>>Yeah. >>From the Cube Studios in Palo Alto and Boston. It's the Cube covering IBM. Think brought to you by IBM. >>Welcome back to IBM. Think Digital 2020. This is the Cube, and we're really excited to have two great guests on Michael Jordan is the distinguished engineer with IBM Z Security. Michael, good to see you again. Welcome back. >>Thank you. It's good to be back. >>And, Matt, what Born is the program director and offering lead for Z 15. Good to see that. >>Thank you for having me, >>guys. Easy. Easy is a good place to be. Great corner, 61% growth. You got to love it. Regulations. It'll be feeling pretty good. I mean, other than what we're going through. But from a business standpoint, Z powered through, didn't it? >>It did. I mean, we're really pleased with the contribution that Z continues to make for our clients. Especially right now, given everything that's going on, business continuity, scale, resilient security. They're just so important for our clients in the platform. >>Yes. So we're gonna We're gonna talk a lot about this. Maybe Matt could start with you just in terms of, you know, you talk about. Ah, cyber resiliency. Hear that a lot? Um, e I think it may be. Means a lot of different things to a lot of different people. What does it mean? Busy? >>Yeah, for us. I mean, you know, we kind of start in many ways with, like that, this definition on that which talks about the ability to anticipate, withstand, recover, adapt all of these adverse conditions, might face or stresses compromises in attacks in your systems and your just cyber results. It's so it's a really important top of mind talking point from other clients who are thinking about this both from, I guess, the resilience when it comes to the systems and also the data as well. From our standpoint, you know, Z has been at the forefront of resilience for many, many generations. Now, whether that's the scale that systems we're able to provide, the ability to tap into more capacity is needed, whether on a temporary or permanent basis, cause you never know when a when a spike might be occurring on day, especially with clients going through digital transformation as well. The fact that we can talk about solutions being designed for seven nines of availability on. But the reason why clients like Tesco or alliances for their resilient banking platform or Department of Treasury in Puerto Rico depend on us or for a highly available solution. So it's never been more important for by us. >>So, Michael, from a technical standpoint, um, I mean, I go back to the rack f days and and I I used to ask, why is it that, you know, the mainframe had, you know, such good security, and it was explained to me years ago? Well, cause you knew everything that went on who touched what? You know, there was a clear understanding of that clear visibility of that. Um, but maybe you could explain just for laypeople from just from a technical standpoint. Why is it that Z has such strong cyber resiliency? >>Sure. So So some of it, I think, is there's 22 aspects that I want to mention first is, you know, culture, right? You know, the IBM Z, you know, development team and broader, you know, design team. We have in our culture to build systems that are secure and robust, that that's kind of part of our DNA. And so it's that mindset when you look at, you know, technologies like parallel system, flex and geographic geographically dispersed, parallel, parallel suspects, GPS. You know, those are ingrained in those technologies, but the other capability that we have or I should say, um, you know, benefit that we we have is we own the whole stack, right? We own, you know, the hardware we own the firmware, um, and we own the software that sits on top of there in the middle, where and so whether it's resiliency or whether it's security when we want to design and build solutions, you know, to make optimal solutions, you know any of those spaces we can actually design and architect the solutions, you know, both at the right point in the stack and across the stack as needed to really deliver on these capabilities. >>So, Matt, one of our partners, ET are holds these CEO roundtables, and one of the CEO said we really weren't ready from a resiliency standpoint. We're too focused on on er and kind of missed the boat on business continuity to narrow focus. I presume you're hearing a lot of that these days. I wonder if you could just tell us about some of the things that you're seeing with clients, Maybe the conversations you're having and how you're helping Sort of broaden that capability. >>Yeah, sure. I mean, to your point. I mean, nobody really could have quite predicted. You know what we're dealing with right now, but, you know, we have had over many generations of the Z platform, you know, clients deeply partnered with us to try and make sure they have a a highly available environment for business continuity. And, you know, just thinking about things from a Dell perspective. You know what they can do to fortify and make their solution sort of more resilient on the day by day basis. I mean, one of the things you might be talking about, some of the inherent capabilities we have a hassle. The fact that we build, you know, our systems with the additional capacity kind of baked in. Which means that for so many of our clients, you know, in the first in the first quarter, where they were seeing the huge amounts of peak workload kind of coming in, that they needed to be able to deal with the fact that we design our systems to be able to just kind of gobble up that work. With that we call dark capacity to be turned on at the drop of a hat. It's tremendously important because not only need to be offsite, just resilient in terms of the applications, but you need to get a deal with growth. You're going through that. The other aspect, which is a new capability with the 15 that kind of builds on what we could do with that dark past thing is this concept of instant recovery. But what we're actually helping clients do there in terms of fortifying and making their environment more resilient, is letting them attack into that dark capacity when they're going through restart activities of partitions, not just thinking about unplanned scenarios, but actually planned out just as well. So what that really helps with is because you always have to do planned maintenance. You know, when your systems, you know when you're partitions your your system because the environment. So what we're doing is saying when you're going through that restart sort of process, whether it's the shutdown, whether it's to bring up of the partition or the middleware or even in fact, actually helping you catch up. Kind of for what? You what you lost one weren't sort of processing workflow. We turn on that extra capacity in the system automatically for this boost window that were that we're helping our clients with. Not only we do that. Mike's point about owning a stack means that we can deliver that in a way that there's no increase in IBM software cost a reliever. So we're always kind of looking about what we can do to kind of move the ball forward to make a client's environment even more resilient as well. >>I've always, I learned from my mainframe days many, many years ago. And what when a vendor comes in and shows a new product, they always ask you what happens when something goes wrong? It's all about recovery that's always been one of the main frame strength. Mike, I want to ask you about data protection. I mean, it's a topic that again means a lot of things to a lot of people you know doesn't mean backup. There's data privacy. There's data Providence. There's data sovereignty. We talk about data protection from a Z prism. >>Sure, so So our point of view on data protection is is we view it as a as a multi layered proposition. It's not. It's not just one thing. In effect, we viewed the lens of a broader, you know, layered cybersecurity strategy where you know, data protection. And, you know, in this case, you know, talking about encryption and being another encrypt data on a massive scale is the foundation for, you know, a layered cyber security strategy, um, and providing capabilities for appliance. Do you protect data at the disk level with the 15? We also introduced the ability of actually being able to protect the data as it flows through their storage area network through something we call fibre channel endpoint security and then layering on top of that, you know, host based encryption capabilities, you know, in the operating system, whether it's, you know, buy or or data set level encryption and you know, then on top of that, they can layer additional capabilities for things like multi factor authentication to protect your privileged identities from being compromised or being able to do damage to your system and then, you know, building and layering. On top of that things like security, intelligence and being able to monitor and understand You know what, what's happening across the system. >>So I was talking with Developer the other day in cloud app pretty, you know, non mission critical. But ask them to use encryption and he said, Yeah, we could, but we don't cause it slows us down a little bit. So I'm wondering how you deal with that trade off performance versus Protection Z. How does he deal with that? >>Sure, So that's that. That's a great That's a great question. And that actually goes back to you know what we did with with our Z 14 so that the generation before and I think we've we've improved that with with the 15 and then I'll get to that in a bit. But one of the barriers that we recognized is exactly what you said is the You know, the cost of doing encryption is prohibitive, Um, and what we did is we have, ah, a cryptographic accelerator that's integrated into our micro processor that's capable of encrypting so each or it's capable of encrypting up to 14 gigabytes of data per second. And if you multiply that by the number of cores that you have. You know, a fully configured you nosy 15 met. What does it have any cores? Do we have in that 100 >>90 with >>190 So So do the math right? 190 times, you know, 14 gigabytes per second. It's an encryption powerhouse, and that can all be done synchronously with extremely low latency. So we have the horsepower to do encryption on a very broad scale with very, very low overhead. And that's what our clients are leveraging and taking advantage of. And with the Zy 15. That being we announced it and made available last year. We actually have now compression that's built into the micro processor so you can actually compress the data, Um, first and then encrypted. And there's a twofold benefits that first is now. I have less data to encrypt, so I have lowered my encryption overhead, and at the same time I've managed to preserve my storage efficiency. So it's a It's a twofold benefit there, >>you know. People talk off about Z, they talk about it, it's open. It's kind of all started back when you guys brought in Lennox. And now, of course, it's It's much more than that. Um, but I'm wondering how open plays into this notion of cyber resiliency in some respects there. Counter poised. But But how do you sort of square that circle for me? >>Yeah, I mean, it's kind of look at it is when it comes to openness and digital transformation, it's kind of doing it without compromise on. That's kind of the way I look at the Z platform because you're right. I mean the fact that we have the likes of open shift support on the seat platform or you can use, you know, answerable for for doing automation. I mean, were always looking to try and make sure that we support from A from a management standpoint or development standpoint. We'll use whichever tool frameworks languages are appropriate on the platform and integrated to a hyper cloud wherever you want to go. That's why when we look at it from the perspective of what it really means to have mission critical applications and why, it's why that is the key point about banks. Insurance companies, etcetera continue to trust. Z is there is the home for their system of record because they want to get the benefits. You know, the best of both worlds. So they want to be able to have the security, the resilience and the scale of the platform. But the same time they want to have flexibility to be able to use cloud native technologies to be able to deploy them on our platform. And then this micro sort of talking about the exciting thing for us is even going one step further. That says, if you do want your data to move around your hybrid cloud for very good reasons for certain scenarios, being able to have that capability to protect the data, not just encrypted that manage the privacy over the data as it flows out and see to kind of take those characteristics into the hybrid cloud is something that a lot of that clients been really, really excited to take advantage of it. It's >>about this conference. You might get certain >>charting Matt into a security guide. You see that? >>Yeah, >>I think everybody's got to be a security person these days. I want to ask about zero trust. You know, that term is thrown around a lot of, uh, you know, you can get kind of buzz, wordy. You see, people always have substance. I want to ask you guys what zero trust means the Io. >>So So I think there's, you know, my view of zeros where we're at from an industry from from zero. Trust is is very similar to where we're at with cloud, you know, going back a handful of years where if you ask 10 different people what you know, cloud was you get 10 different answers. Um, and none of them were probably wrong. And so I think, you know, we're very similar state in terms of our understanding and, you know, market maturity around zero trust. But there's, you know, at its for, you know, the the the The idea is, you know, we've been focused on protecting, you know, our environments using a castle and moat of approach. Um, and, you know, you know, protecting the perimeter. Yeah, and then trusting everything inside of inside of that. You know that that mode, if you will, um and what the zero trust is a recognition that that's not sufficient. And, you know, and then if you look at that in the context of our evolving and changing in environment and moving to hybrid multi clouds where, um, the notion of a perimeter is gone. You know that that strategy and approach for protection, it doesn't hold up. And so we need to evolve that, um And we need to have, you know, you know, move from the notion of, um, operational trust to a notion of technical trust and building, you know, building more sophisticated mechanisms for doing authentication, understanding broader what's happening across the environment and feeding that into, you know, decisions that are made in terms of who gets to access. What data. So, >>yeah, good, Matt, bring us home overnight. You know, this pandemic has really heightened our awareness of cyber resiliency. Business continuity have changed our our mindset and definition of those two things. But give us your final thoughts on this top. >>I think it's probably just been into sharp focus, really what? It what it means to have mission critical applications that are right at the heart of your of your business. And, you know, you come to realize very quickly. But if those services are not available to your clients, I mean it can have such a long lasting implications So I think people embittering you know their strategy when it comes to, you know, millions off applications with infrastructure and all of that in the context of business continuity, I think people are gonna gonna have a much sharper focus in the future to really see, you know, what is what does it mean? And it's the lifeblood of their business is not able todo operate and serve their clients. And probably as well, more and more applications that maybe weren't considered mission critical in the past will be considered mission critical now because it's not just the back end services, but it's the way the community a reply. It's so a lot of that, I think, is going to play out the way that people think about their business continuity strategy in the future. >>Yeah, you're right. Video conferencing has become mission critical, isn't it? Guys, thanks so much for coming on the Cube again. You know, keep up the good work. Uh, I really appreciate your time and your insights. Always, always great talking, talking Z. So thanks again. >>Thank you. >>All right. Thank you for watching. Everybody. This is Dave Volante for the Cube. Our wall to wall coverage of the think 2020 digital event experience. Keep right there. Right back after this short break. >>Yeah, yeah, yeah.

from the silicon angle media office in Boston Massachusetts it's the queue now here's your host David on tape hi everybody welcome to this edition of the cube insights powered by ETR in this breaking analysis we're going to look at IBM's systems business and specifically the IBM system z and talk about the impact that it's going to have on IBM financials now Alex if you would kindly bring up the first slide so this is data from ETRS spending intention survey for the second half of 2019 they asked customers compared to the first half of 2019 what are you spending intentions on the second half of 2019 specifically for IBM so you can see the end here is 448 customers out of their panel of 45 hundred of which around 11 or 1,200 answered this question specifically cited that they were IBM customers what this data shows is 21% of the customer said we're gonna increase spend in the second half relative to the first half with IBM 52% said we're gonna stay flat 14% said they're gonna decrease you see 6% said we're gonna basically leave the IBM platform and 7% said we're gonna bring on IBM as new we're a new customer so if you take the people that are spending more and new and subtract out the leaving and the spending less you get a net score and you get a net score of 8% now we've been sharing with you this ETR data over the last several weeks and months 8% is not great IBM according to et are spending surveys are losing share relative to the overall market you know we've covered this pretty extensively we covered the red hat acquisition and talked about how that IBM intends to supercharge its its cloud business you know specifically with red hat I've said I've been on record saying this is largely a services play where they're gonna basically take red hat app as an application development platform and help there customers are modernize their systems from using their large services footprint to do that but so and I want to talk for a moment about the IBM business overall iBM is all about mission-critical work the IBM's II their high-end systems they're related database it's all about mission-critical work IBM shared some data with analysts recently where they talked about if you if you look at IBM Z by VM security business its database you know particularly db2 it's middleware it's application management services and its infrastructure and all that set a consulting work that goes around that add that up it accounts for 60% of IBM's revenue so this is why I want to spend some time talking about IBM Z I mean it's a kind of a boring but important topic it used to be the heart of IBM's business that used to drive you know entirely their their income statement but in fact today it's still very critical all those pieces that I mentioned account for 60% of that business so Z is critical for driving IBM's systems business and that gives air cover for IBM's business overall so Alex if you bring up the next slide what I've done is just pulled out some quarterly data of IBM's system's revenue overall and then juxtapose it against IBM's Z revenue this is growth this is just percent growth so the blue is IBM Z percent revenue growth relative to the previous year this is in constant currency by the way and as well it excludes the elimination of IBM's systems X business the Intel based business so it's normalized for that and then the orange is the overall systems growth so you can see that the blue grows virtually immediately after IBM announces a new system so for instance in January of 2013 IBM announced the z13 we were there with the cube to cover it we talked to a number of practitioners what big banks and big mainframe customers do and by the way 25 of the world's top 25 banks run on Z a huge proportion of retail giant's run on Z why because it is the system of record and the the top system of record along with Oracle in the world I'll talk more about that but you can see here Z 13 so we talk to a lot of practitioners at the January launch and they told me they buy this thing sight unseen because they know it's gonna drive revenue for them if they can get more power and more performance lower cost it drops right to their bottom line so you can see 2016 even though there was a kicker in there of the you know next generation not next generation but a kicker to the Z I didn't show it here but bad year in 2016 in terms of growth and you can see the blue is proportional to the orange it drags it down in here Z 14 is announced and you can see when the Z 14 was announced in July of 2017 just right after that boom big uptick in Z revenue and proportional systems revenue so you're on this sort of two-year cycle of Z announcements and you can see 2019 in the first half has not been great IBM just announced the Z 15 in September so we fully expect that in q4 you're gonna see that uptick so kinda wanted to share that with you next slide I want to make a couple of points about IBM systems business it's about an eight billion dollar business overall in terms of annual revenue it comprises Z power and storage says they say system Z drags a lot of software it drags a storage it drags services it's about a fifty three percent gross margin business the storage business is actually I think a quite a good gross margin business I think probably you know higher than power the server business is not you know the greatest gross margin I think mainframe is still pretty good IBM and Oracle dominate the business for systems of record Oracle with exadata and IBM with with Z now you might say hey Exadata is is growing and Z you know it's it's I just showed you this sort of fluctuation but overall it's sort of you know flattish maybe it can eke out a you know growth and it actually can show good growth in one year but if you normalize it over a couple of years it's pretty much a flat business or declining business so you might say well Oracle X is growing but that's because Oracle is replacing its entire hardware business and much of its you know related software business with Exadata all that would behind one arrow where as you know IBM has a more diversified portfolio and so that's kind of apples to oranges comparisons now the ETR data shows that the storage intention intentions for the second half of 2019 really flipped to positive territory servers were still negative but improving and so as I showed you in the previous slide I definitely would expect the system's business to have an uptick in q4 and and it's dragging storage with it IBM synchronized the the storage announcement the DSA thousand without not great with model numbers but the recent storage announcement with the mainframe announcement I'll make some more comments about that but you see it seems that IBM's trying to do a better job of synchronizing that iBM is also going to smooth out it's it's it's systems revenue I believe I mean it's right now it's very cyclical but I'll make some comments about that in a moment so IBM System z and Exadata are unique in that their IO is tightly integrated these are purpose-built systems and and the storage is in the IO or purpose-built for the systems of record so they're very very low latency give an example Oracle Exadata recent announcements at Oracle OpenWorld I think 18 microseconds latency IBM with its recent Z announcement I think is even lower I want to say 15 microseconds but don't hold me to that where is it if you compare that to traditional systems you're talking about maybe 200 microseconds in other words those systems that aren't purpose-built for systems of record with integrated i/o the i/o is hardwired with custom silicon and a-sixes so it's ultra ultra fast i/o which means you can push ten times the i/o through the system so very very high performance relative to what you saw in you know kind of previous generations why do I spend so much time talking about this because this is a harbinger for future systems developments talking you know within two to three years you're gonna see the mainstream systems with this type of low latency so you know you might also say well that means that the IBM and the X data business are in big trouble no these are these systems are not going to be replaced and not going to be migrated it's too risky it's too expensive we've talked about that a lot on the cube where it just doesn't make business sense for people to convert off the Z mainframe there's too much custom code they'd have to freeze that code for many many months maybe even longer they'd risk their business they can make much more money purchasing the next generation of system as long as the Z mainframe continues to add function which it's doing same thing with Oracle Exadata years ago IBM you know announced support for Linux obviously you know Red Hat is you know now another key piece of that they just in recent z15 announcement encryption everywhere they announced you know a hybrid cloud so basically bringing the Z to cloud a really strong security focus this cloud piece is interesting you know we talk a lot about cloud 2.0 bringing the Z in to this in the systems of record - cloud is something that IBM has said that it intends specifically to do that will begin to potentially smooth out I beams Z revenue you know it's ironic in the little in the late latter part of the 1980s kind of a financial game that IBM was playing they converted their rental base which was a monthly income stream to purchase when they did that it created the effect of showing up on the income statement and kind of hiding the trouble that IBM was really in when that transition ended IBM really tanked and that's when IBM got into big trouble the whole downsizing trend Gerstner came in they bought PwC and really transformed the company but the Z as the system of record or the old 3090 has has has lived on now we're seeing that dynamic come full circle where over time IBM can shift from a from a an upfront pay to a subscription which is as I say coming full circle it's gonna be interesting to see how that transition works the other point again the storage seems to be synchronizing its product cycles with Z at least at the high end and so this is likely to carry through to q4 we see from the ETR spending data that storage intentions are up I think the net score was was up 5% versus a negative from the previous quarter servers overall we're still down they don't have a question specific to Z but I would expect fully expected that q forward this year you're going to see a nice uptick in Z revenue and as it pointed out before with that 60% number this is going to provide another halo effect for ibm's overall business will it be enough to propel the stock you know probably not this stuff is factored in the the analysts understand these product cycles but it's something that I wanted to shine a light on because again it's it's one of these sort of important topics that not a lot of people talk about people kind of roll your eyes when you talk about the mainframe but the mainframe is here it's alive and well and you know what I call mainframe Oracle Exadata and IBM Z are really sort of the two companies that are prominent in that space and you know well they might compete to my earlier point you're really talking about each company having its own install base and as long as they keep investing in R&D and keep those product cycles coming I would expect that this business is gonna be healthy yet cyclical cyclical for a long long time this is Dave Volante for the cube insights powered by ETR we'll see you next time thanks for watching