 Live, from Madrid, Spain, it's theCUBE. Covering HPE Discover Madrid 2017, brought to you by Hewlett Packard Enterprise. We're back in Espanol, theCUBE, the leader in live tech coverage is here covering HPE Discover Madrid day one. I'm Dave Vellante with my co-host, Peter Burris. Well, it's all coming at the focus, Peter. We've got- It actually is. It is, I mean, it better be after five or six years, but it's taken longer than I had hoped, but the story is consistent now. The last four discovers, despite the some of the distractions of spin merges and so forth, the story of hybrid IT, the intelligence edge, bringing automation is somewhat new to the data center. Services led. Strategy actually makes sense. Yeah, and we talked about at the top of the show today, the spectrum. We're running AWS re-invent, get a big presence there. Obviously, it's affected the entire industry. And then you've got HPE, the likes of HPE, Dell, EMC to a certain extent, IBM, basically not giving up, saying, wait, wait a minute, these are our customers. They want cloud on-prem. We're going to deliver to them. They want cloud in the cloud. We'll help them get there. Oracle. Oracle as well. Oracle, different strategy. We should talk about that a little bit, but summarize, synthesize your take on the day and where we're at with HPE. So I would say that the, that what we talked about this morning was when Meg first took over the reins, she stopped a whole bunch of stuff, and HPE stopped spending and behaving like a company that believed that it had to get scale as fast as possible because that was the only way to win. And she ended up going back to, look, let's focus on the customers and what the customers are trying to do and not how we're trying to leverage our assets. And it kind of took a pause. And for a while, you could kind of see them start putting things back together. And you kind of had a sense of where it was all going to go. But this has been kind of the coming out party for what the last five years have been about. And as you said, I think we've seen the three core messages that certainly line up with a little bit of caveat here. This is, their story is very much aligned with what we think the industry needs to see right now. At least our research suggests. You're going to need true private cloud, the ability to put the cloud service where your data requires and not force your business to move its data to some cloud's location. You're going to need increased automation within your IT organization because you're not going to be able to support these more complex workloads if you don't find ways to increase the productivity of the people. And even more importantly, dramatically reduce even the possibility of a failure. And that's what AI inside IT is all about. And very importantly, the idea that you've got to put more intelligence at the edge, that that interface between the real world and the digital world is really what's going to drive the dynamic in the computing industry over the next few years. And HP has shown up and it's not just talking about it, they're showing it. And that's, it's nice to be there. Well, it's interesting, Meg Whitman came by and was talking to us and we were talking about the Aruba acquisition. She said, look, we bought this because it was a nice business. You could show some growth. And it was a way to compete with Cisco and differentiate because they were trying to compete head to head with Cisco and it's going okay, but not great. Aruba gave them a clear differentiator and then all of a sudden the edge became this tailwind and it kind of got them there early. Well, let's remember what Mark Hurd talked about. He said, well, you know, why are you going after the network world? Well, I like their 67% gross margins. Okay, so- Talk about 3Com. No, he's talking about 3Com. He's talking about all the things that HP did as it tried to get into the network. Cisco, right. It was purely driven by gross margin. They didn't quite have the customer story down. Aruba has always been a great customer story. They've always said, look, this is your business challenge. Are you sick and tired of dropping your connection as you go from one conference room to another? This is your security issues. On and on and on. They had three or four concrete value propositions that just worked for customers. That acquisition at the time it happened, it happened about the same time that HP was starting to rededicate itself back to thinking about its customer base. So it's not surprising to me that that integration or that merger has been one of the more successful that HP's undertaken. So again, the spectrum. You know, you got Andy Jassy on one end who started this whole thing and you got the likes of HP on the other end. And you're right, it does align with a lot of things that we've been saying around true private cloud and so forth. Jassy doesn't buy it. Me flat out says this is old guard thinking, trying to hang on to the past. But our analysis suggests it's not just old guard thinking, it's customer thinking because they can't just move their business into the cloud. Thoughts? Totally agree. So I'd say there's a couple things about it. It's customer thinking based on the realities of the data assets that they're trying to leverage as they transform into digital business. Data is real and it has, it's going to weigh in on how your infrastructure looks and the edge is going to have characteristics. It means that you're going to have to do automation right there, right where the action is. You're not going to be able to send it up to the cloud all the time. There's going to be a lot of business events that take place in that core and that second tier. So it's not that it's old versus new guard and here's why I'd say that, Dave. It's because in many respects, we're giving some props to HP right now, which is great, but in many respects the story that HP is telling today is a story that is still being largely, has largely been told, largely fashioned by what AWS has done over the last 10 years. And that is, here's what the cloud experience is. And now HP's adding and you want that cloud experience whatever your data demands. The difference therefore between the old guard and the new guard or the old way and the new way on premise is that it used to be, it was pretty clear to me and I think it was pretty clear to us that the old, that the talk about private cloud was simply a way of thinking about how to put new marketing spin on the enhancement, upgrade, replacement cycle for servers and storage. And that had, that did not work. It just flat out didn't work. Well, it worked in the sense that it froze the market a little bit. It froze the market a little bit. Overall, for the past five or six years the growth has been slowing down pretty dramatically. So I would say that the data is pretty unassailable. You're not going to move everything to a central location. So, but you're going to want that cloud experience. And so the question is, are we going to see great cloud experience where the physics, the legality and the intellectual property governance demands that you put your data? Well, I thought Jesse Saint Laurent was going to talk about the next wave. He mentioned multi-cloud. And he's CTO of- Of SimpliVity now, HPE Hyperconversion. Right. I thought he was going to talk about, he said the next wave is Hyper-V. Okay, check. I mean, that's like to me a feature of the product. And then he sort of talked about multi-cloud. And that's really where I thought he was going to go because when you look at what AWS is doing, and I've always contended, they're years ahead. We can debate how many, five, seven, three, probably closer to five than three. But where they're headed is serverless, functional programming, stateless, new programming models. It's all about the developer to those guys. And that's the parlance that they speak in. The Hyperconverge guys all talk in VM terms. And that's not how Amazon talks or thinks. So the question is, is that the next wave? And can the enterprise guys talk to the developer? Yeah, can they catch that wave? So, you know, I think, look, let's be honest, AWS is a great company. There's no question about it. They've done things that a lot of old style infrastructure jocks thought that couldn't be done and they did it. And they continue to demonstrate that they are really engaging their customers and turning that insight knowledge into great services. So this is not a knock on AWS. But what ultimately has to, and I think AWS recognizes this as well, because they're starting to talk a lot about IoT and their approach to IoT, recognizing that not all the data is going to be sourced up in the cloud. The data is going to be generated in a lot of other places and they have to participate there as well. So from our perspective, ultimately, we would say that multicloud, the ability to naturally place your data where the data needs to be placed, which is increasingly is going to be closer to the event that needs to be automated, that needs to have that high quality experience, is going to be the way, it's going to be the dominant factor in determining the characteristics of the application infrastructure that you put in place. And we'll see what happens. Serverless, yeah, serverless is great. You can do a lot with it. But you can also still build junky applications with serverless. Microservices are great. Yeah, but you can still build junky applications. Microservices. A lot of those services aren't so micro as Neil Ray did. That's exactly right. So you can still do bad stuff in the cloud. So at the end of the day, the whole point is to get a new compact between business people who have the vision of the digital services and digital capabilities they want, IT professionals and developers who are going to generate, create that value and then infrastructure people who are not, who are allowing the data and the workload to fall where it naturally should fall and then making it possible for the industry to work together. Because that's what users want. Okay, so let me ask a question differently. We agree that the cloud guys generally, Amazon specifically, is ahead of the enterprise guys when it comes to infrastructure. Yeah, there's no question there. Okay, is the lead extending or is it dwindling? Amazon's lead? Well, so look, you have Amazon's lead, first off you have to think about Amazon's lead relative to Microsoft, Oracle and others. And they're not as far ahead as, they're not that far ahead of Microsoft. So there's a real battle raging there. Google has at least as good a relationship with a lot of developers as Amazon does. When you think about what a lot of developers are building in the cloud experience, they're using Kubernetes, so using TensorFlow. They're increasingly going to use Itzio. I mean, so it's not, it's, there's going to be increased energy being put forward to try to talk about how that cloud innovation is going to happen. So those are the three hyper cloud guys. Those are the three hyper cloud guys. And as we talked about, they increasingly are defining what the cloud experience is. I think what we're seeing now is the enterprise guys stepping back and saying, you know what? We have to define our role in the cloud experience and not presume that we're going to tell everybody what the cloud experience is. Which is what they were doing for many years and they failed out. And you can make an argument that HPE as a smaller company with less assets to encumber them, can actually deliver that through partnerships, maybe not as profitably, most definitely not as profitably, but actually can deliver that outcome for customers. Hey, we'll see. We'll see because. You can make that argument. Well, you can make that argument, but remember we're moving from and even HPE announced some stuff today with GreenLake, moving from a product orientation increasingly to a service orientation. And there's demonstration that you can do things with your business model that may allow you to do things in different levels of profitability at some where, you know, when you take more of a services approach to things. So the, I think the most important message that we can leave from today is that our observation on that notion of a spectrum from, you know, public, put it on public to a true private orientation, which is hybrid, where an on-premise play is going to be essential, that spectrum seems to be real. Number one, number two, however, it doesn't mean that AWS in particular is not going to be successful at driving the definition of the cloud experience. And number three, we're now seeing at least one company, but we're also starting to see indications of others, acknowledge that their role in all of this will be to take whatever the leaders in cloud are talking about and make it possible, that experience possible, where the data requires, and that will include on-premise. So, and I agree with you, AWS is defining that cloud experience. And so as Anna Pinzok was speaking, I just wrote down, I jotted down any sort of AWS cloud experience, which they've defined an HPE cloud experience. So I got pay-as-you-go, this sort of flex capacity, is it kind of? I mean, it's as close as you can probably get. Green Lake. Yeah, Green Lake, it's kind of. Something we all need to learn more about, but it's getting there, it's getting there. But it will never get there entirely, right? Because they're going to require you to be, by a year's worth of capacity and thresholds, you're going to have thresholds above and threshold below. Except we also heard, again, I think there's more, I don't want to, I think you're right. If you want, it's not 100% of what it is. We start throwing the balance sheet and finances in there and how you're going to do it. So we'll come back to that. So Elastic, again, kind of, you know, to a point. Integrated services, like tons of them, like thousands a year, there's some of those, but as I was saying before, HP's ecosystem play allows them to pick and choose. Yeah, but remember Dave, okay, keep going, keep going. Security, sort of, let's call it the Amazon way. Here's our security, it's good, but take it or leave it. And then the HP approach is your way, HPE. You have security your way. If that's the edict of the organization, we can map to that. One cloud versus multi-cloud. Obviously HPE's got a multi-cloud strategy, Amazon doesn't, they don't care about managing multi-clouds, they care about managing their cloud. And then services as a service, HPE can deliver that and Amazon, I got a question mark, it's their ecosystem that's delivering those services. So I guess the point is, and I'm making is, maybe it's not the exact replica of the Amazon experience, but there are attributes of it which appeal to enterprise IT. Which Amazon is really not interested in delivering. And Ergo, the assumption is, my assumption is that, that business, that on-prem business, will be here for a long, long time. Absolutely. Indefinitely. And we would agree with that. In fact, we think, ultimately, that there's going to be enough uniqueness about how businesses use their data and treat their data, that we expect to see this notion of true private cloud actually be a bigger, overall piece of the marketplace, than the one size fits all, with a degree of customization possible that Amazon's providing. But again, this is, we have to be careful here. Because as analysts, we're kind of naturally falling into this trap of setting up AWS and HP or any of these folks in opposition. There are companies that have very, very different opposed visions of how this is going to play out. Specifically, we can talk about Amazon saying, it's all going to be IAAS, and we're going to put pass in there. And then, you know, increasingly obviously, Microsoft and Oracle saying, oh no, we're going to have application clouds. You're going to buy an application cloud, and you're going to do a whole bunch of stuff in that. What we see today is not in opposition to the AWS vision. It's not. It is a, okay, great. But for this type of work, for this type of data, this type of workload, this type of reality, chances are you're going to need to put this type of stuff here, and have it fit into the overall motion of cloud experience. And it doesn't have to be a complete substitute. It just has to work for that class of workload. But bringing it back to HP and then we're going to wrap is, HPE does not have an application cloud. They don't. And as a result, it's going to be in a knife fight with Amazon, with Dell EMC, and with China. It's going to be in a knife fight with companies that are like it. China, you know, Huawei, Dell EMC, Cisco. You're right, you're right. Amazon's setting the pricing tone and the business model tone. Look, right now it's Amazon and Microsoft are helping to set the stage of what this is all going to look like. So again, bottom line is, you know, it's not a 60% gross margin company, Mark Herd's vision of going to compete with Cisco. It's a 25 to 32%. It's really focused on customer problems. It's focused on customer problems. It throws off a couple billion dollars of cash. It can eke out a little bit of growth. That's what it is. Not a bad business. No, it's a great business actually. All right, Pete, thanks for the wrap on day one. We'll be back tomorrow, 8.30 AM local time, right? Roughly, 8.45 local time. Check out thecube.net where you'll see this show. You'll see the other shows that we're doing, including, you know, Reinvent, John Furrier and the crew are over there today. That's a wrap for day one. This is theCUBE. We'll see you tomorrow.