 And we are live at IBM Edge. This is theCUBE, SiliconANGLE.tv's continuous coverage of IBM Edge. This is where we bring you the smartest people we can find. We extract the signal from the noise. We package it up and share it with you, our audience. So thanks for all your tweets, your questions. I'm Matt D. Volante. I'm here with my co-host for this segment, John MacArthur. And we are here with Bob Concia. And Bob is the Vice President of Storage Systems at IBM. Welcome. Thank you, David. Good to be here. So Bob runs the DS8000 and the XIV. DS8000 is the very high-end storage, IBM's very high-end systems offering, a system storage offering, and XIV. That's right. The new kid on the block. That's right, relatively. And yeah, I guess so, right? Four years. It's been a while now. It's been a while now, yeah. XIV was a very cool acquisition you guys made back in 2007. That's right. I believe you picked it up. I think you announced the number. I think it was 340 million. Maybe you didn't announce that number. It was, now we didn't, that's the number, but it was less than that. Quite a bit less than that. So anyway, it wasn't 2.4 billion. No, it wasn't. Yeah, it was the point. It wasn't. But it spawned other activity that was in that ballpark, though, by others. Yeah, so. For sure. Congratulations on creating a frothy environment. I know a lot of guys are very happy and, you know. Especially at 3-4 for compelling Iceland. Would like me to. Right, Phil Soren and Dave Scott. Exactly. Thank you very much. For getting it all started. Well, welcome to theCUBE. This is Edge. This is your big event. And it's been a long time coming, actually. I think that this is, we've been calling this year, the Storage Coming Out Party. How do you feel? I think so. I think, you know, we've had events like this in the past that we have done. Certainly on the heels of the acquisitions that we've done. We did in that space between 2006 and 2009, in 2010, we did on the order of 13, 14 acquisitions in and around the storage space, whether it be services, software or hardware. So there was a major, major focus on the corporation on investing in a big, big way in the storage, in the storage infrastructure and everything around storage. Understanding that, you know, it was going to be a very key part of concerns for clients and their infrastructure and everything that they had going for them at that point. At what point did you guys decide to make that investment in storage? I would say it came in the late 2005, 2006 timeframe. In fact, we came off a year in 2006 where we had just picked up some market share benefit. Primarily from our partnerships that we had, we always did very well in the main frame, main frame attached storage, both in tape and desk, but our tape business was doing well and we had started picking up some share in the mid-range space based on a partnership that we had with LSI Logic, which is now part of NetApp, and of course we started the NetApp relationship at that point in time. And we realized in 2006 that our dependency on those relationships had grown quite large in the disk site. And there was a very clear motivation for us to go off and invest more organically and bring some of the technology we had coming out of the research and development labs and around the world, but at the same time, not being afraid to go out and acquire, which was not in IBM's hardware group DNA, if you will, back in that timeframe. We had, the last time we had done an acquisition in the storage space, it was Mylex, rated after cards up in Silicon Valley. And then we spun that off the LSI and actually that's how we got introduced somewhat to LSI Logic. And so our dependency upon those OEM relationships, those OEMN, that joint go-to-market model from a sales model standpoint, the manufacturing development model had grown quite large. And so we wanted to not be as dependent upon those relationships. They've still worked quite well for us and they still work well for us to this day, but we wanted to get more of the organic content. We had the inventiveness, if you will. We had more patents than our other top five competitors combined. We still do, that's still the case here in 2012, but we weren't always the best at bringing solutions that mattered to our clients, especially around the distributed space within the disk storage area. So this was key for us to go out and combine a lot of acquisitions that we had done in that timeframe with our core research and development facilities and thus you see the portfolio we have today. It's quite comprehensive. I call it, the breadth is there left to right, top to bottom. And we've never seen a better portfolio coming from IBM storage, at least as I've been associated with IBM storage. And that's effectively, we were talking earlier about 27 years in the IBM business. Right. Well, Bob, your acquisition strategy is a little different from some of your competitors, I think, in that you are acquiring companies much earlier at perhaps better evaluations than some of your competitors. So we'll have to argue. That's true. That's been our bread and butter for several years and the way the corporation looks at it, they'd rather buy 20 companies at 500 million a piece versus one company at five billion. Yeah, I don't think you've paid 500 million for any company in the storage space, though, have you? Not in the storage space. But I'm talking about within the software group, within our services organization, within the hardware side. But no, we've not been in that league yet. So we do go out and find, we've got a strong go-to-market model, we've got outstanding capabilities of what it takes to really have a successful product in the market around that space of it. So if it's an area we're not innovating in, we'll go out and grab that IP and then integrate it into the IBM. Some companies are really good at onboarding the acquisitions, new technology and integrating them into the process, not only from a product perspective, but also from a go-to-markets standpoint. Where do you use that IBM stack? I think we do quite well. Our due diligence process in evaluating companies is the best I've seen, no doubt about it. We had a process that goes back several years that's run out of corporate. Obviously, they got a lot of experience within the software and services side of the house. And so there is a set of rigorous criteria that you look for to make sure it financially can be ramped once IBM picks the company up and integrate it into the rest of big, bad IBM if you will. So if it doesn't have that capability, then we won't go after it no matter what the value is or what the innovation is at that point in time. So we are very much targeted at making sure that we can integrate it into our product sets, into our solutions, and it's something that our sales teams would know to go out and be able to sell. So all of that goes into the criteria of an acquisition. So I wonder if we could talk about that in the context of XIV, because that was a very major acquisition, at least in my mind. It was both strategic and tactical. I mean, you've done very well with it. You had a, you were talking earlier, Bob, about your reliance on other suppliers. And IBM's never been comfortable being too reliant on other people's, you know, for core technology. And then you make the XIV move. It's super simple, storage virtualization, big trend, you know, storage for the rest of the bus, if you will. That's right, that's right. You don't need to be a PhD in loan management to run an XIV. That's right, that's exactly right. And you brought that in for a very attractive price, you know, whatever, hundreds of millions of dollars versus you're seeing multi-billion dollar acquisitions going on, and very similar technologies. I'm not going to say the same, but essentially that same sort of genre of capability. So take us back through sort of what you guys have done with XIV, particularly I'm interested in the penetration in non-all blue accounts. Right, and that's been a key part for us. I mean, our market share gain, our competitive win-back has been better with that product. Not just the technology, but the go-to-market strategy as well than any other product I've got in the portfolio, bar none. So we have been out in market really since, I would say, with the IBM Blue Wash product, what we call the Generation 2 product since September of 2008. And about 70%, roughly 70, 75% of our sales are competitive displacement. So that's where somebody has not purchased an IBM storage array in the open space in the last three or four years. So you're actually migrating off EMC or Hitachi or Compellent or whatever, HP, EVA, 3-par, 70 to 75% of the time. And so that goes without saying that means you're not typically coming from an IBM environment. And that's a whole different- Not coming from an IBM server environment or storage environment. An IBM storage and server environment, because we do a great job of selling our storage with our servers, right? And that's where you see IBM storage present. I mean, our mainframe attach is very strong, our power attach is strong, you know, the I-Series, you know, the external storage attach is strong with IBM. And even at the low end, the low end of the power line, it's also quite strong, where we were not strong, isn't attaching to the rest of the world's servers and the rest of, I would say, applications. Do you see the server and storage refresh cycles aligning or they tend to run at sort of separate cycles? They tend to run in separate cycles. So we- So it's hard, the bundling is a little hard to do. It is a little bit hard. Now we try to do a pretty tight job with the mainframe side. Obviously there is an affinity there that's like no other affinity with that Z-Series ecosystem. But that one will tend to run very close to one another. But whether you're around in the wind-tail market or System X colleagues, which is more VMware these days than a specific X-Series technology, if you will. But in our power, we incorporate power technology within our products. That's like the DS8000. And we'll typically introduce that power technology. For example, power seven will come into the DS8 line later in the year. So that followed about two years from where the power guys introduced that chip technology. So talk about where, I'm intrigued by XIV because it was not a well-known technology. No, not at all. And you guys purchased it, which is why you got, I think such a good price on it. That's right. The founder was well-known. Well-known founder is really based technology. I want to ask if you think Extreme I.O. is a low price, but we won't have to dance to that. So where does it fit in the portfolio? I've had debates from the XIV team about, it's tier one and I don't want to get into the definitional, but from a portfolio standpoint, where does it fit? I mean, it's close to DS8000 in a low end and it covers a wide swath, doesn't it? It does, it sure does. And now we've got an organic product that's doing quite well in the low end of the mid-range and the low end is coming up with the V7000 that's growing quite popular. And that's really replacing our mid-range DS4000, 5000 product line in that area. Now some of the high-end systems or larger systems that we had with the DS4800, the DS5300 were being mined by XIV when XIV was ramping in the market, but the bulk of that mid-range opportunity is really being satisfied by the V7000. So XIV has only one choice, right? Really is to go up scale and to get into that tier one environment. When we bought the company, we even labeled it internally within the IBM side much to Moshe's chagrin that we called the tier 1.5. We didn't have it at least back in 2006 and seven as that tier one. We've certainly grown the product in 2008 into a tier one product and that's where we're seeing a lot of our success growing the marketplace around the exchange environment, around VMWare, in that true distributed wind-tail space is where tier one space is where we see XIV growing. We integrated the sales force into our IBM storage sales force. We actually copied the model that XIV had and we created a dedicated storage sales force. And the Tiger team's into 2011. And a lot of that team that was outselling the XIV and only being paid on XIV in 2009 and in 2010 were now paid on the whole portfolio and we were going at more the client and the account and the competitive takeout regardless of the product. So it caused a little bit of challenge for us for the XIV but the momentum was not as strong as what we had had in prior years. We're still growing but we weren't going as strong as we had done in 2009 and 2010. And then we came out with Gen three in September of last year and the momentum's been very strong. Back on very strong growth growth. So we're growing on the average 30% per quarter. How are the channel partners dealing with the broad portfolio and the portfolio transitions? I think certainly that's been a challenge. There's no doubt about it. There's strong relationships in selling that DS4000, 5000 product line selling the N-Series within NetApp. They know how to sell that. They know how to sell that very well and they've been doing it for several years and they get a lot of support from what used to be LSI and what is now NetApp as well. You know, going to an organic model requires you not just to make investments in development and manufacturing but also in the whole go-to-market strategy as well. And that's been a major area for us from a marketing standpoint, from a sales support, both pre and post sales technical support. And, you know, it's been a transition. No doubt for our channel partners and for our sellers to be able to ramp that product. I think, you know, we're sort of at the end of that transition, I hope. And we see the market has greatly accepted and our channel partners have greatly accepted both the XIV as that tier one open distributed product and then the tier two being the Star Wise V7000. Did you say the XIV was growing at 30% per quarter? 30% per quarter, since? This is year over year? Yeah, year over year. Yeah, yeah, yeah, okay. So, significantly faster than the marketplace. Let's say the market's growing at what? Mid to high single digits? Well, if you look in that tier one space or what IDC calls the Band 9 and Band 10 space, the high end disc, if you will, it's flat down. Well, I want to say down, but it's flat to very low single digits. So, no, we are doing well. And it kind of depends. It's very cyclical, right? I mean, you had, you know, EMC had a sort of a down quarter or last quarter. Well, everybody knew that their announce was coming out. And it had a very good quarter of the year before. So, you had a tough compare. That's right. But it's flat-ish, let's say. Right, exactly. XIV is up and to the right, although, so that's gaining significant share because there's a lot of bumps in the road right now in storage. There is a lot of bumps in the road. And like I said, last year, at the beginning of the year, you know, we came off growing a business that was $2 million at the end of 07 to, you know, $200 million to $500 million. And, you know, it's a pretty healthy business, you know, from what IBM sees and what it doesn't report the individual revenue streams by itself. But, you know, we're in that ballroom. No, but it's tracking to a billion-dollar interest. Absolutely. That was our goal. Which is what, you know, what obviously three-par wants to do. Absolutely. And that's part of what Compellent wanted to do. So it's quite amazing, actually, that these, let's use the term, sorry, Moshe, for the pejorative, but the whole 1.5 space has created, I mean, essentially, at least three billion-dollar companies. You might even be able to throw, you know, left-hand equal logic in there. I mean, it's a massive innovation. It is. And it is, I think it's defining the new tier one, to be honest. This is what I wanted to ask you. Is there a new definition for tier one? Let's talk about that. And I think there is. It can no longer, that level of function, scalability, availability, robustness, integration, can no longer come at the price and the cost to our clients that it used to be in the past. There's no doubt about it. I mean, if the world was going to continue to operate in that level, they just wouldn't store. They wouldn't store as much information. It would no longer exist to be a really bonafide tier, in my opinion. So something had to change. And I think that XIB and comparable technologies and architectures have changed the game to get more efficient, to jam more data within to a storage array, to make more use of it, to be more virtualized and more utilized information, to effectively, dramatically lower the total cost of ownership. Not just acquisition price, that's the easy part. Management cost. But the whole management cost. We've done a lot of comparisons with our clients, with independent groups, where we are like 30% to 35% of the total cost of ownership of a comparable VMAX solution. And that reward for our customer wanting to take a risk or dip in their toe in the water with a new technology or relatively new technology. I don't want to call XIB a new technology anymore. It's ramped and it's pretty mature. But back then, getting a client to tip their toe in the water, it had to be a pretty good reward for that risk. And for them to migrate off of an existing vendor. But if you put your DS8000 hat on, what is the analog to your VMAX hat, you would say, OK, but the reliability, the availability, the serviceability, the tier one attributes aren't there. But back to the earlier comment, there's a new definition for tier one. And what are the attributes of that? And I would say, the way I look at it with the DS8000, and it's a very strong product in IBM's servers and operating systems, if you will. So you look at where our strength is. It's in the mainframe in the Zettos OS space. It's in high-end power. It's in i-Series. I mean, all those are pretty contained ecosystems. That's a true blue product. That's a true blue product. And it's done well there, and it will always do well there. When we went out and looked where the growth in the market was back in 2005 and 2006, it wasn't as much there. It was out into the wind-tell space. It was into VMware, which is starting virtualized servers. That's where the growth for distributed storage is at. It's not in these other places. So the product could have worked there. But it didn't have the reward that was worth the risk of switching that XIB offers. And so that architecture really opened us up into that tier one enterprise open space. So when I talk about VMware, Exchange, SQL, SAS, Linux-based operating systems, wind-tell-based operating systems, I talk about XIB being that tier one VMAX equivalent, and then V7000, BNRVNX, if you will, equivalent in that space. When you talk about mainframe, you talk about IBM-contained ecosystems, then the DS8000 sort of rules that roast. Yeah, I actually am impressed that you actually manage both products. Because that says to me that you're willing to take the new and the old, and let them position them accordingly. Back to your guys' questions about the acquisitions. That was a very, very key part of it. We did not want to have any confusion out there or erosion of our DS8000 space. And thus, we clearly targeted the team toward where the growth markets were. And it wasn't where we were doing well with the DS8000. I think you've done well with that objective. It's not always that easy. But I think the nature of the XIB made it somewhat easier. But still, we were talking earlier about how do you rationalize the ROI of integration with something like DV2, or mainframe, with having to grow. And you've done, I think, a really good job with the XIB. And it's sort of morphed as we've gone into it. We were thinking at one time about having the XIB have some mainframe capability. And again, you go look at the amount of dollars and investment that we would have to make to do that. I mean, it runs today. The ecosystem that surrounds that and all the feature functions from the host side and from our client side would just take us years to be able to put that onto the XIB. When again, you're chasing a declining market in the mainframe storage space, where you're already the dominant player. Didn't make a lot of sense. So, you know, made more sense for us to go invest in synergy with Microsoft, with VMware, with Oracle, just sort of, you know, unusual for IBM to go off. So what's next? What's the next disruption? Flash, obviously, a lot of noise there. What do we look for? Yeah, we saw, we heard discussions regarding 200 terabyte flash arrays, things like that. Well, certainly there is. We've introduced here just in the first quarter a extension of cache with inside the XIB. We call it flash cache. And that's come to market with our Gen3. We had, we just were talking to the guys from Fidelity before. And they're testing that and getting ready to break that into their environment in a production way, in a very big production way. And we will, you know, that's not like what you typically see within a storage. Arrays, use of solid state drives. It's typically a tier. It'll be a tier zero if you want to call it that. To go along with your classic 15K fiber channel SAS drives and then the near line drives. So we implemented it in a different way. Keeping with the simplicity and the architecture of XIB, we use it more like the way a server would use an extension of their cache with solid state drug devices and improving overall performance. So that's clearly a space that we're going to go target. Right now it's target on the read side. Primarily, we'll go target with the right side. You're going to see the SSDs get even bigger and stronger from that standpoint. On the DS8000 side, we're going to continue to develop EZ tier. We just announced our fourth generation of EZ tier and that's for capability of EZ tier four is encryption of all of the tiers for data at rest. So from SSD through the 15K down into the near line drives and we laid out statements of directions for EZ tier four and for fifth and sixth generation. And we talked about the flash in the direct attached storage with inside a server like a power server being managed by the EZ tier with inside the DS8000 and the SVC. It's quite powerful from that standpoint. We'll introduce very large capacity, solid state drive drawers within the DS8000 within the year as well. So the whole world's chasing that performance but more importantly chasing lowering the total cost of performance, if you will, and clearly flash optimizations a key part for our next big thing as we continue to go forward. Bob, this is great segment. I wish we had more time. We got to go. Love to have you back and continue the discussion. Thank you very much for coming on theCUBE. Congratulations with the success and good luck with the rest of the event and the rest of the year. All right, take care. Thanks for watching everybody. Keep it right there. We'll be right back after this break. Thanks, Bob. Thank you.