and how it's kind of changing jobs and, let's say, taken over jobs. The reality is that only a small percentage of work, five to 10%, will be fully automated in the future, because we've seen this throughout history. Technology advances in the last 20 years has created new professions. You know, 25% of the work type and profession in the last 20 years are new type of work. And John, you were mentioning about the ATM machine just a couple of minutes ago. >> Yep. >> The ATM machine actually has created a new economy. >> John: It was supposed to kill the teller. >> Yeah. >> It kind of did, but it created more jobs because more branches were opening up. >> Exactly, more branches and new ways of interacting, and new, and so on. Now, you have mobile apps, but actually you have to develop applications which you never had to do in the past before, and exactly the same with automation. We're going to have, and robotics and Internet things, combined them together, we'll create a new economy, and the value of that economy is going to be in a couple of areas. One, I think one of the fundamental changes is that our work type, the type of work we do, is going to be automated, about 30% of our work type is going to be automated in certain industries, industries which are highly tasked orientated, highly manual orientated, highly data orientated. They'll all change, that's the reality of it. But, that's also going to create a new type of work, a new profession and people will be up-skilling to that. But, our prediction is that, you know, in the next few years we're going to see between one to one and a half percent GDP increase as a result of cognitive computing and AI. >> Incremental. >> Incremental, incremental, so yes, there'll be some changes of jobs, changes in profession, but incremental, they'll be increasing, and that, for the aging population issue that we know very well, is going to really help to boost a lot of economy out there. >> That scares people, too, this whole notion of job loss and, again, we were talking about before camera. It's not so much controversial, it's more education, both educating people on what the narrative is of the future scenario. >> Exactly. >> But also, education for people to get the new skill. I mean, the stat after the stat, but it's high percentage of jobs are even created yet. So, you know, cross-disciplinary education in higher eds changing, but the skills gap is a huge issue. So, how do you talk to that point because, certainly, that's an area we heard on stage today. Mark Benioff and Ginni Rometty talking about, you know, having a societal impact, and having a mission, education, is a big one. What's your thoughts? >> Absolutely. >> I mean, so I think it starts right from the way we teach, because you can't necessarily always teach the future, but what you can do is you could prepare for the future. So, we need to start teaching our children to our graduates who start in our companies with new skills around creativity, right. High emotional intelligence. I believe that a robot is never going to be able to manage emotional intelligence, right. So, how do use more emotional intelligence? How do we provide more discipline around education? How do we provide them vital skills? >> Critical thinking. >> Critical thinking, absolutely. You know, and science, but also, these Artificial Intelligence going to age human being, you know, it's going to help us discover new remedies for problems that we have today in our society, problems that we have in healthcare, problems that we have in political systems, you know, which we are seeing now and, hopefully, provide more confidence in our system because of the data and intelligence that we see. >> So, now, I've got to throw in the augmented reality because AI is obviously kind of a concept that people are getting. It's not clear, yet, what that is. What really is AI? Well, that chapter will be written, certainly as it evolves. But, augmented reality is happening. So, IoT, you can have googles on that look at meters and get new data, that's not even there. You can do automation around getting predictive analytics around machine, industrial IoT, these kinds of things. You're seeing consumer devices having augmented reality. >> Shamayum: Yep. >> That's here, right. That's here and now. So, how do you advise your clients and customers, the big IBM customers you service, to prepare for augmented reality? Because, is there a playbook? Are they nodding their heads, are they going, "Oh!," face palm. Or, I mean, what's happening? >> So, augmented reality is here and it's here to stay. The difference between augmented reality, now, or if you looked at it, let's say, five years ago when we had Google glasses. One was hype versus reality. One was a use case, now, where actually is transformational, and it's having real impact in ROI. Like the example you gave around manufacturing, or how you use it in logistics, when you are looking at airlines, and how you look at training people. Now you could train people using augmented reality and speed the level of adoption required or the time required to skill people. And then in the past, we never had that. Is there a playbook? I don't think there is a playbook, John, because I think the use cases are so diverse. But I think what we really need to do is go back to fundamental of consulting. What do we look for, you know, in business problem solving? We look for problems. We analyze that problem through design thinking, or whatever methodology we use. We look up what the impact. Is it speed, quality, and cost? And, if we can answer these questions, speed, quality, and cost, and the human impact unto it, those are the factors that's going to determine what are the use case of augmented reality that's really going to transform, and have impact, in industries. >> I find it interesting, too, you mentioned that the old way of doing things, is not going to be there, but the older way of doing software was general purpose, computing, and software. Buy a shrink wrap package, load it, does some function. Now, the composability of APIs and micro services allow for common building blocks. >> Yep. >> Son ow , essentially every solution is custom. >> Shamayum: Yes. >> So, you have a diverse use case. Remember, beauty is in the eye of the beholder. So, that's how it is in the enterprise. So, that's a reality. So, with that as kind of a backdrop, what are some of the cool things that you're working on now that you can point to and say, "These are examples of the kinds of journeys customers are going through." It could be a crazy idea that's implemented or a something, a great idea. Share a story about some of the highlights, some of this new way of building apps, new way of being agile, new way of discovering value creation. >> Sure, so you're absolutely right. You know, we're moving into a world of consumable services, if I could describe it that way, API services, micro-services, pulling data from different sources, augmenting your data source, having functions that you get from your competitors, even, to augment the capability that you want and to create new business processes. And I think we'll see more and more of this, and, you know, I was speaking to a bank, even last week, and in Abu Dhabi where they're saying, "What's the future of a bank? "Do I need a processing bank? "Do I need a back office anymore? "Do I need a branch? "Can it not just be a virtual bank? "Can I not just connect to fin-tech to provide my services, "and I have the customer and own the customer?" So, I think there's an advancement in terms of thinking, now, and that thinking is possible because the possibilities are endless and we have never seen more access to technology at relatively low cost, even, than ever before, and, also, open source is making it more possible, I think. Open source has given power to the people and companies to have world-class technology, you know, combined with IBM technology to provide, you know, real great value. So... >> Oh, go ahead, please carry on. >> Just, in terms of use case. Another example is that I recently sent a use case around, "Know your customer." You know, one example was, you know, opening up accounts for high-worth customers could take months and months to make sure the security checks, and so... You may have an account, but in terms of fully transactional, it takes months. Now, using machine learning, you go and search over a million databases and look for a million different patterns and make a recommendation to your work advisor to see what kind of customer you're going to be. You know, by analyzing movies, watching four movies that you love, we could predict, by 95%, what all the movies that you're going to love in the rest of your life. Those are the use cases I've seen. I just find it fascinating. >> Netflix is doing... They're getting all the data from me. >> Yes, yes. >> An arbitraging out the back door. >> Recommending books, I mean it's getting more and more. >> I want to own my own data. That's what Ginny was saying on stage, we should own our own data. >> Yeah, and there's certainly consumers out there who want to own their data and I think there's going to be this shift where you can have digital ident in the future where you own the data and could like trading your data. So, instead of just giving your data, you could start monetizing your own data, and saying what kind of information do you want, and what kind of experience do you want? You know, how do you want to trade? Who do you want to trade with? Do you want to share the data with your family? With your friends? With your business partner? And you become the owner of data, and that certainly an area that we're seeing a movement to, but, also, it's going to help with the identity. Your identity will be known only to you, not to service providers. >> I think you're on to something, and one of the things we were just talking with Don T was, the block chain, and The Block Chain Revolution, his new book, is when you get the transactional cost of business reduced, you mentioned that virtual bank, makes total sense. Why should I spend all this money to have a company? I can reduce my transactional cost of doing business and still provide great value. >> Well, I don't know. I mean, you talk about the future's hard to predict, sometimes, but the bank in Abu Dhabi, right. I mean, you see banks, we talk to them all the time, re-imagining the banking experience, but not necessarily eliminating the physical. >> Sha: Absolutely. >> And so, you know, to me it's fascinating. Like the list of things that machines can't do, that humans can changes, seemingly, every year, whether it's climbing stairs, or even autonomous vehicles, five years ago nobody thought was... I was and IBM conference, not that long ago, five years ago, they said it's 25 years before you'll see that. Then, wow, just overnight. >> Self-starting cars is another prediction. >> So, do your clients... How much do they try to, you know, skate to the puck, which seems to be a harder endeavor versus saying, you know, "Okay, we can apply this today, "and save money, or tap a new business opportunity." >> So, you make some great points here. The first point I'd just like to elaborate a little bit more which you mentioned about the physical and the digital. >> Yeah, right. >> Which you might, in your example was the branch. What's the role of the branch if you have a fully digital bank in the future? We still need a branch. And, why do we need a branch? Because in the branch, the branch is going to be different in the future. We all hate cueing up in the branch. We all hate going to a generic person that's says, "Can I help you?" >> John: What's your account number? >> "What's your account number?" >> Exactly. >> No, I'm John. >> Come on, you should know me. >> You should know as soon as I walk in, you should know, you know, what are the three things that I'm looking for. You should know how long I've been a customer, what my family is. >> How many Twitter followers you have. If you're an influencer. (laughter) >> Exactly, exactly. And more importantly, you should know that I love speaking to an expert. I don't want to speak to a generic person. So, the future bank is going to be when you walk into your bank, you're going to sit there in a room, in a very nice room, you're going to be in a screen, you're going to talk to someone who's an expert, who knows everything about you, through video conference. You can even order a coffee that someone comes in your room. You don't feel that it's just virtual. You have some emotional connections, as well. You'll have digital printers in there. You can connect. You have a different experience and by the time you go out, your app has already been updated with the loan that you wanted or the mortgages that you wanted. And then, coming back to the point that John and I were talking about, the consumer services, well, actually I might want my loan from one bank, my mortgage from another bank, and my car account from one bank, and I should be able to trade between that. >> Dave: Right. >> So, there's that connection, whether physical or digital, and then different service providers. I think there will be a mash-up if I think of it that way. >> It's that level& of intimacy that has been lacking for so many years in that example, financial services, which it seems like cognitive can help close that gap. >> Yeah, yeah, and cognitive absolutely can because cognitive is now, the technology's here. I think it's advanced, so much is here. The use cases are amazing and you heard about the use cases in healthcare and in customer services and aging assist, which is helping people with self-application repair. So, I think the advancement is here. I mean, the possibilities are huge. We just need to connect those dots together in order to create those new use case. >> And they did model that's come out of that conversation that is domain specific data, and you guys talk about that as verticals. But, you know, that's important because you need to specialism of the data. >> Sha: That's correct. >> But you also want the horizontally scalable cloud, as well. So that's the data challenge right there. >> Absolutely, absolutely. But one thing that's going to be critical, I think, even in the future, is that industry knowledge and how you use that industry knowledge to augment your data. How do you find that, you know... Computers always give you those patterns. How do you interpret that pattern, and how do you create that new experience? That's where the human value is. >> So, you know, we talked yesterday. You're in the consulting side of the business, but 60% of IBM's business remains services. But a key value that you bring to the marketplace is the ability, at least in concept, to codify those services into software. Talk about how you're doing that, and to the degree to which you're succeeding. >> So, we started a conversation in automation. So, if I go back to that. In automation, every client is thinking about automation. Every client is experimenting with automation now, to some level. And, what we have done with our services is that we create frameworks, maturity assessments, business component modeling. So now, what we can do when we go into a bank, we go into an example bank, we could say, "Hey, Mr. Customer, I've done it "with these 30 banks. "I know what does best-in-class bank look like. "You might not, necessarily, and trying to answer your initial question, You know, what's the roadmap look like. "You may want to go over here, "but your level of maturity's here." So, how do you get to that level of maturity, your kind of aspiration, and we could help with those tools and methods and our assessment capability and strategy engagement framework that we bring with the clients. Also, we don't just look at banks. Because, if you're a bank, banks are interesting, but you may want to look at retailers. You might want to look at pharmaceutical companies. You might want to look at Starbucks and all the people that around here, what are they doing, in terms of innovation, so you can bring all the innovation on to this and look at business functions. You know, what does the best-in-class logistic look like? What is the best-in-class back off function look like outside of my industry? And that's the kind of codifying that we have the knack of solving things we can bring to the market. >> Can I even jump industries because digital allows me to actually traverse horizontally, as John was saying. >> And the threat is there. You know, the threat is live today, to be Uber-ized or be a Uber. You know, you decide. So, you are going to jump through these industries because you have now a global platform which allows you to transform your industry, and jump from one to another, and monetize what you have very, very fast, and the barrier to entry is lower than ever before, not just because of technology, but because how industry works on the consumers' demand. Shamayum, than so much for coming on. Great insight. Thanks for sharing. Love that content. Really good insight. >> Pleasure. And the future's here. >> Thank you very much. The future's here, absolutely. Thank you very much. >> The future's here, now. This is the CUBE bringing you all the action, here, live in Las Vegas. Stay with us. We've got a lot more today to come, and all day tomorrow. We'll be right back. I'm John Furrier with Dave Vellante. (light electronic music)