 InterConnect 2016, brought to you by IBM. Now your host, John Furrier and Dave Vellante. Hello everyone, welcome to IBM InterConnect. This is theCUBE's flagship program. We go out to the events and extract the signal from noise. I'm John Furrier, my co-host Dave Vellante here for three days of wall-to-wall coverage in Las Vegas for IBM InterConnect 2016. It's our fifth year covering IBM's InterConnect kind of event. It's more of, but now this is the cloud show. Dave Vellante with all the analysis. I'm John Furrier at Silicon Angle. Dave, obviously the founder of Wikibon, bringing you all the action here. Day one kickoff for IBM InterConnect. Dave, a lot of action going on on stage. Certainly we saw all about cloud. This is IBM's cloud show, but it's not dominated heavily by cloud. It has security. They're talking about mobile. Mobile World Congress is going on where you can see virtual reality and Mark Zuckerberg announcing all that stuff. So in context to all this, you have a user experience explosion and what's happening is now the cloud is dominating the conversation. So the narrative with Robert LeBlanc on stage here at IBM really sets the tone. So what did you see? Share with the folks your view on what happened today on stage. Well, John, there were over 20,000 people in attendance now here at IBM InterConnect. The number could go as high as 25,000, I was told by some of the cab drivers coming in. I saw something that I don't think I've ever seen, John, at a technology conference before. That is three customers kicked off the event. So you had Alphamodus, you had Siemens, you had a bank from Australia and their key technology leaders were up there introducing the show. That was different. I mean, the message, of course, was this is all about you, the customer, it's all about customer content. It was different, like a little bit awkward, I thought. I don't know what we should take on it. Well, first of all, I love practitioners when they're on stage like that because one, it shows the value. If IBM can lead a conference with their customers showing their stories, to me that ultimately is great content. But they're kind of fumbling through it a little bit. It's like, okay, they're probably not used to doing the headline keynotes, but I thought it was authentic and it looked awkward in the sense that it wasn't a scripted conversation. I thought Karl Eschenbach and Robert LeBlanc's exchange on the VMWare was definitely scripted. It was almost back and forth, like, what are you hearing from your customers? That was totally scripted. And certainly that was the big announcement that was staged up. But to me, the big story here is the announcements in the cloud, the cloud announcements are so significant for IBM. Robert LeBlanc didn't even have enough time on stage to do justice on the announcements. So a ton of activity going on with Bluemix, some of the technology advancements. Clearly it's a cloud show. He got the plug in for the hybrid cloud that they're all in. He also weaved in the kind of nuanced future of digital transmission. And that is their video strategy. I thought one of the gems of the keynote was LeBlanc highlighting the video concept around their clear acquisition. They have, you know, Cleversafe, they got Ustream. And what IBM is building is a digital transmission in the cloud. And that is something that they haven't fully announced, but certainly where they're going with that is that every single transmission, whether it's a sports event or a cube event like this, will be transmitted on the internet. And right now the leaders in this area are Major League Baseball Advanced Media Unit and companies like that, but they still can't even hold the throughput levels on the concurrence that they need. So you're looking at the Super Bowl doing 50 million concurrent streams. You're talking about digital assets that will be transmitted. So LeBlanc said that the cloud is no longer about cheap storage and compute. It's about business value. Now I thought that was an interesting statement. I thought it was a little bit of a slight toward, you know, Amazon Web Services, which is certainly known for cheap storage and compute. You had a great comment on Twitter. What's wrong with cheap storage and compute? Give me more of that every day. I'll take more storage and compute all day long. I mean, strategy is not to go, you know, head to head banging heads on cheap storage and compute. It's to really drive new innovation, new business value. So you've seen some amazing acquisitions that IBM has made over the last, you know, several months even. You know, the weather company. You're talking about a file transfer company. You're talking about Cleversafe for object storage. You're talking about Ustream. You're talking about a content distribution network. IBM is building out a media platform, essentially, on top of its cloud. That is a unique strategy. Now, some of the moves, Miro, some of what Amazon has done, but IBM's taking it to another level. And then there's also a big data component. So while this is a cloud show, it's about cloud, it's about data, it's about mobile. There's certainly a social angle in here. All those pieces coming together in the cloud is the transport that enables businesses to exploit those services. Yeah, I mean, I thought the cheap compute comment by LeBlanc was a shot at Amazon. The word cheap is a relevant, is an interesting term. He didn't say inexpensive compute. Inexpensive is a great term. That means low cost or zero cost. Cheap implies quality. It implies some sort of SLA-like impact. But I think that's just their dig at Amazon. Amazon, I would argue, loves notion of inexpensive compute and will bring that all day long and commoditize the infrastructure layer. So there's no doubt IBM's conceiving the commoditization. And by the way. What's their play? I mean, I want to get your take on that. Assuming commoditization at an inexpensive or hardware level, okay? You're then looking at blue mix and look at competitive shifting over things with weather data. You've got, IBM's taking a different approach. What is IBM doing differently in your mind? Well, I think IBM's of the realization that from a volume standpoint, it really is not today anyway in a position to compete head on with Amazon. Amazon, as you know, it's growing at 70% a year to $8 billion last year. And it's last quarter, John, Amazon at 29% operating margin. That's much, much higher than a company like EMC, who's known for high margin hardware. And so rather than try to compete on that basis of cheap commodity hardware, IBM has to have differentiation, you know, above the stack, as we like to say. And so what they're doing is the number of announcements that they made today. You remember when Blue Mix first came out. We were at this event and it was a lot of, okay, we got this thing called Blue Mix, it's this middleware layer. We noted that it was sort of a web spear-like playbook for the cloud. But IBM very clearly didn't have, you know, a critical mass of developers. Now they're talking about 20,000 developers signing up per week. IBM is driving new services. So today we saw a VMware partnership announcement. That essentially to me, John, is an on-ramp to the soft-layer cloud. New connectors to apps and data. New cloud-based blockchain. You're seeing all kinds of services. So you're seeing an AWS flywheel-like effect, what I called on Twitter, critical mass. People say, ah, critical mass, not really. It's becoming a critical mass and very rapid innovation of new services. Largely driven in part anyway by the acquisitions that they've made, but also a lot of internal organic development. So here's the keyword summary of the keynote. Try to break down the keynote. I would share the following. Cheap compute, VMware, open technologies, video, digital assets, and Apple. And I think that pretty much encapsulates their main theme, Dave. And I want to get your thoughts on the impact. Obviously, cheap compute we just talked about. VMware essentially solidifies as the enterprise. Don't lose your investment. That holds down the fort, if you will, in this digital transformation for enterprise and IBM's customers. Certainly a great win for VMware. 14-year relationship. IBM solidifies that and essentially holds the fort down so enterprises don't really get worried. The video piece, really my comment, I created a new term on Twitter around this, around IBM's strategy, is IBM wants to digitize everything. And that is something that digitizing everything for their customer base includes completely rethinking how they do their websites, to how they do business, social business, whatever you want to call it, data. So digitizing everything is a whole new normal that's going to be coming down the pike. But the Apple presence on stage was really compelling to me. One, the fact that Swift programming language has got so much traction to be able to build native apps. The fact that Apple is on stage with IBM is a real testament to IBM's strategy. But two things that came out of the Apple comment, Dave, I want to get your thoughts on. He said, Swift makes it easier to program millions and millions of apps. And then he said something, take advantage of the hardware. His argument for building native apps, of course, that's Apple's rhetoric, take advantage of the iPhone and the iPad and Apple hardware and Mac OS and all that stuff. So that sounds like Oracle. It does sound like Oracle, that's true. So taking advantage of the hardware, if IBM doesn't have the hardware, what is the hardware, is it power? I mean, what's your take on all this? Okay, well, so a couple of things. One is that IBM is the number one Swift developer. That's what we heard today, that they've developed 100 applications for iOS. And those are unique applications. So that's a big commitment, obviously. IBM, Jettison, it's x86 business. So a partnership with VMware brings that base of users, those x86 users closer to IBM. It has to do things like that on a virtual basis. That whole notion of hardware and software engineered together that Oracle likes to talk about. IBM has some of that where it puts its hardware in the cloud like it's doing with power. But because it's really moving its hardware into a software-defined world, it can't take that strategy. So what does it have to do? Look what IBM's doing with its media platform play. It buys ClearLeap, a content distribution network. Aspera, which is a file transfer network. Cleversafe, which is object store services. Ustream, which is video. So they're building a complete end-to-end video capability all available as services within the software cloud as part of Bluemix. Now what you said, I think, is right on. It's all about the digital transformation. Essentially what IBM's doing, in my opinion, John, is they're helping their customers build digital assets. That's what they're doing. And they're building an entire stack in order to facilitate the building of digital assets, which is what people mean when they talk about transforming their organization to digital. I 100% agree with that. You're right on that point there. Digital asset creation or digitizing everything as the future mandate for enterprises is clearly happening. But what does that mean for the customer? It means that they have to do things differently. New way to work, whatever the slogan this IBM has, I think it's spot on. That means the ecosystem for developers to go out and actually do that as critical. And I think the undertone of the Apple keynote with IBM is IBM's huge opportunity to win the developer community because someone actually has to build the date. So to me, the developer opportunity, having open technologies, whether it's blockchain, a lot of APIs from BlueMix, get the software commodity stuff over there as well, but you got all that stuff. Yeah, I throw Watson in there, a little differentiation. Really the developers are the unsung heroes. Those are the folks that enabled Apple to be successful. Brian Kroll pointed that out on stage, that 100 billion downloads of Apple success is due directly to the fact of things like Xcode and the developer community. So IBM plays it right. They could really kick some butt on the marketplace by enabling developers in the enterprise to do the transformation journey with the solutions. Right, so it's infrastructure is code, right? That's the play, DevOps, because they got to do it fast and iterate, and then services to create digital assets. So IBM is essentially plugging into that digital fabric. We like to use that term sometimes so that organizations, industries can transform to digital and build on top of that digital fabric. IBM is going to be a player, both horizontally, you're seeing that with technology and also it's becoming more vertically integrated in places like healthcare. Well, we're doing our share of digital assets by pumping out as much confidence as we can. We'll be here for three days here in Las Vegas. 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