 Live from Las Vegas, Nevada, it's theCUBE at IBM Interconnect 2015. Brought to you by headline sponsor IBM. Okay, welcome back everyone. You're watching theCUBE live in Las Vegas for a special presentation for IBM Interconnect. This is our day two wrap up. I'm John Furrier, the founder of SiliconANGEL, my co-host. Dave Vellante, co-friend of Wikibon Research and said have special guests for our wrap up. No other than the Ray Wang. I think you're number two on the leaderboard right now. The last time I checked here in the social media lounge. Welcome back to theCUBE, great to see you. Hey thanks, I didn't even know I was on the LLL list. You're just always influential. But you are, you've been covering analysts. Always have all the inside baseball. They've been following the industry. You certainly are a road warrior like us. We always see each other. But we know we've been following your career. You've been on theCUBE many times. And at Oracle Open where we laid out what Oracle was doing, and I was saying to Dave earlier, Oracle always talks about IBM. Of all the vendors, that's the consistent company that Oracle always talks about. And IBM is looking good, right? The system Z, engineering system, mainframe, bunch of other stuff, now cloud focus. So you're seeing IBM marching on the vectors that we've seen before, more meats coming on the bone. But what's your take this year? The new show wrapped up in one, all these three shows coming into one. Are they doing it right with the show? Could it be better? What's the focus? What are you hearing on the ground from the presentations? Just what's your take so far? So we looked at it from a couple angles, right? The concept of the show's great, right? Developers, builders, infrastructure, all the ecosystem. I mean, that's what the show's really been about. It doesn't matter if it's mobile or cloud or if it's digital transformation. So I think they got that part right. I think the challenge is, where do you put 21,000 people, right? We're like shuttling back and forth, you know, like 20 minute ride over here, 20 minute ride over here. And I think that's the harder part, right? But I think when the Manila Bay gets built out, that thing that's going on back there with the construction, they'll be able to get to 21,000. Now, the interesting thing is when you talk to the people that are here, they're excited. Folks want to build, right? They're ready to move. But I think the piece that's missing is they need to know what the business strategy. What is that story? Like, what are we building towards? Why are we building? What is this transformation? It's not just the enablement. It's not just putting it in the cloud. It's not just, you know, making things collaborative. So. Yeah, so I've got to ask you. So when you look at companies that are in transition, you look for things teasing out the data, saying, hmm, is it real there? And some companies just put lipstick on the pig and saying, we got it. IBM seems to have real deep stuff going on. Can you share your perspective? Where they're strong? Where they're weak? Where they need work to be done? Because clearly they're marching down the cloud. It's just all about the cloud. End of the day, big data's part of it. So it's an internet of things. You've seen that on the radar. But this is the cloud. The engine of innovation is the cloud. Standing stuff up. What's your take? You know, they're betting on the cloud. This is the direct-to-developer model, right? This is what it's all about. How do we get directly to the folks that actually matter? But on the other hand, we're seeing some interesting things. I'm like right at the edge of NDA, but they've been hiring all these external folks in. And one of the things they don't know, like sat down with a chief digital officer, Kevin Egan today, right? There's a chief digital officer trying to figure out how to reinvent IBM on the inside so that they can serve developers. They can serve customers better. There's a new chief innovation officer. So they're bringing a lot of talent in. So there's a talent change, right? So we're seeing the transformation culture. Now the other piece that's also changing is if you think of their models in terms of what they're really building, they're going after all the high-end, high-transaction data sources. So you saw the partnership announcement that was going on with Juniper. Let's get in at the network level. We've seen the Twitter partnership, the LinkedIn partnership. Apple. Apple partnership. So they're focused on alliances. This is not go-it-alone IBM. This is let's go build an ecosystem. Let's go find people that get enterprise and let's work with them. Can there be an inside-out enterprise? That's essentially what's happening. You're seeing the openness, the community model, not just with open source directed developers. I totally agree with you, by the way, but on the business side, talk about startups. So talk about startups here. There's partnerships going on. The open marketplace in the cloud. Is that an inside-out reinvention? Are they talking about that? What's the key things that they talk about relative to that? They're still passionate around the developers. They know that's core. They know they got to work with startups. You saw the startup program that's being built out. They're building the ecosystem. They still have the startup contest. I think that's important. Can you build it inside out? I think what they're trying to do is, this is the same transition Gershner was going through during that period. It's going to take them three years to pull out of this. But you know what? On the other side, it's going to be pretty. Are you impressed with what they're doing internally? I think there's still a lot of work to do. I'd say I'd be impressed in the fact that they've made the hard cuts. They've trimmed out a lot of the fat. They did the reorganization around the cloud. They have the reorganization around the Watson Group. I mean, all these things are really designed to say, look, the future of software is not the software where you remember. We're not buying an on-prem box. We're delivering everything in the cloud. And you know what? People are buying outcomes. They're not buying products. They're not even buying services. So let's quantify this a little bit. Can we do that? We're talking about IBM with about a $25 billion business in these strategic areas. Cloud, mobile, analytics and about a $70 billion business and everything else. And that's the strategic business maybe growing 15% a year. Let's say 10 to 20%. So the big question is, and the rest of the business is declining. They got currency headwinds. So the big question is, can they sustain or even accelerate that strategic business, that $25 billion and grow it? And can it offset the cloud? 75 billion. Right, we've seen this before. I actually, you know, you mentioned the Gerson. I actually think they're in better shape than they maybe were before. I think there's more clarity now. But can they do it? Can they pull it off? You know, so here's the interesting thing. That $25 billion has to be growing at about a 40 to 50% rate for them to make that number in three years. But it's the partnerships that are going to help them accelerate that. So all these partnerships they're doing are 12 to 24 month bets. These aren't going to happen right away. But if they get them right and they're focused, they're in place for that part of the business. Can they differentiate? I mean, take the Apple partnership, for example. They talk about a lot. They talk about unique apps in the enterprise. Can other people copy that? You know, SAP, you remember McDermott a couple of years ago at Sapphires, told the story about how Steve Jobs called them. This was years ago. Yeah, he made that order for how many iPads? 20,000 or so? Right, exactly. What are you doing? We're not about the enterprise. So my question to you is, do you think they can sustain that competitive advantage? Is there a competitive advantage there? I think there is. Because I think other people woke up wondering why in the world IBM got that business to do the enterprise based on the Apple. It comes down to this. Apple really doesn't seem like they want to be in the enterprise business. But the iPad numbers are dropping like crazy on the consumer side long term because the iPhones are getting bigger. The only place that iPad growth is what? The enterprise. Great. I got to get your take on the big data pieces. When we were at the big data SVR event last weekend, Silicon Valley, Hadoop, the world was going on, Strata, Hadoop, and Cloudera announced $100 million unaudited numbers. Almost half services, some are speculating. Hortonworks had earnings today down, down only 12 million revenue for the quarter. Below expectations. Pivotal, releasing, open sourcing, the open data platform, what some are saying is resigning that sector, which we were arguing, might not be a sector at all. When you look at the big picture, what IBM's doing, you look at that, that's a feature, could be a feature of a bigger market. Do you see it that way? And because big data plays everywhere, right? So can there be a big data peer play industry? Or is that just, all that stuff is just going to be weeded out? There can be a peer play big data in the industry, but the reality is the IS and past market in the cloud is where big data needs to reside, right? And that's the challenge, right? How do you actually make that occur? And if you've got an independent silo sitting out there, and you've got all your other data consolidated somewhere else, that's okay, but I think ultimately people are going to want to start consolidating, like the way we look at that best of breed in suites. We always go through those cycles as you know, so. But if you're a customer, are you going to go with cloud air, or are you going to go with IBM? I mean, IBM services are deep and broad. So global? I think it depends on the use case, right? Are there going to be use cases where people just putting stuff up fast and quick, they're probably going to get up on cloud era first, and then it depends, right? Depends where they want to go with their services, depends what they want to do with multinational rules. It depends on highly regulated markets, what they have to do, right? So I think there's room for both, but I see the aggregation is always one. I mean, you look at Oracle, that's what they've done really well. They've aggregated services, one-stop shop, you know, IBM's in the same spot. They've aggregated services, one-stop shop, and look at their pricing models. They're based on what you bought last year. Yesterday, Doug Baylock talked about the key conversations that they want to talk about it, and want people to join, join the conversation, as we say. There was, one, drowning in data, two, consumption of customers on-prem, off-prem, and three, ecosystem. So drowning in data, I got to ask you, data lake or data ocean? What's a better metaphor for the future? I think you're right, it's data ocean. That data lake is way too small, and like we talked about data lakes becoming data swamps, those data oceans are now super fun sites. Ha ha ha ha ha ha. Ray Wang, I've always thought you were brilliant. You know, you were always one of my favorite analysts. Now your number one, Ray Wang, is going to be the number one on the leaderboard. We'll see how that happens. Ha ha ha ha. Great, thank you for that. No, but oceans are different. You talk about the tsunami of ocean. You know, the tsunamis, the currents are changing. Real time streaming. Real time, wait, pipes man. You're surfing the pipe, right? You know, it's all these things that actually happen. Hang 10. I mean, yeah. You point out though, you could drink the water in the lake. Well, lakes have streams to the ocean. So streaming, fresh water, salt water. You drink the water from the lake. Anyway, we're going over the top. So, final question. What's your take on IBM? Just in general, your advice. I'm sitting next to IBM CEO. What do you tell us? I'm the senior vice president. What's the Ray Wang advice to us IBM if I work for IBM? So back to where we were in insights. We were actually seeing the same spot about four months ago, three months ago. And I think it's the same thing, right? They are going down at transformation. And I think it's a very important transformation. We're seeing the change, the change in the people that are coming in. There's management changes. There's consolidations. There are different teams merging. And I think it's right. You're right. You're towards the cloud. Big data is still a huge part of it because that's going to be driving an insights business. I think Pitchiano, Bob Pitchiano was saying that there's an insight economy that he's trying to create. That's actually a very important thing that's actually happening because that's long tail on their business. The cloud is the entry point. The developers, they've got to go galvanize. And then in between, they got to keep the rest of the business as humming. But you see the stuff that's coming out of interactive and design. I mean, GBS has a lot of tricks up their sleeve in terms of like growth and bringing customers in. And so now the challenge is how do we fix the mix? All IT people here. Where are the business folks, right? Who are the folks coming up with strategy? And I think you'll see that in the shift. I mean, right now, you look at every presentation. It's here's the product. Here's the feature. Here's what we're trying to do. And now it's digitally enabled. I think in six months, it's going to be, here's the storyboard of what we're trying to go. Here's the design. Solutions. It's solution selling. It's talking about journeys. It's taking the design thinking, bringing it up front by the experience, by the outcome. I think that's what we're heading. Okay, so I like their whole systems of record. I buy that old school batch model inside the data warehouse. Systems of engagement, very awesome messaging. Love that's an open green field. Oracle's going for it. But what's this new thing? Systems of insight. Is that marketing or is there any meat on the bone there? So there are systems of insight being created, but I actually think the broader thing is these are systems of experiences. And those systems of experiences are becoming ultimately mass personalization at scale. And that's the generation to digital. We see it going from transactions to engagement, to experiences and outcomes, to ultimately mass personalization at scale. The insights are important, right? But the big term this year is predictive, prescriptive. Throw it all out. It's about being intention driven. Can I figure out what you're going to do next? If you go to Starbucks every day and you pick up coffee at 9 a.m. and you get the same tall black, can I get you to get a tall white? And what's the shift? And when you buy the tall white, what I really want to know is, I know you're going to buy a tall black, but can I get you to buy the tall white? Was it the time of day? Did you come at four and had to change your heart? Did you walk out of a different meeting? Was it raining outside? What was it that got you to do that? And that's where we see these intention-driven design. Well, you know, wearable computers are coming, so maybe you're hungry, a little biosensor. So, great, great, great. Thanks for coming on, appreciate it. Final, give us an update on what's going on with Constellation. What do you got going on? You always have an event, you always got some stuff going on to share. What's going on with your company that you founded? Big thing, Constellation Executive Network, where it's on fire, we're actually adding people. It's basically taking Silicon Valley insights, taking it out to the masses. Really trying to help leaders figure out what's practical. The last stuff we come up with in the valley is like pie in the sky. Really cool ideas, works well in the valley, might not work somewhere else. Second thing that's hot, we're actually focused on the digital disruption tour. So, our book is coming out, the Disrupting Digital Business from Harvard, comes out in April online, and every bookstore by May 5th, that's when the official launch is going to be. And so there's a tour going around on how people can figure out how to build disruptive business models and actually get into digital. And then the last thing is our event. So hopefully we'll see you, Constellation Connected Enterprise, Half Moon Bay Ritz, November 4th through 6th. What I love about what you do, Ray, is you bring the sexiness and the Kool-Aid from Silicon Valley, all these great concepts, and put it into use for the playbook. Everyone wants the playbook. At the end of the day, it's always good to get intoxicated on the latest trends, but they get in the playbook. Right, and it's how you actually go out, do it, roll up your sleeves and get there. I think that's important, but hey, you know. Book signing in the Cube? Yeah, we got it, yeah, we got it. We had another book launched in the Cube, Schmarzo's book, right, New York City. He just launched it, coming up. May, May, let's do it. All right, Ray Wang, as always, great insight. Thank you for coming on the Cube, really appreciate it. For the constellation research, we'll be right back on the Cube after this short break.