>> From theCUBE studios in Palo Alto in Boston, bringing you data driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. >> In the words of my colleague CTO David Nicholson, Broadcom buys old cars, not to restore them to their original luster and beauty. Nope. They buy classic cars to extract the platinum that's inside the catalytic converter and monetize that. Broadcom's planned 61 billion acquisition of VMware will mark yet another new era and chapter for the virtualization pioneer, a mere seven months after finally getting spun out as an independent company by Dell. For VMware, this means a dramatically different operating model with financial performance and shareholder value creation as the dominant and perhaps the sole agenda item. For customers, it will mean a more focused portfolio, less aspirational vision pitches, and most certainly higher prices. Hello and welcome to this week's Wikibon CUBE Insights powered by ETR. In this Breaking Analysis, we'll share data, opinions and customer insights about this blockbuster deal and forecast the future of VMware, Broadcom and the broader ecosystem. Let's first look at the key deal points, it's been well covered in the press. But just for the record, $61 billion in a 50/50 cash and stock deal, resulting in a blended price of $138 per share, which is a 44% premium to the unaffected price, i.e. prior to the news breaking. Broadcom will assume 8 billion of VMware debt and promises that the acquisition will be immediately accretive and will generate 8.5 billion in EBITDA by year three. That's more than 4 billion in EBITDA relative to VMware's current performance today. In a classic Broadcom M&A approach, the company promises to dilever debt and maintain investment grade ratings. They will rebrand their software business as VMware, which will now comprise about 50% of revenues. There's a 40 day go shop and importantly, Broadcom promises to continue to return 60% of its free cash flow to shareholders in the form of dividends and buybacks. Okay, with that out of the way, we're going to get to the money slide literally in a moment that Broadcom shared on its investor call. Broadcom has more than 20 business units. It's CEO Hock Tan makes it really easy for his business unit managers to understand. Rule number one, you agreed to an operating plan with targets for revenue, growth, EBITDA, et cetera, hit your numbers consistently and we're good. You'll be very well compensated and life will be wonderful for you and your family. Miss the number, and we're going to have a frank and uncomfortable bottom line discussion. You'll four, perhaps five quarters to turn your business around, if you don't, we'll kill it or sell it if we can. Rule number two, refer to rule number one. Hello, VMware, here's the money slide. I'll interpret the bullet points on the left for clarity. Your fiscal year 2022 EBITDA was 4.7 billion. By year three, it will be 8.5 billion. And we Broadcom have four knobs to turn with you, VMware to help you get there. First knob, if it ain't recurring revenue with rubber stamp renewals, we're going to convert that revenue or kill it. Knob number two, we're going to focus R&D in the most profitable areas of the business. AKA expect the R&D budget to be cut. Number three, we're going to spend less on sales and marketing by focusing on existing customers. We're not going to lose money today and try to make it up many years down the road. And number four, we run Broadcom with 1% GNA. You will too. Any questions? Good. Now, just to give you a little sense of how Broadcom runs its business and how well run a company it is, let's do a little simple comparison with this financial snapshot. All we're doing here is taking the most recent quarterly earnings reports from Broadcom and VMware respectively. We take the quarterly revenue and multiply by four X to get the revenue run rate and then we calculate the ratios off of the most recent quarters revenue. It's worth spending some time on this to get a sense of how profitable the Broadcom business actually is and what the spreadsheet gurus at Broadcom are seeing with respect to the possibilities for VMware. So combined, we're talking about a 40 plus billion dollar company. Broadcom is growing at more than 20% per year. Whereas VMware's latest quarter showed a very disappointing 3% growth. Broadcom is mostly a hardware company, but its gross margin is in the high seventies. As a software company of course VMware has higher gross margins, but FYI, Broadcom's software business, the remains of Symantec and what they purchased as CA has 90% gross margin. But the I popper is operating margin. This is all non gap. So it excludes things like stock based compensation, but Broadcom had 61% operating margin last quarter. This is insanely off the charts compared to VMware's 25%. Oracle's non gap operating margin is 47% and Oracle is an incredibly profitable company. Now the red box is where the cuts are going to take place. Broadcom doesn't spend much on marketing. It doesn't have to. It's SG&A is 3% of revenue versus 18% for VMware and R&D spend is almost certainly going to get cut. The other eye popper is free cash flow as a percentage of revenue at 51% for Broadcom and 29% for VMware. 51%. That's incredible. And that my dear friends is why Broadcom a company with just under 30 billion in revenue has a market cap of 230 billion. Let's dig into the VMware portfolio a bit more and identify the possible areas that will be placed under the microscope by Hock Tan and his managers. The data from ETR's latest survey shows the net score or spending momentum across VMware's portfolio in this chart, net score essentially measures the net percent of customers that are spending more on a specific product or vendor. The yellow bar is the most recent survey and compares the April 22 survey data to April 21 and January of 22. Everything is down in the yellow from January, not surprising given the economic outlook and the change in spending patterns that we've reported. VMware Cloud on AWS remains the product in the ETR survey with the most momentum. It's the only offering in the portfolio with spending momentum above the 40% line, a level that we consider highly elevated. Unified Endpoint Management looks more than respectable, but that business is a rock fight with Microsoft. VMware Cloud is things like VMware Cloud foundation, VCF and VMware's cross cloud offerings. NSX came from the Nicira acquisition. Tanzu is not yet pervasive and one wonders if VMware is making any money there. Server is ESX and vSphere and is the bread and butter. That is where Broadcom is going to focus. It's going to look at VSAN and NSX, which is software probably profitable. And of course the other products and see if the investments are paying off, if they are Broadcom will keep, if they are not, you can bet your socks, they will be sold off or killed. Carbon Black is at the far right. VMware paid $2.1 billion for Carbon Black. And it's the lowest performer on this list in terms of net score or spending momentum. And that doesn't mean it's not profitable. It just doesn't have the momentum you'd like to see, so you can bet that is going to get scrutiny. Remember VMware's growth has been under pressure for the last several years. So it's been buying companies, dozens of them. It bought AirWatch, bought Heptio, Carbon Black, Nicira, SaltStack, Datrium, Versedo, Bitnami, and on and on and on. Many of these were to pick up engineering teams. Some of them were to drive new revenue. Now this is definitely going to be scrutinized by Broadcom. So that helps explain why Michael Dell would sell VMware. And where does VMware go from here? It's got great core product. It's an iconic name. It's got an awesome ecosystem, fantastic distribution channel, but its growth is slowing. It's got limited developer chops in a world that developers and cloud native is all the rage. It's got a far flung R&D agenda going at war with a lot of different places. And it's increasingly fighting this multi front war with cloud companies, companies like Cisco, IBM Red Hat, et cetera. VMware's kind of becoming a heavy lift. It's a perfect acquisition target for Broadcom and why the street loves this deal. And we titled this Breaking Analysis taming the VMware beast because VMware is a beast. It's ubiquitous. It's an epic software platform. EMC couldn't control it. Dell used it as a piggy bank, but really didn't change its operating model. Broadcom 100% will. Now one of the things that we get excited about is the future of systems architectures. We published a breaking analysis about a year ago, talking about AWS's secret weapon with Nitro and it's Annapurna custom Silicon efforts. Remember it acquired Annapurna for a measly $350 million. And we talked about how there's a new architecture and a new price performance curve emerging in the enterprise, driven by AWS and being followed by Microsoft, Google, Alibaba, a trend toward custom Silicon with the arm based Nitro and which is AWS's hypervisor and Nick strategy, enabling processor diversity with things like Graviton and Trainium and other diverse processors, really diversifying away from x86 and how this leads to much faster product cycles, faster tape out, lower costs. And our premise was that everyone in the data center is going to competes, is going to need a Nitro to be competitive long term. And customers are going to gravitate toward the most economically favorable platform. And as we describe the landscape with this chart, we've updated this for this Breaking Analysis and we'll come back to nitro in a moment. This is a two dimensional graphic with net score or spending momentum on the vertical axis and overlap formally known as market share or presence within the survey, pervasiveness that's on the horizontal axis. And we plot various companies and products and we've inserted VMware's net score breakdown. The granularity in those colored bars on the bottom right. Net score is essentially the green minus the red and a couple points on that. VMware in the latest survey has 6% new adoption. That's that lime green. It's interesting. The question Broadcom is going to ask is, how much does it cost you to acquire that 6% new. 32% of VMware customers in the survey are increasing spending, meaning they're increasing spending by 6% or more. That's the forest green. And the question Broadcom will dig into is what percent of that increased spend (chuckles) you're capturing is profitable spend? Whatever isn't profitable is going to be cut. Now that 52% gray area flat spending that is ripe for the Broadcom picking, that is the fat middle, and those customers are locked and loaded for future rent extraction via perpetual renewals and price increases. Only 8% of customers are spending less, that's the pinkish color and only 3% are defecting, that's the bright red. So very, very sticky profile. Perfect for Broadcom. Now the rest of the chart lays out some of the other competitor names and we've plotted many of the VMware products so you can see where they fit. They're all pretty respectable on the vertical axis, that's spending momentum. But what Broadcom wants is that core ESX vSphere base where we've superimposed the Broadcom logo. Broadcom doesn't care so much about spending momentum. It cares about profitability potential and then momentum. AWS and Azure, they're setting the pace in this business, in the upper right corner. Cisco very huge presence in the data center, as does Intel, they're not in the ETR survey, but we've superimposed them. Now, Intel of course, is in a dog fight within Nvidia, the Arm ecosystem, AMD, don't forget China. You see a Google cloud platform is in there. Oracle is also on the chart as well, somewhat lower on the vertical axis, but it doesn't have that spending momentum, but it has a big presence. And it owns a cloud as we've talked about many times and it's highly differentiated. It's got a strategy that allows it to differentiate from the pack. It's very financially driven. It knows how to extract lifetime value. Safra Catz operates in many ways, similar to what we're seeing from Hock Tan and company, different from a portfolio standpoint. Oracle's got the full stack, et cetera. So it's a different strategy. But very, very financially savvy. You could see IBM and IBM Red Hat in the mix and then Dell and HP. I want to come back to that momentarily to talk about where value is flowing. And then we plotted Nutanix, which with Acropolis could suck up some V tax avoidance business. Now notice Symantec and CA, relatively speaking in the ETR survey, they have horrible spending momentum. As we said, Broadcom doesn't care. Hock Tan is not going for growth at the expense of profitability. So we fully expect VMware to come down on the vertical axis over time and go up on the profit scale. Of course, ETR doesn't measure the profitability here. Now back to Nitro, VMware has this thing called Project Monterey. It's essentially their version of Nitro and will serve as their future architecture diversifying off x86 and accommodating alternative processors. And a much more efficient performance, price in energy consumption curve. Now, one of the things that we've advocated for, we said this about Dell and others, including VMware to take a page out of AWS and start developing custom Silicon to better integrate hardware and software and accelerate multi-cloud or what we call supercloud. That layer above the cloud, not just running on individual clouds. So this is all about efficiency and simplicity to own this space. And we've challenged organizations to do that because otherwise we feel like the cloud guys are just going to have consistently better costs, not necessarily price, but better cost structures, but it begs the question. What happens to Project Monterey? Hock Tan and Broadcom, they don't invest in something that is unproven and doesn't throw off free cash flow. If it's not going to pay off for years to come, they're probably not going to invest in it. And yet Project Monterey could help secure VMware's future in not only the data center, but at the edge and compete more effectively with cloud economics. So we think either Project Monterey is toast or the VMware team will knock on the door of one of Broadcom's 20 plus business units and say, guys, what if we work together with you to develop a version of Monterey that we can use and sell to everyone, it'd be the arms dealer to everyone and be competitive with the cloud and other players out there and create the de facto standard for data center performance and supercloud. I mean, it's not outrageously expensive to develop custom Silicon. Tesla is doing it for example. And Broadcom obviously is capable of doing it. It's got good relationships with semiconductor fabs. But I think this is going to be a tough sell to Broadcom, unless VMware can hide this in plain site and make it profitable fast, like AWS most likely has with Nitro and Graviton. Then Project Monterey and our pipe dream of alternatives to Nitro in the data center could happen but if it can't, it's going to be toast. Or maybe Intel or Nvidia will take it over or maybe the Monterey team will spin out a VMware and do a Pensando like deal and demonstrate the viability of this concept and then Broadcom will buy it back in 10 years. Here's a double click on that previous data that we put in tabular form. It's how the data on that previous slide was plotted. I just want to give you the background data here. So net score spending momentum is the sorted on the left. So it's sorted by net score in the left hand chart, that was the y-axis in the previous data set and then shared and or presence in the data set is the right hand chart. In other words, it's sorted on the right hand chart, right hand table. That right most column is shared and you can see it's sorted top to bottom, and that was the x-axis on the previous chart. The point is not many on the left hand side are above the 40% line. VMware Cloud on AWS is, it's expensive, so it's probably profitable and it's probably a keeper. We'll see about the rest of VMware's portfolio. Like what happens to Tanzu for example. On the right, we drew a red line, just arbitrarily at those companies and products with more than a hundred mentions in the survey, everything but Tanzu from VMware makes that cut. Again, this is no indication of profitability here, and that's what's going to matter to Broadcom. Now let's take a moment to address the question of Broadcom as a software company. What the heck do they know about software, right. Well, they're not dumb over there and they know how to run a business, but there is a strategic rationale to this move beyond just doing portfolios and extracting rents and cutting R&D, et cetera, et cetera. Why, for example, isn't Broadcom going after coming back to Dell or HPE, it could pick up for a lot less than VMware, and they got way more revenue than VMware. Well, it's obvious, software's more profitable of course, and Broadcom wants to move up the stack, but there's a trend going on, which Broadcom is very much in touch with. First, it sells to Dell and HPE and Cisco and all the OEM. so it's not going to disrupt that. But this chart shows that the value is flowing away from traditional servers and storage and networking to two places, merchant Silicon, which itself is morphing. Broadcom... We focus on the left hand side of this chart. Broadcom correctly believes that the world is shifting from a CPU centric center of gravity to a connectivity centric world. We've talked about this on theCUBE a lot. You should listen to Broadcom COO Charlie Kawwas speak about this. It's all that supporting infrastructure around the CPU where value is flowing, including of course, alternative GPUs and XPUs, and NPUs et cetera, that are sucking the value out of the traditional x86 architecture, offloading some of the security and networking and storage functions that traditionally have been done in x86 which are part of the waste right now in the data center. This is that shifting dynamic of Moore's law. Moore's law, not keeping pace. It's slowing down. It's slower relative to some of the combinatorial factors. When you add up in all the CPU and GPU and NPU and accelerators, et cetera. So we've talked about this a lot in Breaking Analysis episodes. So the value is shifting left within that middle circle. And it's shifting left within that left circle toward components, other than CPU, many of which Broadcom supplies. And then you go back to the middle, value is shifting from that middle section, that traditional data center up into hyperscale clouds, and then to the right toward infrastructure software to manage all that equipment in the data center and across clouds. And look Broadcom is an arms dealer. They simply sell to everyone, locking up key vectors of the value chain, cutting costs and raising prices. It's a pretty straightforward strategy, but not for the fate of heart. And Broadcom has become pretty good at it. Let's close with the customer feedback. I spoke with ETRs Eric Bradley this morning. He and I both reached out to VMware customers that we know and got their input. And here's a little snapshot of what they said. I'll just read this. Broadcom will be looking to invest in the core and divest of any underperforming assets, right on. It's just what we were saying. This doesn't bode well for future innovation, this is a CTO at a large travel company. Next comment, we're a Carbon Black customer. VMware didn't seem to interfere with Carbon Black, but now that we're concerned about short term disruption to their tech roadmap and long term, are they going to split and be sold off like Symantec was, this is a CISO at a large hospitality organization. Third comment, I got directly from a VMware practitioner, an IT director at a manufacturing firm. This individual said, moving off VMware would be very difficult for us. We have over 500 applications running on VMware, and it's really easy to manage. We're not going to move those into the cloud and we're worried Broadcom will raise prices and just extract rents. Last comment, we'll share as, Broadcom sees the cloud data center and IoT is their next revenue source. The VMware acquisition provides them immediate virtualization capabilities to support a lightweight IoT offering. Big concern for customers is what technology they will invest in and innovate, and which will be stripped off and sold. Interesting. I asked David Floyer to give me a back of napkin estimate for the following question. I said, David, if you're running mission critical applications on VMware, how much would it increase your operating cost moving those applications into the cloud? Or how much would it save? And he said, Dave, VMware's really easy to run. It can run any application pretty much anywhere, and you don't need an army of people to manage it. All your processes are tied to VMware, you're locked and loaded. Move that into the cloud and your operating cost would double by his estimates. Well, there you have it. Broadcom will pinpoint the optimal profit maximization strategy and raise prices to the point where customers say, you know what, we're still better off staying with VMware. And sadly, for many practitioners there aren't a lot of choices. You could move to the cloud and increase your cost for a lot of your applications. You could do it yourself with say Zen or OpenStack. Good luck with that. You could tap Nutanix. That will definitely work for some applications, but are you going to move your entire estate, your application portfolio to Nutanix? It's not likely. So you're going to pay more for VMware and that's the price you're going to pay for two decades of better IT. So our advice is get out ahead of this, do an application portfolio assessment. If you can move apps to the cloud for less, and you haven't yet, do it, start immediately. Definitely give Nutanix a call, but going to have to be selective as to what you actually can move, forget porting to OpenStack, or do it yourself Hypervisor, don't even go there. And start building new cloud native apps where it makes sense and let the VMware stuff go into manage decline. Let certain apps just die through attrition, shift your development resources to innovation in the cloud and build a brick wall around the stable apps with VMware. As Paul Maritz, the former CEO of VMware said, "We are building the software mainframe". Now marketing guys got a hold of that and said, Paul, stop saying that, but it's true. And with Broadcom's help that day we'll soon be here. That's it for today. Thanks to Stephanie Chan who helps research our topics for Breaking Analysis. Alex Myerson does the production and he also manages the Breaking Analysis podcast. Kristen Martin and Cheryl Knight help get the word out on social and thanks to Rob Hof, who was our editor in chief at siliconangle.com. Remember, these episodes are all available as podcast, wherever you listen, just search Breaking Analysis podcast. Check out ETRs website at etr.ai for all the survey action. We publish a full report every week on wikibon.com and siliconangle.com. You can email me directly at david.vellante@siliconangle.com. You can DM me at DVellante or comment on our LinkedIn posts. This is Dave Vellante for theCUBE Insights powered by ETR. Have a great week, stay safe, be well. And we'll see you next time. (upbeat music)

(upbeat music) >> Welcome back to theCUBE. We're covering Red Hat Summit 2022. We're going to wrap up now, Dave Vellante, Paul Gillin. We want to introduce you to Stephanie Chan, who's our new correspondent. Stephanie, one of your first events, your very first CUBE event. So welcome. >> Thank you. >> Up from NYC. Smaller event, but intimate. You got a chance to meet some folks last night at some of the after parties. What are your overall impressions? What'd you learn this week? >> So this has been my first in-person event in over two years. And even though, like you said, is on the smaller scale, roughly around 1000 attendees, versus it's usual eight to 10,000 attendees. There's so much energy, and excitement, and openness in these events and sessions. Even before and after the sessions people have been mingling and socializing and hanging out. So, I think a lot of people appreciate these in-person events and are really excited to be here. >> Cool. So, you also sat in some of the keynotes, right? Pretty technical, right? Which is kind of new to sort of your genre, right? I mean, I know you got a financial background but, so what'd you think of the keynotes? What'd you think of the format, the theater in the round? Any impressions of that? >> So, I think there's three things that are really consistent in these Red Hat Summit keynotes. There's always a history lesson. There's always, you know, emphasis in the culture of openness. And, there's also inspirational stories about how people utilize open source. And I found a lot of those examples really compelling and interesting. For instance, people use open source in (indistinct), and even in space. So I really enjoyed, you know, learning about all these different people and stories. What about you guys? What do you think were the big takeaways and the best stories that came out of the keynotes? >> Paul, want to start? >> Clearly the Red Hat Enterprise Linux 9 is a major rollout. They do that only about every three years. So that's a big deal to this audience. I think what they did in the area of security, with rolling out sigstore, which is a major new, I think an important new project that was sort of incubated at Red Hat. And they're trying to put in to create an open source ecosystem around that now. And the alliances. I'm usually not that much on partnerships, but the Accenture and the Microsoft partnerships do seem to be significant to the company. And, finally, the GM partnership which I think was maybe kind of the bombshell that they sort of rushed in at the last minute. But I think has the biggest potential impact on Red Hat and its partner ecosystem that is really going to anchor their edge architecture going forward. So I didn't see it so much on the product front, but the sense of Red Hat spreading its wings, and partnering with more companies, and seeing its itself as really the center of an ecosystem indicates that they are, you know, they're in a very solid position in their business. >> Yeah, and also like the pandemic has really forced us into this new normal, right? So customer demand is changing. There has been the shift to remote. There's always going to be a new normal according to Paul, and open source carries us through that. So how do you guys think Red Hat has helped its portfolio through this new normal and the shift? >> I mean, when you think of Red Hat, you think of Linux. I mean, that's where it all started. You think OpenShift which is the application development platforms. Linux is the OS. OpenShift is the application development platform for Kubernetes. And then of course, Ansible is the automation framework. And I agree with you, ecosystem is really the other piece of this. So, I mean, I think you take those three pieces and extend that into the open source community. There's a lot of innovation that's going around each of those, but ecosystems are the key. We heard from Stefanie Chiras, that fundamental, I mean, you can't do this without those gap fillers and those partnerships. And then another thing that's notable here is, you know, this was, I mean, IBM was just another brand, right? I mean, if anything it was probably a sub-brand, I mean, you didn't hear much about IBM. You certainly had no IBM presence, even though they're right across the street running Think. No Arvind present, no keynote from Arvind, no, you know, Big Blue washing. And so, I think that's a testament to Arvind himself. We heard that from Paul Cormier, he said, hey, this guy's been great, he's left us alone. And he's allowed us to continue innovating. It's good news. IBM has not polluted Red Hat. >> Yes, I think that the Red Hat was, I said at the opening, I think Red Hat is kind of the tail wagging the dog right now. And their position seems very solid in the market. Clearly the market has come to them in terms of their evangelism of open source. They've remained true to their business model. And I think that gives them credibility that, you know, a lot of other open source companies have lacked. They have stuck with the plan for over 20 years now and have really not changed it, and it's paying off. I think they're emerging as a company that you can trust to do business with. >> Now I want to throw in something else here. I thought the conversation with IDC analyst, Jim Mercer, was interesting when he said that they surveyed customers and they wanted to get the security from their platform vendor, versus having to buy these bespoke tools. And it makes a lot of sense to me. I don't think that's going to happen, right? Because you're going to have an identity specialist. You're going to have an endpoint specialist. You're going to have a threat detection specialist. And they're going to be best of breed, you know, Red Hat's never going to be all of those things. What they can do is partner with those companies through APIs, through open source integrations, they can add them in as part of the ecosystem and maybe be the steward of that. Maybe that's the answer. They're never going to be the best at all those different security disciplines. There's no way in the world, Red Hat, that's going to happen. But they could be the integration point. And that would be, that would be a simplifying layer to the equation. >> And I think it's smart. You know, they're not pretending to be an identity in access management or an anti-malware company, or even a zero trust company. They are sticking to their knitting, which is operating system and developers. Evangelizing DevSecOps, which is a good thing. And, that's what they're going to do. You know, you have to admire this company. It has never gotten outside of its swim lane. I think it's understood well really what it wants to be good at. And, you know, in the software business knowing what not to do is more important than knowing what to do. Is companies that fail are usually the ones that get overextended, this company has never overextended itself. >> What else do you want to know? >> And a term that kept popping up was multicloud, or otherwise known as metacloud. We know what the cloud is, but- >> Oh, supercloud, metacloud. >> Supercloud, yeah, here we go. We know what the cloud is but, what does metacloud mean to you guys? And why has it been so popular in these conversations? >> I'm going to boot this to Dave, because he's the expert on this. >> Well, expert or not, but I mean, again, we've coined this term supercloud. And the idea behind the supercloud or what Ashesh called metacloud, I like his name, cause it allows Web 3.0 to come into the equation. But the idea is that instead of building on each individual cloud and have compatibility with that cloud, you build a layer across clouds. So you do the hard work as a platform supplier to hide the underlying primitives and APIs from the end customer, or the end developer, they can then add value on top of that. And that abstraction layer spans on-prem, clouds, across clouds, ultimately out to the edge. And it's new, a new value layer that builds on top of the hyperscale infrastructure, or existing data center infrastructure, or emerging edge infrastructure. And the reason why that is important is because it's so damn complicated, number one. Number two, every company's becoming a software company, a technology company. They're bringing their services through digital transformation to their customers. And you've got to have a cloud to do that. You're not going to build your own data center. That's like Charles Wang says, not Charles Wang. (Paul laughing) Charles Phillips. We were just talking about CA. Charles Phillips. Friends don't let friends build data centers. So that supercloud concept, or what Ashesh calls metacloud, is this new layer that's going to be powered by ecosystems and platform companies. And I think it's real. I think it's- >> And OpenShift, OpenShift is a great, you know, key card for them or leverage for them because it is perhaps the best known Kubernetes platform. And you can see here they're really doubling down on adding features to OpenShift, security features, scalability. And they see it as potentially this metacloud, this supercloud abstraction layer. >> And what we said is, in order to have a supercloud you got to have a superpaz layer and OpenShift is that superpaz layer. >> So you had conversations with a lot of people within the past two days. Some people include companies, from Verizon, Intel, Accenture. Which conversation stood out to you the most? >> Which, I'm sorry. >> Which conversation stood out to you the most? (Paul sighs) >> The conversation with Stu Miniman was pretty interesting because we talked about culture. And really, he has a lot of credibility in that area because he's not a Red Hat. You know, he hasn't been a Red Hat forever, he's fairly new to the company. And got a sense from him that the culture there really is what they say it is. It's a culture of openness and that's, you know, that's as important as technology for a company's success. >> I mean, this was really good content. I mean, there were a lot, I mean Stefanie's awesome. Stefanie Chiras, we're talking about the ecosystem. Chris Wright, you know, digging into some of the CTO stuff. Ashesh, who coined metacloud, I love that. The whole in vehicle operating system conversation was great. The security discussion that we just had. You know, the conversations with Accenture were super thoughtful. Of course, Paul Cormier was a highlight. I think that one's going to be a well viewed interview, for sure. And, you know, I think that the customer conversations are great. Red Hat did a really good job of carrying the keynote conversations, which were abbreviated this year, to theCUBE. >> Right. >> I give 'em a lot of kudos for that. And because, theCUBE, it allows us to double click, go deeper, peel the onion a little bit, you know, all the buzz words, and cliches. But it's true. You get to clarify some of the things you heard, which were, you know, the keynotes were, were scripted, but tight. And so we had some good follow up questions. I thought it was super useful. I know I'm leaving somebody out, but- >> We're also able to interview representatives from Intel and Nvidia, which at a software conference you don't typically do. I mean, there's the assimilation, the combination of hardware and software. It's very clear that, and this came out in the keynote, that Red Hat sees hardware as matter. It matters. It's important again. And it's going to be a source of innovation in the future. That came through clearly. >> Yeah. The hardware matters theme, you know, the old days you would have an operating system and the hardware were intrinsically linked. MVS in the mainframe, VAX, VMS in the digital mini computers. DG had its own operating system. Wang had his own operating system. Prime with Prime OS. You remember these days? >> Oh my God. >> Right? (Paul laughs) And then of course Microsoft. >> And then x86, everything got abstracted. >> Right. >> Everything became x86 and now it's all atomizing again. >> Although WinTel, right? I mean, MS-DOS and Windows were intrinsically linked for many, many years with Intel x86. And it wasn't until, you know, well, and then, you know, Sun Solaris, but it wasn't until Linux kind of blew that apart. And the internet is built on the lamp stack. And of course, Linux is the fundamental foundation for Red Hat. So my point is, that the operating system and the hardware have always been very closely tied together. Whether it's security, or IO, or registries and memory management, everything controlled by the OS are very close to the hardware. And so that's why I think you've got an affinity in Red Hat to hardware. >> But Linux is breaking that bond, don't you think? >> Yes, but it still has to understand the underlying hardware. >> Right. >> You heard today, how taking advantage of Nvidia, and the AI capabilities. You're seeing that with ARM, you're seeing that with Intel. How you can optimize the operating system to take advantage of new generations of CPU, and NPU, and CPU, and PU, XPU, you know, across the board. >> Yep. >> Well, I really enjoyed this conference and it really stressed how important open source is to a lot of different industries. >> Great. Well, thanks for coming on. Paul, thank you. Great co-hosting with you. And thank you. >> Always, Dave. >> For watching theCUBE. We'll be on the road, next week we're at KubeCon in Valencia, Spain. We're at VeeamON. We got a ton of stuff going on. Check out thecube.net. Check out siliconangle.com for all the news. Wikibon.com. We publish there weekly, our breaking analysis series. Thanks for watching everybody. Dave Vellante, for Paul Gillin, and Stephanie Chan. Thanks to the crew. Shout out, Andrew, Alex, Sonya. Amazing job, Sonya. Steven, thanks you guys for coming out here. Mark, good job corresponding. Go to SiliconANGLE, Mark's written some great stuff. And thank you for watching. We'll see you next time. (calm music)

>>mhm Yes. >>Welcome back to the cubes coverage of red hat summit 2021 virtual. I'm john for a host of the cube we're here in Palo alto. Were remote with our great guest here cube alumni. I've been on many times chris wright, Senior vice president and CTO of red hat chris great to see you. Always a pleasure to have you on the screen here too. But we're not in person but thanks for coming in remote. >>Yeah, you bet. Glad to be here. >>Not only were talking about speeds and feeds, digital transformation going under the hood here we're gonna talk about red hats, expanded collaboration with boston University to help fund education and research for open source projects. So you guys have a huge relationship with boston University. Talk about this continued commitment. What's the news, what's the, what's the story? >>Well, we have a couple different things going on uh and and the relationship we have with the EU is many years in. So this itself isn't brand new. Um one of the things that's important to highlight here is we are giving something north of $550 million dollars worth of software to be you really in pursuit of running uh powering and running scaled infrastructure. That's part of the open hybrid class. Um and that's that's an important piece which we can touch on a little bit as we talk to this conversation. The other one is like I said, this isn't a new relationship with the U. And what we're doing now is really expanding the relationship. So we've we've built a great connection directly with the You were substantially expanding that. Um The original relationship we had was a $5 million relationship spread over five years now. We're talking about a $20 million Relationship spread over five years. So really a significant expansion. And of course that expansion is connected to some of the work that we plan to do together in this open hybrid cloud infrastructure and research space. So a lot of things coming together at once to really really advance the red hat ca laboratory at the U. That combined effort in bringing you know, cloud research and open source and all these things together >>and a lot of actually going on. So basically the boston area lot of universities, but I love the shirt you're wearing with his red hat innovation in the open. This is kind of one of those things you also mentioned out of this huge subscription of software grant that's going to be you just a huge number give value for for the boston University. But you also have another project that's been going on the collaborative research and education agreement called red hat collaborative orI Okay, this was in place. You mentioned that. How's that tying in because that was pre existing. Now. You've got the grant, you got your funding more and more research. Talk about how this connects into the open cloud initiative because this is kind of interesting. You're not bringing hybrid cloud kind of research and practical value in A i ops is hot. You can't you can't go anywhere these days without having great observe ability. Cloud native more and more is more complex and you've got these young students and researchers dying and get their hands on it. Take us through the connection between the CA laboratory and open open cloud. >>So the CA laboratory is a clever name that just talks about collaboration and research laboratory type research. And initially the CA laboratory focus was on the infrastructure running the cloud and some of the application workloads that can run on top of an open cloud infrastructure uh that are that's very data centric. And so this is uh an opportunity for multidisciplinary work looking at modeling for um for health care, for example for how you can improve imaging and we've had a great results in this collaboration. Um We've talked at times about the relationship with the boston Children's Hospital and the chris project not related to me, but just similar acronym that spells chris. Um and these things come together in part through connecting relationships to academia, where academia as research is increasingly built in on and around open source software. So if you think of two parallel worlds, open source software development, just the activity of building open source software, it brings so many people together and it moves so quickly that if you're not directly connected to that as an academic researcher, you risk producing academic research results that aren't relevant because it's hard for them to connect back to these large, fast moving projects, which may have invented a solution to the problem you've been focused on as an academic if you're not directly connected. So we see academia and open source coming together to build really a next generation of understanding of the scientific in depth and he's joining the >>train operations you're talking about here though, this is significant because there's dollars behind it, right? There's real money, it's not >>just the right software, >>it's it's a center, it's a joint operation. >>That's right. And so when you think about just the academic research of producing um ideas that manifest themselves as code and software projects, we want to make sure we're first connecting the software projects to open source communities in with our own engineering experience, bringing code into these open, open source projects to just advance the the feeds and speeds and speeds, the kind of functionality the state of the art of the actual project. We're also taking this to a new level with this expanded relationship and that is software today. When you, when you operate software as a cloud, a critical part of the software is the operationalization of that software. So software just sitting there on the shelf doesn't do anybody any good. Even if the shelf is an open source project, it's a tar ball waiting for you to download. If you don't ever grab it and run it, it's not doing anybody any good. And if the challenge of running it is substantial enough that it stops you from using that software, you've created a barrier to the value that's locked inside that project. The focus here is how can we take that the operations experience of running a cloud, which itself is a big complex distributed system, tie some of those experiences back into the projects that are used to build that infrastructure. So you're taking not just the output of the project, but also the understanding of what it takes to run a project and bringing that understanding and even the automation and code associated with that back into the project. So, your operational izing this open source software and you're building deeper understanding of what it means to operate things that scale, including data and data sets that you can use to build models that show how you can create the remediation and closed loop systems with AI and machine learning, you know, sort of synthesizing all the data that you generate out of a big distributed infrastructure and feed that back into the operations of that same infrastructure. So a lot going on there at the same time operationalization as as an open source initiative but also um really the understanding advancement of A I and data centric operations, so ai ops and closed the remediation. >>Yeah, I mean, devops developer and operations to operationalize it and certainly cloud Native put an emphasis on Day two operations, which leads a lot more research, a lot more uh student work on understanding the coding environment. Um so with that I got to ask um I asked you about this uh massachusetts focused or this open cloud initiative because you guys are talking about this open cloud initiative including this massachusetts. Open Cloud, what is that? What is the massachusetts? Open Cloud sounds like you're offering a kind of open person, not just bu but other um Yeah, institutions. >>That's right. So the the M o C massachusetts open cloud is itself a cross um organizational collaboration bringing together five different academic institutions in New England In massachusetts. It's bu it's Harvard mit, its Northeastern and its U. Mass. Coming together to support a common set of infrastructure which is cloud. It's a cloud that runs in a data center and then um it serves a couple of different purposes. One is research on clouds directly. So what does it mean to run a cloud? What does it look like from a research point of view to understand large scale distributed systems? And then the other is more on top. When you have a cloud you can run workloads and those workloads scaled out to do say data processing, looking at the implications of across different fields which could be natural sciences, could be medicine, could be, even political science or social science is really a multidisciplinary view of what it means to leverage a cloud and run data centric workloads on top. So two different areas that are of a focus for the M. O. C. And this becomes this sort of vehicle for collaboration between Red Hat View and the Red Hot Laboratory. >>So I have to ask only because I'm a big fan of the area and I went to one of those schools, is there like a bean pot for technical hackathons where you get all the schools matched up against each other on the mass open cloud and compete for who gets bragging rights and the text city there. >>It's a great question. Not yet. But I'll jot that down here in hell. Up on that. >>Happy to sponsor. We'll we'll do the play by play coverage, you know. Great. >>I love that. Yeah, kind of twitch tv style. The one thing that there is which is very practical is academic research grants themselves are competitive, right? People are vying for research dollars to put together proposals, Bring those proposals to um the agency that's that's that's giving out grants and winning those grants is certainly prestigious. It's important as part of her research institutes continue to fund the work that they're doing. Uh Now we've been associated uh through the work we've done to date with the U. With Yeah almost $15 million 20 papers. So there's there's a lot of work you can't quite call the play by play. It's a >>scoreboard. I mean their numbers you can put numbers on the board. I mean that's what's one of the things you can measure. But let me ask you on those grants. So you're saying this is just the bu you guys actually have data on um the impact of the relationship in terms of grants and papers and stuff like that academic work. >>That's right. That's right. And so those numbers that I'm giving you are examples of how we've worked together with the u to help their faculty generate grant dollars that then fund some of the research that's happening there together with redhead engineers and on and on the infrastructure like the massachusetts Open cloud. >>That's a good way to look at the scoreboard. It's a good point. We have to research that if you don't mind me asking on this data that you have um are all those projects contributing to open source or do they have to be? That's just generic. Is that all of you all papers around bu is part of the research. In other words, I'm trying to think if I'm in open source, has this contributed to me as an >>open source? Yeah, it's a big and complex question because there's so much research that can happen through a research institution. And those research grants tend to be governed with agreements and some of those agreements have intellectual property rights um front and center and might require things like open source software as a result, the stuff that we're working on clearly isn't that focus area of open source software and and research activities that help kind of propel our understanding forward of what does it mean to do large scale distributed systems creation and then operation. So how do you develop software that does it? How do you how do you run the software that builds these big large distributed systems? So we're focused in that area. Um some of the work that we facilitated through that focus includes integrating non open source software that might be part of um same medical imaging. So for example work we've done with the boston Children's Hospital That isn't 100 doesn't require us to be involved 100 of the open source pieces. All the infrastructure there to support it is. And so we're learning how we can build integrated pipelines for data analysis and image analysis and data sharing across different institutions uh at the open source project level. Well maybe we have a specific imaging program that is not generated from this project. And of course that's okay with >>us. You know chris you bring up a good point with all those conversations. I could see this really connecting the dots. Most computer science programs. Most engineering programs haven't really traditionally focused on it at the scale we're talking about because we look at cloud scale but now scaling with hybrid it's real engineering going on to think about the large scale. We know all the big hyper scale ear's right so it's not just I. T. Provisioning you know network connection and doing some I. T. Work. We're talking about large scale. So I have to ask you as you guys look at these relationships with academics uh academia like like bu and others um how are the students responding to this? Are you guys seeing any specific graduate level advancements? Because you're talking about operational roles that are becoming so important whether it's cyber security and as cloud needed because once more data driven you need to have all this new scale engineered up. That's >>what how >>do you look at that? >>There's two different pieces that I would highlight. One is just the data science itself. So schools still need to produce data scientists. And having data is a big part of being a data scientist and knowing what your what your goals are with that data and then experimenting with different techniques, whether it's algorithms or tools. It's a big part of being a data scientist sort of spelunking through the data. So we're helping produce data. We're looking at data science efforts around data that's used to operationalize infrastructure, which is an interesting data science endeavor by itself. The other piece is really what you highlighted, which is there's an emergence of a skill set in the industry, often referred to as SRE site reliability engineering. Um it is a engineering discipline. And if you back up a little bit and you start thinking about what are the underlying principles behind large scale distributed systems, you get to some information theory and computer science. So this isn't just something that you might think of as um some simple training of a few key tools and knowing how to interpret a dashboard. And you're good to go, this is a much more sophisticated view of what does it mean to really operate large scale infrastructure, which to date, there aren't a lot of these large scale infrastructures available to academics to research because their commercial endeavors >>and their new to me. I was talking to some young folks my son's age and daughters age and I was saying, you know, architect in a building, a skyscraper isn't trivial. You can't just do that overnight. There's a lot of engineering that goes on in that science, but you're bringing kind of operating systems theory, systems thinking to distributed computing. I mean that's combination of a interdisciplinary shift and you got, I won't say civil engineering, but like concept is there, you've got structure, you've got networks, they're changing and then you've got software so again completely new area. >>That's right and there's not a lot of even curriculum that explores this space. So one of the opportunity, there's a great program that really focuses on um that that space of site reliability engineering or operational izing software. Um And then the other piece that I'm I'm really excited about is connecting to open source communities so that as we build software, we have a way to run and operationalize that software that doesn't have to be directly tied to a commercial outlet. So products running in the cloud will have a commercial S. L. A. And commercial agreements between the user and the producer of that service. How do you do that in open source context? How do you leverage a community, bring that community software to a community run service, learn through the running of that service. How to best build architect the service itself and then operationalized with the tooling and automation that service? How do you, how do you bring that into the open source community? And that's something that we've been referring to as the operate first initiative. How do you get the operationalization of software? Really thought of as a primary focal point in the software project where you normally think about the internals of software, the features, the capabilities of functionality, less about the operationalization. So important shift at the open source project level, which is something that I think will really be interesting and we'll see a lot of reaping a lot of rewards. Just an open source communities directly. >>Yeah, speed and durability. Certainly having that reliability is great. You know, I love talking with you guys at red hat because, you know, software, you know, open source and you know, operating systems because as it comes together in this modern era, what a great, great fit, great work you're doing with Boston University's and the mass open cloud initiative. Congratulations on that. I got I got to ask you about this Red Hat Graduate Fellows program you have because this kind of speaks to what you guys are doing, you have this kind of this redhead graduate fellows network and the work that's being done. Does that translate into red hat at all? From an engineering standpoint? How does that, how does that work together? >>Basically, what we do is we support um PhD students, we support post docs. So there's a real direct support to the, you know, that is the Red Jack Graduate Fellow program on our focus there is connecting those um uh academics, the faculty members and the students to our engineers to work together on key research initiatives that we think will help drive open source software agendas forward really broad can be in all different areas from security to virtualization too, the operating systems to cloud distributed systems, uh and one of the things that we've discovered is it creates a great relationship with the university and we find students that will be excited to leave university and come into the the industry workforce and work at Red hat. So there is a direct talent relationship between the work that we do at bu and the talent that we can bring into red hat, which is awesome. Uh We know these people we've worked with well with them, but also we're kind of expanding understanding of open source across, you know, more and more of academia, which I think is really valuable and important for red hat. We just go out to the the industry at large, um, and helping bring a set of skills to the industry that whether they're coming, whether these are students that come into red hat or go elsewhere into the industry, these are important skills to have in the industry. So we look at the, how do you work in open source communities? How to operationalize software at scale? These are important things. They didn't >>expand, expand the territory if you will in terms of systems thinking. We just talked about great collaboration. You guys do a great job chris great to have you on a quick final word from you on this year at red hat summer. I know it's virtual again, which we could be in person, but we're starting to come out of the covid kind of post covid right around the corner. Um, what's the update? How would you describe the current state of red hat? Obviously you guys still got that, that vibe. You still pumping strong a lot going on. What's the current? What's the current, uh, bumper sticker? What's the vibe? >>Well, in many ways, because we're so large and distributed. Um, the last year has been, uh, can't say business as usual because it's been an impact on everybody, but it hasn't required us to fundamentally change. And as we work across open source communities, there's been a lot of continuity that's come through a workforce that's gone completely distributed. People are anxious to get to the next phase, whatever back to normal means. Uh, and people at Red Hat are no different. So we're looking forward to what it can mean to spend time with colleagues in offices, were looking forward to what it means to spend time together with our friends and families and travel and all those things. But from a, from a business point of view, Red Hat's focus on the open hybrid cloud and that distributed view of how we work with open source communities. That's something that's, it's only continued to grow and pick up over the course of the last year. So it's clearly an important area for the industry and we've been busier than ever the last year. So, uh, interesting, interesting times for everybody. >>Well, it's great to see and I love how the culture maintains its its relevance, its coolness intersection between software, Open Source and systems. Great, Great working congratulations chris. Thanks for coming on. >>Thank you. >>All right. I'm John for here with the Cube for Red Hat Summit 2021. Thanks for watching. Mhm.

from around the globe it's the cube with digital coverage of Red Hat summit 2020 brought to you by Red Hat last year in 2019 IBM made the biggest M&A move of the year with a 34 billion dollar acquisition of red hat it positioned IBM for the next decade after what was a very tumultuous tenure by CEO Ginni Rometty who had to shrink in order to grow unfortunately she didn't have enough time to do the grille part that has now gone toward Arvind Krishna the new CEO of IBM this is Dave Volante and I'm here with Stu minimun and this is our Red Hat keynote analysis is our 7th year doing the Red Hat summit and we're very excited to be here this is our first year doing Stu the Red Hat summit post IVM acquisition we've also got IBM think next week so what we want to do for you today is review what's going on at the Red Hat summits do you've been wall-to-wall with the interviews we're gonna break down the announcements IBM had just announced its quarter so we get some glimpse as to what's happening in the business and then we're gonna talk about going forward what the prognosis is for both IBM and Red Hat well and Dave of course our audience understands there's a reason why we're sitting farther apart than normal in our studio and you know why we're not in San Francisco where the show is supposed to be this year last year it's in Boston Red Hat summit goes coast-to-coast every year it's our seventh year doing the show first year doing it all digital of course our community is always online but you know real focus you know we're gonna talk about Dave you know you listen to the keynote speeches it's not the as we sit in our preview it's not the hoopla we had a preview with pork or mayor ahead of the event where they're not making big announcements most of the product pieces we're all out front it's open source anyway we know when it's coming for the most part some big partnership news of course strong customer momentum but a different tenor and the customers that Red Hat's lined up for me their interview all talking you know essential services like medical your your energy services your communication services so you know real focus I think Dave both IBM and right making sure that they are setting the appropriate tone in these challenging times yeah I mean everybody who we talked to says look at the employees and safety comes first once we get them working from home and we know that they're safe and healthy we want to get productive and so you've seen as we've reported that that shift to the work from home infrastructure and investments in that and so now it's all about how do we get closer to clients how do we stay close to clients and be there for them and I actually have you know business going forward you know the good news for IBM is it's got strong cash flow it's got a strong balance sheet despite you know the acquisition I mean it's just you know raise some more you know low low cost debt which you know gives them some dry powder going forward so I think IBM is gonna be fine it's just there's a lot of uncertainty but let's go back to your takeaways from the Red Hat Summit you've done you know dozens of interviews you got a good take on the company what are you top three takeaways - yeah so first of all Dave you know the focus everybody has is you know what does Red Hat do for the cloud story for IBM OpenShift especially is absolutely a highlight over 2,000 customers now from some really large ones you know last year I interviewed you know Delta you've got you know forward and Verizon up on stage for the keynote strong partnership with Microsoft talking about what they're doing so OpenShift has really strong momentum if you talk about you know where is the leadership in this whole kubernetes space Red Hat absolutely needs to be in that discussion not only are they you know other than Google the top contributor really there but from a customer standpoint the experience what they've built there but what I really liked from Red Hat standpoint is it's not just an infrastructure discussion it's not OPM's and containers and there's things we want to talk about about VMs and containers and even server lists from Red Hat standpoint but Red Hat at its core what it is it they started out as an operating system company rel Red Hat Enterprise Linux what's the tie between the OS and the application oh my god they've got decades of experience how do you build applications everything from how they're modernizing Java with a project called Korkis through how their really helping customers through this digital transformation I hear a similar message from Red Hat and their customers that I hear from Satya Nadella at Microsoft is we're building lots of applications we need to modernize what they're doing in Red Hat well positioned across the stack to not only be the platform for it but to help all of the pieces to help me modernize my applications build new ones modernize some of the existing ones so OpenShift a big piece of it you know automation has been a critical thing for a while we did the cube last year at ansible fest for the first time from Red Hat took that acquisition has helped accelerate that community in growth and they're really Dave pulling all the pieces together so it's what you hear from Stephanie shirasu ironically enough came over from IBM to run that business inside a Red Hat well you know now she's running it inside Red Hat and there's places that this product proliferate into the IBM portfolio next week when we get where it I didn't think I'm sure we'll hear a lot about IBM cloud packs and look at what's underneath IBM cloud packs there's open shift there's rel all those pieces so you know I know one of the things we want to talk about Davis you know what does that dynamic of Red Hat and IBM mean so you know open shift automation the full integration both of the Red Hat portfolio and how it ties in with IBM would be my top three well red hat is now IBM I mean it's a clearly part of the company it's there's a company strategy going forward the CEO Arvind Krishna is the architect of the Red Hat acquisition and so you know that it's all in on Red Hat Dave I mean just the nuance there of course is the the thing you hear over and over from the Red Hatters is Red Hat remains Red Hat that cultural shift is something I'd love to discuss because you know Jim Whitehurst now he's no longer a Red Hat employee he's an IBM employee so you've got Red Hat employees IBM employees they are keeping that you know separation wall but obviously there's flowing in technology and come on so come on in tech you look at it's not even close to what VMware is VMware is a separate public company has separate reporting Red Hat doesn't I mean yes I hear you yo you got the Red Hat culture and that's good but it's a far cry from you know a separate entity with full transparency the financials and and so I I hear you but I'm not fully buying it but let's let's get into it let's take a look at at the quarter because that I think will give us an indication as to how much we actually can understand about RedHat and and again my belief is it's really about IBM and RedHat together I think that is their opportunity so Alex if you wouldn't mind pulling up the first slide these are highlights from IBM's q1 and you know we won't spend much time on the the the IBM side of the business although we wanted to bring some of that in but hit the key here as you see red hat at 20% revenue growth so still solid revenue growth you know maybe a little less robust than it was you know sequentially last quarter but still very very strong and that really is IBM's opportunity here 2,200 clients using red hat and an IBM container platforms the key here is when Ginni Rometty announced this acquisition along with Arvind Krishna and Jim Whitehurst she said this is going to be this is going to be cash flow free cash flow accretive in year one they've already achieved that they said it's gonna be EPS accretive by year two they are well on their way to achieving that why we talked about this do it's because iBM has a huge services organization that it can plug open shift right into and begin to modernize applications that are out there I think they cited on the call that they had a hundred ongoing projects and that is driving immediate revenue and allows IBM to from a financial standpoint to get an immediate return so the numbers are pretty solid yeah absolutely Dave and you know talking about that there is a little bit of the blurring a line between the companies one of the product pieces that came out at the show is IBM has had for a couple of years think you know MCM multi cloud management there was announced that there were actually some of the personnel and some of the products from IBM has cut have come into Retta of course Red Hat doing what they always do they're making it open source and they're it's advanced cluster management really from my viewpoint this is an answer to what we've seen in the kubernetes community for the last year there is not one kubernetes distribution to rule them all I'm going to use what my platforms have and therefore how do I manage across my various cloud environments so Red Hat for years is OpenShift lives everywhere it sits on top of VMware virtualization environments it's on top of AWS Azure in Google or it just lives in your Linux farms but ACM now is how do I manage my kubernetes environment of course you know super optimized to work with OpenShift and the roadmap as to how it can manage with Azure kubernetes and some of the other environments so you know you now have some former IBM RS that are there and as you said Dave some good acceleration in the growth from the Red Hat numbers we'd seen like right around the time that the acquisition happened Red Hat had a little bit of a down quarter so you know absolutely the services and the the scale that IBM can bring should help to bring new logos of course right now Dave with the current global situation it's a little bit tough to go and be going after new business yeah and we'll talk about that a little bit but but I want to come back to sort of when I was pressing you before on the trip the true independence of Red Hat by the way I don't think that's necessarily a wrong thing I'll give an example look at Dell right now why is Dell relevant and cloud well okay but if Dell goes to market says we're relevant in cloud because of VMware well then why am I talking to you why don't I talk to VMware and so so my point is that that in some regards you know having that integration is there is a real advantage no you know you were that you know EMC and the time when they were sort of flip-flopping back and forth between integrated and not and separate and not it's obviously worked out for them but it's not necessarily clear-cut and I would say in the case of IBM I think it's the right move why is that every Krista talked about three enduring platforms that IBM has developed one is mainframe that's you know gonna here to stay the second was middleware and the third is services and he's saying that hybrid cloud is now the fourth and during platform that they want to build well how do they gonna build that what are they gonna build that on they're gonna build that an open shift they they're there other challenges to kind of retool their entire middleware portfolio around OpenShift not unlike what Oracle did with with Fusion when it when it bought Sun part of the reason - pod Sun was for Java so these are these are key levers not necessarily in and of themselves you know huge revenue drivers but they lead to awesome revenue opportunities so that's why I actually think it's the right move that what IBM is doing keep the Red Hat to the brand and culture but integrate as fast as possible to get cash flow or creative we've achieved that and get EPS accretive that to me makes a lot of sense yeah Dave I've heard you talk often you know if you're not a leader in a position or you know here John Chambers from Cisco when he was running it you know if I'm not number one or number two why am I in it how many places did IBM have a leadership position Red Hat's a really interesting company because they have a leadership position in Linux obviously they have a leadership position now in kubernetes Red Hat culturally of course isn't one to jump up and down and talk about you know how they're number one in all of these spaces because it's about open source it's about community and you know that does require a little bit of a cultural shift as IBM works with them but interesting times and yeah Red Hat is quietly an important piece of the ecosystem let me let me bring in some meteor data Alex if you pull up that that's that second slide well and I've shown this before in braking analysis and what this slide shows in the vertical axis shows net score net score is a measure of spending momentum spending velocity the the horizontal axis is is is called market share it's really not market share it's it's really a measure of pervasiveness the the mentions in the data set we're talking about 899 responses here out of over 1200 in the April survey and this is a multi cloud landscape so what I did here Stu I pulled on containers container platforms of container management and cloud and we positioned the companies on this sort of XY axis and you can see here you obviously have in the upper right you've got Azure in AWS why do I include AWS and the multi cloud landscape you answered that question before but yesterday because Dave even though Amazon might not allow you to even use the word multi cloud you can't have a discussion of multi cloud without having Amazon in that discussion and they've shifted on hybrid expect them to adjust their position on multi-cloud in the future yeah now coming back to this this this data you see kubernetes is on the kubernetes I know is another company but ETR actually tracks kubernetes you can see how hot it is in terms of its net score and spending momentum yeah I mean Dave do you know the thing the the obvious thing to look at there is if you see how strong kubernetes is if IBM plus red hat can keep that leadership in kubernetes they should do much better in that space than they would have on with just their products alone and that's really the lead of this chart that really cuts to the chase do is you see you see red Red Hat openshift has really strong spending momentum although I will say if you back up back up to say April July October 18 19 it actually was a little higher so it's been pushed down remember this is the April survey that what's ran from mid-march to mid April so we're talking right in the middle of the pandemic okay so everybody's down but nonetheless you can see the opportunity is for IBM and Red Hat to kind of meet in the middle leverage IBM's massive install base in its in its services presence in its market presence its pervasiveness so AKA market share in this rubric and then use Red Hat's momentum and kind of meet in the middle and that's the kind of point that we have here with IBM's opportunity and that really is why IBM is a leader in at least a favorite in my view in multi cloud well Dave if you'd look two years ago and you said what was the competitive landscape Red Hat was an early leader in the kubernetes you know multi-cloud discussion today if you ask everybody well who's doing great and kubernetes you have to talk about all the different options that amazon has Amazon still has their own container management with ACS of course IKS is doing strong and well and Amazon whatever they do they we know they're going to be competitive Microsoft's there but it's not all about competition in this space Dave because you know we see Red Hat partnering across these environments they do have a partnership with AWS they do have you know partnership with you know Microsoft up on stage there so where it was really interesting Dave you know one of the things I was coming into this show looking is what is Red Hat's answer to what VMware is really starting to do in this space so vSphere 7 rolled out and that is the ga of project Pacific so taking virtualization in containers and putting them together Red Hat of course has had virtualization for a long time with KVM they have a different answer of how they're doing openshift virtualization and it rather than saying here's my virtual environment and i can also do kubernetes on it they're saying containers are the future and where you want to go and we can bring your VMs into containers really shift them the way you have really kind of a lift and shift but then modernize them Dave customers are good you know you want to meet customers where they are you want to help them move forward virtualization in general has been a you don't want to touch your applications you want to just you know let it ride forever but the real the real driver for companies today is I've got to build new apps I need to modernize on my environment and you know Red Hat is positioning and you know I like what I'm hearing from them I like what I'm hearing from my dad's customers on how they're helping take both the physical the virtual the containers in the cloud and bring them all into this modern era yeah and and you know IBM made an early bet on on kubernetes and obviously around Red Hat you could see actually on that earlier slide we showed you IBM we didn't really talk about it they said they had 23% growth in cloud which is that they're a twenty two billion dollar business for IBM you're smiling yeah look good for IBM they're gonna redefine cloud you know let AWS you know kick and scream they're gonna say hey here's how we define cloud we include our own pram we include Cano portions of our consulting business I mean I honestly have no idea what's in the 22 billion and how if they're growing 22 billion at 23% wow that's pretty awesome I'm not sure I think they're kind of mixing apples and oranges there but it makes for a good slide yeah you would say wait shouldn't that be four billion you added he only added two or three billion you know numbers can tell a story but you can also manipulate but the point is the point is I've always said this near term the to get you know return on this deal it's about plugging OpenShift into services and modernizing applications long term it's about maintaining IBM and red-hats relevance in the hybrid cloud world which is I don't know how big it is it's a probably a trillion-dollar opportunity that really is critical from a strategy standpoint do I want to ask you about the announcements what about any announcements that you saw coming from Red Hat are relevant what do we need to know there yeah so you know one of the bigger ones we already talked about that you know multi cloud manager what Red Hat has the advanced cluster management or ACM absolutely is an era an area we should look VMware Tong's ooh Azure Ark Google anthos and now ACM from Red Hat in partnership with IBM is an area still really early Dave I talked to some of the executives in the space and say you know are we going to learn from the mistakes of multi vendor management Dave you know you think about the CA and BMC you know exactly of the past will we have learned for those is this the right way to do it it is early but Red Hat obviously has a position here and they're doing it um did hear plenty about how Red Hat is plugging into all the IBM environments Dave Z power you know the cloud solutions and of course you know IBM solutions across the board my point of getting a little blue wash but hey it's got to happen I think that's a smart move right you know we talked about you know really modernizing the applications in the environments I talked a bit about the virtualization piece the other one if you say okay how do I pull the virtualization forward what about the future so openshift serverless is the other one it's really a tech preview at this point it's built off of the K native project which is part of the CNC F which is basically how do I still have you know containers and kubernetes underneath can that plug into server list order server let's get it rid of it everything so IBM Oracle Red Hat and others really been pushing hard on this Kay native solution it is matured a lot there's an ecosystem growing as how it can connect to Asher how it can connect to AWS so definitely something from that appdev piece to watch and Dave that's where I had some really good discussions with customers as well as the the Red Hat execs and their partners that boundary between the infrastructure team and the app dev team they're hoping to pull them together and some of the tooling actually helps ansible is a great example of that in the past but you know others in the portfolio and lastly if you want to talk a huge opportunity for Red Hat IBM and it's a jump ball for everyone is edge computing so Red Hat I've talked to them for years about what they were doing in the opened stack community with network function virtualization or NFV Verizon was up on stage I've got an interview for Red Hat summit with Vodafone idea which has 300 million subscribers in India and you know the Red Hat portfolio really helping a lot of the customers there so it's the telco edge is where we see a strong push there it's definitely something we've been watching from the you know the big cloud players and those partnerships Dave so you know last year Satya Nadella was up on the main stage with Red Hat this year Scott Guthrie you know there he's at every Microsoft show and he's not the red head show so it is still ironic for those of us that have watched this industry and you say okay where are some of the important partnerships for Red Hat its Microsoft I mean you know we all remember when you know open-source was the you know evil enemy for from Microsoft and of course Satya Nadella has changed things a lot it's interesting to watch I'm sure we'll talk more at think Dave you know Arvind Krishna the culture he will bring in with the support of Jim Whitehurst comes over from IBM compared to what Satya has successfully done at Microsoft well let's talk about that let's let's talk about let's bring it home with the sort of near-term midterm and really I want to talk about the long term strategic aspects of IBM and Red Hat's future so near-term IBM is suspended guidance like everybody okay they don't have great visibility some some some things to watch by the way a lot of people are saying no just you know kind of draw draw a red line through this quarter you just generally ignore it I disagree look at cash flow look balance sheets look at what companies are doing and how they're positioning that's very important right now and will give us some clues and so there's a couple of things that we're watching with IBM one is their software business crashed in March and software deals usually come in big deals come in at the end of the quarter people were too distracted they they stopped spending so that's a concern Jim Cavanaugh on the call talked about how they're really paying attention to those services contracts to see how they're going are they continuing what's the average price of those so that's something that you got to watch you know near-term okay fine again as I said I think IBM will get through this what really I want to talk about to do is the the prospects going forward I'm really excited about the choice that IBM made the board putting Arvind Krishna in charge and the move that he made in terms of promoting you know Jim Whitehurst to IBM so let's talk about that for a minute Arvind is a technical visionary and it's it's high time that I VM got back to it being a technology company first because that's what IBM is and and I mean Lou Gerstner you know arguably save the company they pivoted to services Sam Palmisano continue that when Ginny came in you know she had a services heritage she did the PWC deal and IBM really became a services company first in my view Arvind is saying explicitly we want to lead with technology and I think that's the right move of course iBM is going to deliver outcomes that's what high-beams heritage has been for the last 20 years but they are a technology company and having a technology visionary at the lead is very important why because IBM essentially is the leader prior to Red Hat and one thing mainframes IBM used to lead in database that used to lead in storage they used to lead in the semiconductors on and on and on servers now they lead in mainframes and and now switch to look at Red Hat Red Hat's a leader you know they got the best product out there so I want you to talk about how you see that shift to more of a sort of technical and and product focus preserving obviously but your thoughts on the move the culture you're putting Jim as the president I love it I think it was actually absolutely brilliant yeah did Dave absolutely I know we were excited because we you know personally we know both of those leaders they are strong leaders they are strong technically Dave when I think about all the companies we look at I challenge anybody to find a more consistent and reliable pair of companies than IBM and Red Hat you know for years it was you know red hat being an open-source company and you know the way their business model said it it's not the you know Evan flow of product releases we know what the product is going to be the roadmaps are all online and they're gonna consistently grow what we've seen Red Hat go from kind of traditional software models to the subscription model and there are some of the product things we didn't get into too much as to things that they have built into you know Red Hat Enterprise Linux and expanding really their cloud and SAS offerings to enhance those environments and that that's where IBM is pushing to so you know there's been some retooling for the modern era they are well positioned to help customers through that you know digital transformation and as you said Dave you and I we both read the open organization by Jim lighters you know he came in to Red Hat you know really gave some strong leadership the culture is strong they they have maintained you know really strong morale and I talked to people inside you know was their concern inside when IBM was making the acquisition of course there was we've all seen some acquisitions that have gone great when IBM has blue washed them they're trying to make really strong that Red Hat stays Red Hat to your point you know Dave we've already seen some IBM people go in and some of the leadership now is on the IBM side so you know can they improve the product include though improve those customer outcomes and can Red Hat's culture actually help move IBM forward you know company with over a hundred years and over 200,000 employees you'd normally look and say can a 12,000 person company change that well with a new CEO with his wing and you know being whitehurst driving that there's a possibility so it's an interesting one to watch you know absolutely current situations are challenging you know red hats growth is really about adding new logos and that will be challenged in the short term yeah Dave I I love you shouldn't let people off the hook for q2 maybe they need to go like our kids this semester is a pass/fail rather than a grid then and then a letter grade yeah yeah and I guess my point is that there's information and you got to squint through it and I think that look at to me you know this is like Arvin's timing couldn't be better not that he orchestrated it but I mean you know when Ginny took over I mean was over a hundred million a hundred billion I said many times that I beams got a shrink to grow she just ran out of time for the Gro part that's now on Arvind and I think that so he's got the cove in mulligan first of all you know the stocks been been pressured down so you know his tenure he's got a great opportunity to do with IBM in a way what such an adela did is doing at Microsoft you think about it they're both deep technologists you know Arvind hardcore you know computer scientist Indian Institute of Technology Indian Institute of Technology different school than Satya went to but still steeped in in a technical understanding a technical visionary who can really Drive you know product greatness you know in a I would with with Watson we've talked a lot about hybrid cloud quantum is something that IBM is really investing heavily in and that's a super exciting area things like blockchain some of these new areas that I think IBM can lead and it's all running on the cloud you know look IBM generally has been pretty good with acquisitions they yes they fumbled a few but I've always made the point they are in the cloud game IBM and Oracle yeah they're behind from a you know market share standpoint but they're in the game and they have their software estate in their pass a state to insulate them from the race to the bottom so I really like their prospects and I like the the organizational structure that they put in place in it by the way it's not just Arvind Jim you mentioned Paul Cormier you know Rob Thomas has been been elevated to senior VP really important in the data analytic space so a lot of good things going on there yeah and Dave one of the questions you've been asking and we've been all talking to leaders in the industry you know what changes permanently after the this current situation you know automation you know more adoption of cloud the importance of developers are there's even more of a spotlight on those environments and Red Hat has strong positioning in that space a lot of experience that they help their customers and being open source you know very transparent there I both IBM and Red Hat are doing a lot to try to help the community they've got contests going online to you know help get you know open source and hackers and people working on things and you know strong leadership to help lead through these stormy weathers so Stuart's gonna be really interesting decade and the cube will be here to cover it hopefully hopefully events will come back until they do will be socially responsible and and socially distant but Stu thanks for helping us break down the the red hat and sort of tipping our toe into IBM more coverage and IBM think and next week this is Dave alotta for Stu minimun you're watching the cube and our continuous coverage of the Red Hat summit keep it right there be back after this short break you [Music]

>> Announcer: Live from San Francisco, it's theCUBE, covering Red Hat Summit 2018, brought to you by Red Hat. >> Hello everyone, welcome back to theCUBE's exclusive coverage of Red Hat Summit 2018 in San Francisco, Moscone West. I'm John Furrier, my co-host John Troyer, and we are here with David Levine, Assistant General Counsel of Red Hat, we've got the lawyer in the house. Who's billing for this hour? >> Exactly. >> Welcome to theCUBE. >> Thank you, John, it's good to be here. >> So, obviously the legal challenges, putting GDPR aside, which I don't want to get on that rant, we're not going to talk about, is licenses. In open source, this has been an enabler but also an inhibitor for many in not knowing what license to use or what code is, licenses mean for them, their role in the community, all of this stuff could be a morass of gray area, or just no one's educated in some cases, right? So it's tough. >> And that's what I do. I mean my job is to help bring some order to what you describe as some morass, right. How do we help reassure especially enterprises that it's safe to go in the water, it's safe to use open source. Red Hat is an open source company, our entire business is built on open source, and that sort of has a couple aspects to it. One is on the development side, you know we collaborate in the development of software, but what really enables that are licenses, open source licenses. And much of Red Hat's software is built on top of a particular license, which is called the copyleft license. It's known as the GPL or the General Public License. And it's a great tool to foster collaboration, right? What copyleft means is if I create a piece of software under a copyleft license and I give this software to you, I give it to you with all my copyrights. So you have the right to copy it, to distribute it to John, to improve upon it, but the only requirement is if you give it to John, you have to give it to him with the same rights and you have to give him the source code, and if you improve upon it, you have to license the improvements to him under those same rights. So it's this whole virtuous circle, right? I create something, I give it to you, you're able to continue to improve on it, you redistribute it, and we all get to share... >> Furrier: So if I create value, do you get that back? >> If you decide to distribute it to me, you don't have to, >> OK. >> David: But if you distribute it to someone else, then you have to give it back with all those same rights. >> Furrier: So you're paying it forward, basically all the rights forward, >> Exactly. >> Furrier: A dose of good ethos. But then if I improve upon, I create a derivative work, whatever the legal jargon is, >> Right, right. >> Furrier: And I have, this is a magic secret sauce, ten percent of it is magic secret sauce, now I distribute that product, I pass along the license. >> David: Correct. >> Including my secret sauce. >> David: If you decide to, there's nothing that requires you to do it, so a lot of our customers sort of build their secret sauce internally, they keep it within their companies and it doesn't go out any further than that, and that's perfectly fine, but if you decide to distribute it, you have to continue to... >> What does that mean, >> Furrier: Distribute, distribute the software to a partner or the product itself? >> David: It could be both. >> So the product is sold publicly as a service, say a cloud service, and I've got some secret sauce. >> David: So if it's a service, it's a great question and it goes into legal issues, but generally speaking, if you're providing a service that's not a distribution, so I don't really have access to the software. >> Furrier: That's actually a really good thing for developers. >> Yeah. >> Well, it's an issue, we are now in a service-oriented world so that's a, we are, maybe that's one of the next things that we as a technology community and an IT industry have to deal with. Certainly, it seems though, David, before we get into the new news here and the specifics of the new development, but open source was scary... A generation or two ago. It seems like, at this point especially in cloud, it's the new normal. Is that as you, inside Red Hat, as you all look at your landscape, it doesn't seem like you have, do you have big Fortune 100 lawyers coming in and yelling at you now versus ten years ago? >> It's a great point. So I've been at Red Hat for 13 years now, so I've seen sort of tremendous change over the years, and when I started in 2005, we were having a lot of discussions with customers about the copyleft aspects of the GPL, you know, this requirement to give back, and there were companies that were concerned about this, but over time, they've become more sophisticated and they're realizing that, notwithstanding what their lawyers were telling them, it really wasn't that dangerous, and I have very few of those conversations today. Most people get it. >> Furrier: And also a lot's changed since that time, I mean right now I think people are seeing the benefits of projects being out in the open, where it's fostering great collaboration. And the productization piece can still exist >> Yeah. >> With that, so that dynamic between productization, AKA commercialization, and open source projects is interesting. So you could almost make the argument, it's easier to be compliant if you just make everything open source because, rather than just re-engineering any fixes, the community can do it for you. >> David: Absolutely. >> So this efficiency's already been proven. >> David: Absolutely. And you know, customers are concerned about compliance with all of the obligations under the open source licenses, and one of the things that I try to tell customers is if you take open source, you build it into a product, rather than spend a lot of time focusing on pulling out the obligations into a separate file, just make the source code available, republish it and you get to participate, you get to push your contributions upstream and so you a whole community that's supporting the contributions that you described. >> Furrier: Okay, so what's the big news here that GPL, version 2, okay, so first of all, what's the current situation? You guys made a quick tweak in this GPL 2-3 situation, what was the current situation, what was the motivation? Why the change? What's the impact? >> David: So I talked earlier about the GPL and the GPL has very exacting requirements. I mentioned that if you're going to distribute the software to John, you have to give him the source code, and you have to include a copy of the license. Understanding what is source code, what has to be, what has to accompany it, depending on how you're distributing the software, that's not always an easy question, and so companies don't always get it right. And one of the challenges with GPL, version 2 is that there is no grace period, and so if you miss something, if you make a mistake in the way that you've tried to meet your license obligations, your license is terminated and you're a copyright infringer, sort of, right at that point in time, and that scares a lot of our customers, it scares enterprises. They need more predictability, they want some level of fairness. >> This is the grace period you're talking about. >> David: Yeah, this the grace period. So, there's no grace period in version 2 of the General Public License. That problem was fixed when they came out ten years ago with version 3 of the GPL. So version 3 included this grace period in it, but the challenge is that a lot of code today remains GPL, version 2, so what do we do with that large existing code base? And so, the solution was to adopt the cure provision, or the grace provision from GPL, version 2, I'm sorry, version 3, for GPL, version 2 code. Stop me if I'm speaking too quickly or if I'm getting too technical. So the idea is >> Let's rewind just back 30 seconds. So, do a little playback. So, if we can apply GPL, v.3 to the v.2 code, >> So, the cure period. >> Oh, just the cure period. >> So I'm adopting >> David: the cure period. >> Got it. >> David: So, the license stays the same, the only difference is, I've said that if you fail to meet your obligation to John when you redistribute, I'm going to give you 30 days to fix the problem. >> Furrier: So essentially you grandfather in the v.2 with the grace period. >> We're giving this grace period. >> Troyer: And this is a corporate promise. This doesn't change the license, this is a corporate promise. >> So it's a promise >> David: by any copyright holder, so in my example to you, I'm the sole copyright holder here, but in the Linux kernel, there are thousands of copyright holders. So the Linux kernel developers back in October adopted this same approach, adopted the GPL v.3 cure period for the Linux kernel, which continues to be licensed under GPL, version 3. And then in December, Red Hat led a group of companies that included IBM, Google, Facebook, we all adopted it for our own copyrights. So, we together, those four companies own a lot of copyrights to open source code. And then again in March, six more companies joined us. SAP, Microsoft, Cisco, HPE, Soothsay, CA Technologies, and at the Red Hat Summit today, we're asking developers to do the same thing. We want to show that it's a movement, that we want to cooperate in enforcement, because we think ultimately if we want more people to join the open source ecosystem, we can do that by making enforcement more predictable. >> Furrier: And so what specifically are you asking startups? What's the ask for developers? >> For developers, if you go to, we have a site on GitHub, so it's the GPL Cooperation Commitment, so gplcc.github.io/gplcc. >> And what do they do, just take a guess? >> And you go there, and there's the statement, the same commitment that the company's made, and you go in and add your name to the bottom of the file and submit a pull request, like developers know how to do on GitHub, and your name will be added as a supporter. >> Into the record. >> David: It would apply to every new copier. >> That gives them the primary source (mumbles), or write... >> David: It gives anyone who takes that code, has that piece of mind. >> Furrier: Well, great stuff, great one-on-one on the GPL v.2, v.3 grace period, it's super cool you guys are doing that. It's just such a hassle, I'm sure the complaints have been crazy. The bigger question for me as I look at, cause I love that the innovation comes from open source, we're seeing that both on the collaborative side in the project, but also people are really productizing open source and its running everything. The question is, where do I have code that I, you know, people are programming like crazy, they're slinging code like it's nobody's business right now. So, I might be afraid I'd be liable if I'm an enterprise or a startup that, through venture capital or an M&A process where something's going on, wait a minute, we can't actually sell this because that's his code over there. You didn't comply with the license, so there's always these tripwires in the mind, and sometimes that's just fear, this is a general kind of license hygiene practice. What's your take on that? What's your advice to entrepreneurs, to enterprise developers, to be safe? What should they do as their approach? >> David: That's a great question. I mean, what you want to know is where's my code coming from? And you have, it's a license issue, but it's also a product security issue. If you're taking something from someone, they took it from two places down the food chain, what's the provenance of that code? So, just like from a security perspective... >> Furrier: I've seen M&As go south because of this. >> Yes, so you want to know the source of your code, get it from a trusted source. Make sure that you understand what the license terms are. One of the things that we're trying to encourage developers to do is make sure you attach a license to it, because if you don't, a user or startup's not going to know what rights they have. And that can become problematic if they have a liquidity fight. >> Furrier: Okay, so here's my next question. So, the next question is obviously open source is growing and people are joining projects and/or creating projects. So this is a hypothetical: I have a project and I want to donate to CUBE code, to the open source CUBE community. Do I just ship the code, do I have to pick the license, what's the best license? And then I want to also have in the mind that I might use Linux and other things, so I have code I've written, proprietary code I want to open it up, I've got to pick a license, like, do I just go like that and pick the license out of the hat, or... >> Lots of times, it's sort of dictated for you. So it depends on the ecosystem that you're working with. I mean, if you're working in the Linux kernel ecosystem, generally it's going to be GPL, version 2. So you have to look at what other projects you're working with, is this part of a particular project that already has an existing license? And then it's a philosophical point. I mentioned before, the GPL is a copyleft license. It forces sharing, right, so it protects John's rights downstream from you, but there are other licenses that are permissive and give you lots of rights, but you could decide what you want to do with it downstream. So if you're okay with people taking your code downstream from you and making it proprietary, then using a permissive license is fine. But if you want to ensure this virtuous circle, then you want to pick a copyleft license. >> Troyer: Paul, do you think we have reached the end stage of open source licenses here? Are you, you know, GPL v.3 is ten years old, and after we started from MIT and Apache, and I could probably list a couple of others and I haven't even been paying attention, so, are we settled down, are we about done? Are you looking for things? >> David: That's a great question. So I was at a conference two weeks ago in Barcelona put on by the Free Software Foundation in Europe, and one of the conference sessions was The Future of Copyleft. You know, is there going to be another copyleft license? Do we need GPL, version 4? It's, you look at what the GPL has done and how many projects are governed by it, and how it's forced this collaboration, it's done amazing things, but it's pretty complicated. So is there a simpler way of accomplishing the same objectives? But I don't know that people have the stomach... >> Furrier: And the answer is? >> Uh, (laughing). I'll come back next year and let you know what I learn... >> Were you worried about, and now I'm going to ask, have to ask this, ask me how you can support open source licensing, so I'll ask you: how can you and me support open source licensing? >> David: So, take the GPL v.3 Cure Commitment, commit your name to supporting greater stability and predictability and fairness in the way enforcement takes place. So, I mean it's an exciting project. It's kind of fun to pull the whole community together. >> It's quite an accomplishment, too if you think about open source principles are now, again, we don't want to skew other events, but okay, this beginning of another generation of open source greatness certainly, remember the glory days when there was a Tier 2 citizen in the enterprise, you guys made it Tier 1 but now it's going to a whole other level with Cloud-Native, and you're seeing open source ethos being applied to other markets, not just software development. So, you're starting to see the success create this circle of innovation. Have you guys had the "pinch me" moments inside Red Hat, saying, "hey, this is actually working, and really well"? >> David: I think just a couple touchpoints, I mean, I think, look at where Microsoft has come, right? When I joined Red Hat, that wasn't a friendly relationship, but now they've embraced it. Who would have thought 15 years ago that we'd see Microsoft on board and we have. And your point about where else is open source going; one of my colleagues spoke about a year ago to seed developers who were interested in open sourcing seeds, because there was concern about seeds becoming patented and not being able to grow food. And so, thinking about ways to open up the market in seeds. >> Productization is a great thing. >> Yeah, absolutely. >> On the legal front, what's on the horizon? Any hurdles you see, opportunities, challenges that your guys are working on? Obviously, there's always the legal framework, we just commented before you came on with Chris Wright about Blockchain and some of the tokenization around content, we might even see a token economics model in software down the road. So, a lot of interesting legal things happening to rights if you open them up. What's your thoughts on the future? >> So, one of the areas that we're focused on, as is Red Hat, is containers. So what does it mean if you put open source software layers in a container? What does it mean if there are proprietary layers in there? Does it mean if you add, if you take my open source software, add a proprietary component, package it in a container and give that container to John, what does it mean for your proprietary layer? Is that, does that have to be licensed under the GPL? And so we spent a lot of time thinking about that a number of years ago and luckily concluded that it may improve the situation as opposed to adding any concerns, so we're thinking about the impact of open source licensing and containers, ensuring, again to your point earlier, what's the provenance of the code? There's so much code now available, making sure that there is a license associated with it. >> It's almost, you just declare all code free. (all laughing) >> Absolutely. >> Well certainly a lot of new things you're seeing, societal change is impacted, you've got self-driving cars and all kinds of new things that are just mind-blowing on a legal framework standpoint. First-time challenges, so you're busy, you're always going to have an interesting job. >> I really think that I have the best job in Red Hat, because I get to think about these things. What does it mean from a licensing perspective? What are the new issues that we're going to face as the technology evolves, the market evolves? And... >> Furrier: Super important, I mean there's tripwires in there, and again, if you don't think about it probably, I know or I've seen from experience, great companies lose big-time acquisition opportunities because of some faulty code on a license, and it's just killed things, and I've seen enterprises get (laughing). I mean, little weird things could happen, you've just got to be on top of it. >> David: I mean, look at what Tesla did in open sourcing their patents, making their patented technology available so that, to help the whole autonomous car industry. We've been doing a lot of work in the patent area as well to ensure that patents don't become an inhibitor to the change that you've described. >> Furrier: It's a great conversation, provocative, legal and open source software. These are competitive advantages and opportunities, not challenges and compliance, old-school guarded secrets. Open it up and good things happen. David, thanks for coming on theCUBE. Thanks for sharing the insights on the legal perspectives of licenses as open source software continues to power the globe on a global basis, the global economy, and the technology innovation coming. It's theCUBE, bringing you all the live action here in San Francisco. We'll be right back with more after this short break. (upbeat music) (inspirational music)