 Live from Las Vegas, it's theCUBE. Covering VMworld 2017, brought to you by VMware and it's ecosystem partner. Hey, welcome back to day two of VMworld 2017, theCUBE's continuing coverage. I'm Lisa Martin with my co-host Dave Vellante and we have kind of a CUBE mafia going on here. We have Eric Herzog, the sumo of IBM Storage back with us and we also have Steve Keniston, another CUBE alumni, Global Spectrum Software Business Development Executive at IBM, welcome guys. Thank you. Thank you, great to be here. So, lots of stuff going on, IBM Storage Business Health. First question Steve, do you, what's going on there? Tell us about that. What's going on in IBM Storage? Yes. All kinds of great things. I mean, first of all, I think we were walking the show floor just talking about how VMworld used to be a storage show and then it wasn't for a long time. Now you're walking around there, you see all kinds of storage. Now IBM really stepping up its game. We've got two booths we're talking all about. Not just the technology's cognitive, IoT, that sort of thing, but also where do those bits and bytes live? That's your assets. You got to store that information someplace and then you got to protect that information and we're showcasing all kinds of solutions on the show floor, including versus stack and that sort of thing where you make your copies of your data, store your data, reissue your data, protect your data, it's a great show. Go ahead. Please, so I want to get into it, right? I mean, we've watched the evolution, this is our eighth year doing theCUBE at VMworld and doing theCUBE in general, but to see the evolution of this ecosystem and this community, you're right, it was storage world. And part of the reason was, and you know this well, Eric, it was such a problem. You know, and all the APIs that VMware released to really solve that storage problem, Flash obviously has changed the game a little bit, but I want to talk about data protection and generally backup specifically. Steve, you and I have talked over the years about the ascendancy of VMware coincided with a reduction in the physical capacity that was allocated to applications like backup. That was a real problem. So the industry had to re-architect its backup. And the companies like Veeam exploded on the scene, simplicity was the theme. And now we're seeing sort of a similar sea change around cloud. So what's your perspective on that sort of journey and the evolution of data protection and where we are today, especially in the context of cloud? Yeah, I think there's been a couple big trends. I think you talked about it correctly, Dave, from the standpoint of when you think about your data protection capacity being 4X at a minimum, greater than your primary storage capacity, the next thing you start understanding is, now with the growth in data, I need to be able to leverage and use that data. The number one thing, the number one driver to putting data in the cloud is data protection, right? And then it's now, how can I reuse that data that's in the cloud? And you look at things like AWS and that sort of thing, the ability to spin up applications. And now what I need to do is I need to connect to it, the data, to be able to run those applications and if I'm going to do a test development environment, if I'm going to run an analytics reporter, I'm going to do something, I want to connect to my data. So we have solutions that help you promote that data into the cloud, leverage that data and take advantage of that data. And it's just continually growing and continually shifting. So you guys are really leaning into Veeam world this year. You've got a big presence, what's going on there? You know, one would think, okay, you know, VMware, it's clearly grabbing a big piece of the market. You got them doing more storage. What's going on, Eric? Is it just, hey, we're a good partner. Hey, we're not going to let them elbow us out. We're going to be competitive with the Evil Machine Company. What's the dynamic in the VMware ecosystem with you guys? Well, I think the big thing for us is IBM has had a powerful partnership with VMware since day one. Way back when IBM used to have the Intel server division. Everything was worked with VMware, been a VMware partner years and years ago in the server world. As that division transferred away to Lenovo, the storage division became front and center. So all kinds of integration with our all flash arrays, our versus stack, which we do jointly with Cisco and VMware providing a converged infrastructure solution. The products that Steve's team's just brought out, Spectrum Tech Plus installs in 30 minutes. Recovers instantly off of a VM. Can handle multiple VMs. Can recover VMs or files. Can be used to back up hundreds and thousands of virtual machines if that's what you've got in your infrastructure. So the world has gone virtual in cloud. IBM is there with virtual in cloud. You need to move data out to IBM cloud or to Amazon or Azure. Spectrum Tech Plus, Spectrum Scale, Spectrum Virtualize, all members of our software family and the arrays that they ship on all can transparently move data to a cloud, move it back and forth at the blink of an eye. With VMware, you need that same sort of level of integration. We've had it on the array side. We've now brought that out with Spectrum Protect Plus to make sure that backup, in fact, Spectrum Protect Plus is so easily, even me with my master's degree in Chinese history can back up and protect my data in a VMware environment. It's designed to be used by the VMware admin or the app owner, not by the backup guy or the storage admin. Not that they won't love it too, but it's designed for the guys who don't know much about storage. I'll tell you Dave, I saw it. I watched him get a demo and then I watched him turn around and present it. It was impressive. I want to ask you a quick question. Long time partners, IBM and VMware, as you've just said, you're an EMC guy. It's where I first met you. From a marketing and a positioning perspective, what have you guys done in the last year since the combination has completed to continue to differentiate the IBM VMware strengths as now VMware's part of Dell EMC? So I think the key thing is VMware always has been the Switzerland of the storage business. When I was at EMC, we owned 81% of the company and you walked into Palo Alto and Pat Gelsinger who I used to work for at EMC is now the CEO of VMware. You walk into the data center and there's IBM arrays, EMC arrays, HP arrays, Dell arrays, NetApp arrays and a bunch of all small guys. So the good thing is they've always been the Switzerland of the storage industry. IBM because of its old history and the server industry has always had tight integration with them and we've just made sure we've done it. I think the key difference we've done is it's all about the data. CEO, CIO, they hate talking about storage, it's all about the data and that's what we're doing, Spectrum Protect Plus is all about keeping the data safe, protected and as Steve talked about using in the cloud, using real data sets for test and dev for DevOps, that's unique, not everyone's doing that. We're one of the few guys that do that. It's all about the data and you sell the storage as a foundation of that data. Well, I mean IBM's always been good about not selling speeds and feeds but selling at the boardroom level, the C level, I mean your IBM, I mean that's your brand. Having said that, there's a lot of knife fights going on tactically in the business and you guys are knife fighters. I know you both, you both start up guys, you're not afraid to get down and dirty. So Steve, how do you address the skepticism that somebody might have and say, all right, I hear you, this all sounds great but I need simplicity. You guys, you talk simplicity, your Chinese history background but I'm still skeptical. What can you tell me, proof points, share with us to convince us that you really are from a simplicity standpoint competitive with the pack? I think you've seen a pretty big transformation over the last 18 months with some of the stuff that we've done with the software portfolio. So a lot of folks can talk a good game about a software defined strategy. The fact that we put the entire spectrum suite now under one portfolio, now things are starting to really gel and come together. We've done things like interesting Skunkworks project with Spectrum Protect Plus and now we even had business partners in our booth who are backup architects talking about the solution who sell everybody else's solution on the floor saying, I can't believe it, I can't believe this is IBM. They're putting together solutions that are just unbelievably easy to use. They need that and I think you're exactly right Dave. It used to be where you have a lot of technical technicians in the field and people wanted to architect things and put things together. Those days are gone, right? So now what you're finding is the younger generation coming in, they're iPhone type people, they want clicks, simplicity, just want to use it, that sort of thing. We've started to recognize that and we've had to build that into our product. We are a humbler IBM now. We are listening to our business partners. We are asking them, what do we need to be doing to help you be successful in the field? Not just from a product set but also a selling, you know, a selling motion. The spectrum suite, all the products under one thing, now working and interoperating together, the ability to buy them more easily, the ability to leverage them, use them, put it in a sandbox, test it out, not get charged for it. Okay, I like it, now I want to deploy it. We've really made it a lot easier to consume technology in a much easier way, right? Software defined and we're making the products easier to use. How have you been able to achieve that transformation? Is it cultural? Is it somebody came down and said, you thou shalt simplify? I mean you've been there a couple years now. Yeah, so I think the real thing is IBM has brought into the division a bunch of people from outside the division. So Ed Walsh, our general manager who's going to be on shortly, five startups. Steve, five startups. Me, seven startups. Our new VP of offering manager in the solution set, not only NetApp, four startups. Our new VP of North American sales, HDS three startups. So we've brought in a bunch of guys who, A, used to work at the big competition, EMC, NetApp, Hitachi, et cetera. And we've also brought in a bunch of people who are startup guys who are used to turning on a dime, it's all about ease of use, it's all about simplicity, it's all about automation. So between the infusion of this intellectual capital from a number of us who have been outside the company, particularly in the startup world, and the incredible technical depth of IBM's storage teams and our test teams and all the other teams that we leverage, we just sort of pointed them in the direction like, it needs to be installed in 30 minutes. Well guess what, they knew how to do that 30 years ago. They just never did because they were stuck in the IBM silo if you will, and now the big model we have at IBM is outside in, not inside out, outside in. And the engineering teams have responded to that and made things that are easy to use, incredibly automated, work with everyone's gear, not just ours, there's other guys that sell storage software. But other than in the protection space, all the other guys, it only works with EMC or it only works with NetApp or it only works with HP. Our software works with everyone's stuff, including every one of our major competitors, and we're fine with that. So that's come from this infusion and combination of the incredible technical depth in DNA of IBM with a bunch of group of people, about 10 of us, who've all come either A from the big competitors, but also from a bunch of startups. And we've just merged that over the last two years into something that's forged an incredibly powerful, we are now the number one storage software company in the world, and in overall storage, both systems and software, we're number two. So where's that data? Is that IDC data? That's the IDC data. And what do they, when they count that, what are they counting? Are they sort of eliminating any hardware associated with it? Storage systems would be external systems, our all flash arrays, that's all on the system side, software is purely software only. Right, so no appliances, the value of those licenses associated with that. Well as our CFO pointed out in the, so if you take a look at our track record in the last, in the beginning of this year, we grew 7% in Q1, one of the only storage companies to grow, certainly of the majors. We grew 8% in Q2, again one of the only storage companies to grow of the major players. And as our CFO pointed out in his call in Q2, over 40% of the division's revenue is stored software, not full systems, just standalone software, particularly with the strength of the suite and all the things we're doing to make it easy to use, install in 30 minutes and have a mastery in Chinese history be able to protect his data and never lose it. So that's what we want to be able to do. Okay, so that's a license model and is it a, is it a, is it a ratable model? Or is it a sort of a perpetual model? What is it? We've got both depending on the solution. We have cloud engagement models. We can consume it in the cloud. We've got some guys who are traditionalists, give me an ELA, you know, enterprise license agreement. Whatever they want, basically. So we, we're the pasta guys. We have the best pasta in the world. Do you want red sauce, white sauce or pesto? Dave, I said that because you're poor Italian, I'm half Italian on my mother's side. I like Italian. So we have the best pasta. Whatever the right sauce is for you, we deliver the best pasta on the planet. In our case, the best storage software on the planet. You heard, you heard Michael up there on stage today. Don't worry about it. He was invoking his best Italian. I have an affinity for that. So, so Steve, this is your second stint at IBM. Ed's second stint. I am very intrigued that Doug Baylog has now moved over, there's a little inside baseball here, but running sales again. Right. So that's unique actually to see, I have a guy who used to run storage, leave, go be the general manager of the power systems division and open power and then come back to drive storage sales. So you're seeing, it's like a little gravity action, guys sort of coming back in. What's going on from your perspective? Well, I think Eric said it best. We've done an outside in, we've been bringing a lot of people in and I think that the development team, and I wanted to bounce off of what Eric had said, was they always knew how to do it. It's just, they needed to see and understand the motivation behind why they wanted to do it or why they needed to do it. And now they're seeing these people come in and talk about in a very caring way, this is how the world is changing and they believe it. And they know how to do it and they're getting excited. So now there's a lot more what people might think, oh, I'm just going to go develop my code and go home and whatever. They're not, they're excited. They want to build new products. They want to make these things interoperate together. They're passionate about hearing from the customer. They're passionate about, tell me what I can do to make it better. And all of those things, when one group hears something that's going on to make something bad, they want to do the same thing, right? So it's really, it's breathing good energy into the storage division, I think. So question for you guys on that front, you talked about Eric, we don't leave his storage anymore, right? The sea levels don't care about that. But you've just talked about two very strong quarters in storage revenue perspective. What's driving that? Or what's dragging that? Is it data protection? What are some of the other business level drivers that are bringing that storage sale along? So for us, it's been a couple of things. So when you look at just the pure product perspective, the growth has been around our all flash arrays. We have a broad portfolio. We have very cost effective stuff. We have stuff for the mainframe, we have super high performance stuff. We have stuff for big data analytic workloads. So again, there isn't one flash. There's a couple startups that started with one flash and that's all they had. We think it's the right flash tool for the right job. It's all about data applications, workloads and use case. Big data analytics is not the same as your Oracle database to do your ERP system or your logistics system if you're someone like a Walmart. You need a different type of flash for that. We tune everything to that. So flash has been a growth engine for us. The other has been software defined storage. The fact that we sweeted it up, we have the broadest software portfolio in the industry. We have block, we have file, we have object, we have backup, we have archive, we've got management plane, we've got that. And by packaging into a suite, I hate to say we stole it from the old Microsoft office, but we did. And for the end user base, it's up to a 40% discount. I'm old enough to remember the days of the computer store. I think Dave might have gone to a computer store once or twice too. And there it was, Microsoft Office at iLevel for $9.99, Excel, PowerPoint, and Word above it at $4.99. Which would you buy? So we've got the Spectrum suite up to a 40% savings and we let the users use all of the software for free in their dev environments at no charge and it's not a timeout version, it's not a light version. It is a full version of the software. So you could try a full thing out for free and then at the suite level you save up to 40%. What's not to like? And I think I just wanted to compliment that too. I think to also answer the question is, one of the things we've done, so we've talked about development really growing, getting excited and wanting to build things. The other thing that's also happening is at the field level, we've stopped talking speeds and feeds like directly, right? And so it has become this higher level conversation and now IBMers who go and sell things like cognitive and IoT and that sort of thing, they're now wanting to bring us in because we're not talking about the feeds and speeds and screwing up like how they like to sell. We're talking about, Ginny will come out and say, data is your most valuable asset in your company. And we say, okay, I got to store those bits and bytes someplace, right? We provide that mechanism, we provide it in a multitude of different ways and we want to compliment what they're doing. So now when I put presentations together to help the sales field, I talk about storage in a way that is more, how does it help cognitive? How does it help IoT? How does it help test and dev? And by the way, there's a suite, it's storing it, it's using it, it's protecting it, it's all of those things. And now it's complimenting their selling motion. Well, both the passion and the energy coming from both of you is very palpable. So thank you for sticking around, Eric and Steve, for coming back to theCUBE and sharing all the exciting things that are going on at IBM. That energy is definitely electric. So wish you guys the best of luck on the next day or so of the show. And again, thank you for spending some time with us this afternoon. Thanks for having us. Thanks for having us. Absolutely. For my co-host, Dave Vellante, I'm Lisa Martin. You're watching theCUBE's live continuing coverage of the Emerald 2017 day two. Stick around, we'll be right back.