 Live from San Francisco, California, it's theCUBE at VMworld 2014, brought to you by VMware. Cisco, EMC, HP, and Nutanix. Okay, welcome back everyone. We are live in San Francisco. This is theCUBE, our flagship program. We go out to the events, extract the signal from the noise. I'm John Furrier with Dave Vellante, our next guest, Mike Kaler. COO, EMC, professional services. Great to have you on theCUBE again. Welcome back. Happy to be here, thank you, thank you. Love getting the customer perspective. First of all, as the senior executive at EMC Services, we know business is good because every single person we talk to in the services business, whether it's management consulting firm or large-scale tier one global vendor like EMC, is taking ass. Business is good. Customers are moving to the cloud. Hybrid cloud is the destination. It's the final resting stop really for this new IT model. So I got to ask you, what's the state of the union for services confirm is business good? And what kinds of things are the customers thinking about? Yeah, absolutely. So first and foremost, the macro trends are continuing. Whether it's big data or social media coming in, this rate of change of technology and innovations happening faster and faster. And especially in the large customer segments that I spend my time in, they're struggling to keep up. So this notion of the hybrid cloud continues to gain momentum. And the hybrid cloud is really more about the notion of some of your services are going to be internal within the IT organization and some of your services are going to be brokered out to lots of third parties and lots of innovation. And that notion of the hybrid cloud, we're spending a lot of time with our customers on what is my journey? What is my specific journey? Because we're all starting from a different place. Every day, we always say the fruit and the blender, our new fruit gets dropped in and changes color today, it's containerization. That really speaks to the application tsunami coming on with this new breed of DevOps developers. Certainly, you guys have been involved in orchestration, dealing with cloud, but now containerization, interoperability comes to bear. So that is the holy grail conversation many people want. I want cloud, I want low cost, buy by the drink, I want adaptive, I want flexible, but I want it to work across multiple vendors. Where are we with this? Is it still early days? Give us a sense of where that market is right now. I think it is still early days. A lot of customers I spend time with are still working on the private side of that, the private side of the cloud to say, I've just got to get my technology organization up to the innovation and speed my customers are expecting. And beyond that, everybody's got their eye towards and how do I start to get to the brokerage model and how do I start to take advantage of lots of third party services? But until you get the house cleaned up inside, it's really difficult to put a composite model together and maintain security and consistency and the ability to move workloads across the boundaries of corporations. We were talking with a startup earlier, Data Gravity, which is a brand new launch startup, and she said, you know, Paula Long. We're a vaccine, not a vitamin or a aspirin. And you mentioned getting the house cleaned. What specifically do customers are doing to take care of business in that area? Is it the house, is the room on fire? Are they rearranging furniture? Are they ripping and replacing? What is that cleaning the house mean? It's so, there's not one answer to it, but so we've really spent a lot of time on our services. So back to your question is, how service is doing? It continues to accelerate because everybody's at a different place. We're really trying to wrap our services around meeting our customer where they are. So you've got some customers they're just fundamentally undecided on. Is cloud good? Is it right? And because, and then when you really look at that, it's because they don't really have a vision of what it should be. So they're struggling with old types of IT infrastructure and organizations and what is the new model for them. So we meet them at the kind of the undecided phase and help them build an IT strategy. What does IT as a service look like? There's another set that say I get where it needs to go, but I'm motivated, but I'm not sure I have a business case yet that allows me to go spend the money with the way I need to spend the money. So we actually wrap a set of services around looking at the applications, looking at workload placement and where, what's the art of the possible? So they can get a business case built around it. And then there's a third category that says, look, I know the vision. I am absolutely motivated and I have a business case. Hey EMC come help me with actually getting to this notion of the hybrid cloud. And that's full tell, how do I stand up a new instance of a hybrid cloud? Or in particular, a private cloud, but then that journey as we just talked about to the integration with a third party service providers. Mike, are customers deliberately changing their organization to accommodate this sort of new world? Or is it just sort of happening as an evolution? So I'll give you the, customers ask us a lot of, when you work with it, what differentiates the great success from just okay success? And it actually is all around the organizational model. The ones that aren't necessarily moving fast enough are the ones that say, I'm going to take my current organization. I'm going to allow them to take the notion of let's go build the cloud along with their other daily tasks. So something fundamentally never changes because everybody's organized and built the same way they were previously. Customers that are doing it more successfully are the ones that are really saying, I'm going to carve off a part of the organization. I'm going to retrain, retitle, retool that part of the organization and go build it. And so then there becomes a migration of certainly the capability and technology into the new world, but also the people. So they can see what a new job description looks like. They can see what the new skill sets. And that's the ones we've seen be the most successful is when they've made that change. Yeah, because, you know, in observing EMC services of yesterday, the services were designed to sell hardware. And that's the way it was. And you guys have completely transformed the services organization. And if you look at the services business, I mean, outsourcing had its day, but people realized, you know, this whole my mess for less really wasn't a long-term solution. So specifically how is EMC helping organizations, you know, transform business models, not just sort of technology models, but business models? Yeah, I think that's right. So when we look more, when we really engage with a customer on the business model transformation, it is exactly what it says. It's a business led discussion. So we actually get away, our consulting organization actually gets away from talking about technologies. It really is talking about how a CIO and an IT organization delivers real business value from IT as a service, or you move up stack to platform as a service. And where the real business value comes is the application. So you got to put a lot of infrastructure in place. In today's world, it's, you know, enterprise hybrid cloud, but it's really that application transformation and taking advantage of the new ways, the new models of IT in a cloud world. So we were talking off camera about one of the interviews we did last week at a conference two weeks ago, actually, and the CEO of this large, well, there's Phillips. I mean, it's all public, right? The CEO said 85% of our IT spend is undifferentiated. So we're going cloud. Everything we're doing is going to be a consumption based model, which is, you know, an astounding reality. I mean, for the CEO to put that forward. Now, having said that, I mean, executives are looking for operating leverage. So when you hear things like hybrid cloud and you compare it to what's going on with public cloud, are in your view, are companies thinking about how they can get sort of operating leverage, marginal cost, you know, down at volume relative to what's going on in, say, the public cloud? And are they going to be able to achieve that with their so-called hybrid clouds? They are. And again, it starts with, you know, the public, let's just take the public, or excuse me, the private side of it. No longer should IT organizations be thinking about how they integrate technology, integrate servers, and storage. I mean, it is shown up as hyper-converged infrastructure. And what that allows IT organizations to do is take all of that traditional systems engineering work and integration investments they've made and repurpose it, repurpose it up into the application. So the notion of hyper-converged infrastructure is one of the, to get leverage on your IT cost. Second part of that is virtualization, right? So that next layer of how do I take all those things physical and get them virtualized? And then, you know, around that, you start to get the automation and orchestration. And that's really where the key, you get a lot of leverage on your traditional IT assets. So the services business change is then concomitant to that because you're not just charging for sort of undifferentiated provisioning, right? So, you know, services is such a complex industry. There's still so many opportunities for services. So I wonder if you could talk from a strategy standpoint of how you guys are approaching that? Because a lot of the outsourcing guys, they may be going through some pain, they are going through some pain. Yeah, they are going through some pain. And so, how do you guys look at the opportunity? Yeah, I mean, we really are trying to take, you know, separate ourselves from what outsourcers do. That's just not what we do. We really are engaging with customers on IT transformation as a journey. And, you know, not one size fits all. So this is the, add the complexity of what is services today and what will it be in the future. But really engaging with a customer almost one by one. And again, examples would be meeting customers where they are in the life cycle and helping them on the journey with the overall transformation, but not technology. It is the people side of this. We've said this before here. It's people, processes, and technology. And that continues to remain to be true. The nouns and verbs are a bit different, but it's certainly the same three elements. Well, and carrying through that people, the three, the two P's and the T, is the technology is always, they say, the easy part. It's the people and processes, the hard part. Okay, great. And then, but then your Joe Tucci says, we're a technology company. We will not compete with our partners from a services standpoint. So, but there's a big opportunity there. So, but for the, I mean, for us, and that opportunity, Joe's been very clear with me, right? It's, we build a lot of great intellectual property. We want our partners to actually go take that and actually go scale far beyond what we would go do as a services organization. So I've kind of been tasked with, how do you first get alignment against a technology company? And what are the services that really help customers adopt and implement our technology? But that's for us direct, but more importantly, the prize is, is to get it into the industry and get it into partners where they take the intellectual property and they actually, you know, execute it on our behalf. So as a services professional, you sometimes get frustrated with that and say, well, can we get out? Or is it sort of an interesting challenge? It's the new interesting side of it because, you know, I've come, I've grown up in services all my life. And if you get to a certain size and scale, and it's a huge treadmill that sometimes you get your eye off the ball of innovation by having to just focus on making the P&L. And so you start saying yes to everything, services, and that takes you down to a dilutive path. And this keeps us very narrowly focused on what do we want to be great at and what do we want our partner ecosystem to be great at? So complete that thought. What do you want to be great at and where do the partner ecosystem pick up? Yeah, so, I mean, so we want to be great as the innovative thought leaders in the technology from a services angle wrapping more and more, you know, any of our products, any of our technology is a services led discussion. It's a sale, it's a services led sale. It's no longer you just buy a box that shows up and you plug it in and life's good. So when you look at the path of services in EMC, it's getting more and more to the core. We've got a major sales transformation going on and it's all about consultative led selling. So for us, that's the vision around how do we think about engaging with our customers? Where we get to ecosystems is we will never, CEO directive is, we don't want to be all things to all people. We don't want to be 200,000 people in services and we want to have a partner front of the ecosystem. So my job is to take that intellectual property and ensure it's packaged in a way that we can take it to third party service providers and SI's around the world and have them go grow their own practices around our intellectual property. Yeah, that's exactly what I was going to just, you segwayed perfectly into my question about the service providers and the channel partners. We love the services angle by the way. We think that's really key, that services led is the conversation point we're seeing. So I got to ask you, how do you guys balance between the direct engagement with your clients that are high touch, high value and the need for the channel partners? Because we were talking about when you came on, the general purpose computing market is now specialized, a lot of different solutions are very Lego box, composite apps, whatever you want to call it, service-oriented architects, all that stuff happening. But now the channel has to be just as agile, just as adaptive, just as flexible. How do you guys do that? What is the, where's the pull and push? What are you guys doing there? And where do you say, hey channel guys, take it from here? And where do you go say, hey, I want to work direct with a name to count and whatnot? Yeah, so it's, I can't say we've completely solved that model. But generally speaking, we are not 10,000 people in every country and every locale. So sometimes it's very easy when we get, especially with a multinational company where there are places we will be very strong and we'll want to go direct, but then there's other parts of their business that we shouldn't say yes to and we try to hold ourselves to, hey, we've got to go get somebody in the channel partner world that has capability in that part of the world. That's one engagement model. Another engagement model is when a lot of times customers are going through more than just an IT transformation. So if you start talking about business transformation from business processing or major application workload developments, those are things we would say, we would consult with you on, but we would not take that on as end to end. So there's some very natural and end to end service provider we're not. And so there's some natural places you'd go plug SIs and partners into along the journey. So where do you guys do well and where do you guys pass off the ball? In other words, just like, because channel partners certainly do want to get that gross profit on the consultants, a lot of margin there. High margin business. And then the second question to that is, what do you like for technology that you see as an executive, as the enabler for the faster times of value? Meaning, what are the hot technologies that are really accelerating the conversations? Yeah, so what do we want to be, is we want our technology. I mean, so back to kind of Joe's vision is we are a technology company. So I'm here to go build services enablement and that enablement will come direct, but it's also got to come through the partners. So for me, when we lead with a service partner or we lead directly, it's actually more about the customer than it is us. So while we want to have great revenue and great growth, it's not the single vision of what I've got to get done. What I got to get done is the propagation of all of our technologies through the services and enabled model. And what do you like for technologies out there that go, hey, that's awesome. That's going to help our customers. That's going to help us getting peaked on those certain skills. What are the techniques? Flash, is it like, is it? Certainly, yeah. Certainly if you just look at the core, all flash arrays, I mean that has taken off like wildfire and every conversation and customers that you get into is some start with, hey, flash is not part of my world. By you end the conversation and they look up and say, well, I never had any idea that flash was going to change my business the way it has. So I think in technology, absolutely flash is in the sweet spot that continues to accelerate. You know, we always talk about pure storage, how they're nipping at the heels of EMC and trying to eat your croissant at breakfast. They got certain some work to do. They got to get to lunch and then dinner. But first get that little crumb off the breakfast. You guys had Extreme IO and then when that came, quote, direct today availability, sales are pretty amazing. Just boom, out of the box. Now, as it goes GA, as things start to go to the pedal of the metal, that's going to increase sales power. Is that putting pressure on your services organization? Yeah, a bit. As we start to really engage with customers on the integration of that and that starts to put pressure on it. But the great news was is, it's one of those waves we saw coming. So as we started, that product started getting to maturity and market. We were behind the scenes, building skills and capability. But again, this goes back to- So you were skated where the puck is coming. I mean, we were made a bit, right? We were made a bit of a whiskey with a stick out there, ready for the puck. And that's what's key about, as we're a technology company, we're making the bets on the technology and I'm following suit. So some are saying that Pure's eating your lunch. I would argue maybe a croissant here or there on the breakfast side. Certainly they have an all-flash array solution. But they're a startup, right? So yeah, granted, their valuation's high, but they still don't have the feet on the streets. How do you guys talk to customers when they say, hey, Pure just came in and dropped the box and they're doing a demo at EMC and I want to renegotiate my contract. Does it come to services? The services they have? Sometimes it comes to services, but in a lot of times when you go talk to a mature company when that dialogue's going on, we talk to them about the broader footprint because it's more than just dropping one box in. It has to fit in a management or a constration infrastructure. It's got a tie to the support structure and the IT processes that have been put in place. And a lot of times you can look at how fast the lights blink and you say, wow, that's a really great piece of technology. But if it doesn't fit in the ecosystem of these large corporations, it has a real hard time ever getting real scale because it's just one more thing a CIO's got to go think about. And we try to put, you know, be best of breed technology in the case of all flash array, but also make sure it's tied into the infrastructure and the other assets that these large IT organizations use. I want to, Mike, I want to ask you about the CIO question. You're a COO. We've been doing a couple of events now. Pretty interesting where some very prominent CIOs have sort of called it to question the role of the CIO long term. And they've said, we see it sort of diverging into either a COO role or a technology role. If you're a technical CIO, go be a CTO. If you're a business oriented CIO, go be the COO. And then the CTO, the chief data officer, and you know, would report into the COO. Are you seeing any of that activity? Do you buy that maybe in some regulated industries? I mean, let's talk about the role of the CIO. So, you know, we're seeing some conversations around it. I personally, but I don't see a massive movement. Let's bifurcate the market into these two. We do see CIOs role changing that has to take into account this notion of the broker. And the CIOs that I think are going to make this next generation will be the ones that will be the accepting of. Part of them, the workload will be done in my shop when I control it. And part of it will be done externally. My job is to ensure that I have security and consistency of data, but speed and agility to deliver that to my customers. So, okay, so it's maybe too early for that vision to come true. But it was sort of a Hail Mary that some of these guys were throwing to shake things up. Now, having said that, we are seeing, I wonder if you could comment on a trend toward many more business types becoming CIOs. Are you seeing that? And why would a business guy want to be, or a gal, want to become a CIO? So we're seeing that a bit, but we're seeing actually a lot of CIOs go the other direction into the business, which is interesting. But coming across, because my comments earlier on was, it's less about the bits and the bytes of the technology. So things like hyperconverge show up. You can make one decision, which is around hyperconverge. And you're not making network decisions and database decisions and storage decisions. You're making a decision around something that comes pre-packaged to perform a function. That changes the whole did business criteria because now the CIO, business people coming in, being able to make more business-like decisions because while there's not one solution, this notion of composite in the Lego kind of world is coming together. So it's snapping things together as opposed to building, hand-crafting everything. The other thing, John and I talk about being sort of born data-driven or born in the big data world. A lot of companies will talk. We want to be sort of data-driven. Are they really becoming sort of data-driven in your view? And are they looking to companies like EMC to help them become data-driven? And what are you doing there? Yeah, it's tough. So this is an emerging part of our portfolio. So I feel like we've gotten the portfolio right around cloud and hybrid cloud and now that's really starting to take off. That next wave is how do you help customers with getting to quote data-driven, getting to big data concepts? And we're just on the dawn of that. And really it's a little like, I don't know what my cloud strategy is. I don't know what my big data or my data-driven strategy is. So there's a real drive to first, tell me what it is, what should my vision be, and then help me build a roadmap. But again, we're just starting really at the early days, engaging customers around that. So it seems to me, I mean, a big theme I'm hearing here and just in knowing you is transformation. You're helping customers transform. So as part of that transformation, it can't just be storage, obviously. It touches everything. Cloud, big data, certainly now platform as a service, application development. So how are you leveraging the Federation specifically with your services strategy and you go to market? Yeah, so when we start to think about the Federation, so here at VMworld, and VMworld's vision around the Software-Defined Data Center. So we start to really take that vision into account as we start to talk about hybrid cloud. How does a hybrid cloud infrastructure fit into the broader concept of a Software-Defined Data Center? And we share those, the thinking with the services organization in VMware. So when we're, hopefully, when we're in front of customers, we're talking about, depending on whether you come through the VMware door or the EMC door, we're talking about how the Federation fits together and the set of services and technologies are complementary to each other as opposed to one of us. But that's not the only technologies in the world. So outside of the Federation, when you look at things like OpenStack, so from my world, I got to talk about OpenStack and how to think about customers that want to get to the vision, but they want to get there with it using different sets of technology. So we play on both sides of the coin. And that's a difficult line to walk through. I mean, I see you're saying you've got to be at least quasi-agnostic, but if there's an opportunity to do something with Pivotal, is it easier to work with Pivotal than it is some third-party company? Yeah, absolutely, because as we start to really tighten the Federation message, we tighten the messages around, this is one of Joe Tucci's big, he wants customers to have choice, but at the same time he wants to have some preference, too, and so when you get into the preference, you want it to be easier. If you're CIO, you want the Federation to come together and to be easy to work with, more so than putting it together yourself, flip side of it is if you've got some real passion or you've got some decision that you may not want all the elements, you still want the best of the technology to come together. Well, Pivotal's may be an easier example because they're sort of new, and they need help getting incubated, and EMC can help them do that as can VMware, but VMware is different, it's big. There's always been sort of a need to be somewhat hands-off and not make it appear that EMC is stacking the deck and so forth. So in terms of relationship with VMware, I mean you leverage that heavily when you go to market. That's sort of fundamentally your strategy. And if you look at some of my offerings, I actually don't deliver them. VMware services actually deliver them, and so we come in front of a customer and look like one EMC, but the reality of it is there's capabilities that VMware does extremely well that we leverage within the Federation, and VMware would say they would leverage that with other third parties as well, but because we feel like we're part of the family, we do try to ensure that we have the tightest affinity to the messages and where both companies are trying to go. Right, so spinning off VMware would not be something that you would be in favor of, obviously, not anyway, because you work for Jochuchi, but... No, I think there's real value there, and it really comes, in a lot of cases, it comes under the covers, is when we sit down, and again, back to the notion of software-defined data center, and now we're starting to really put on paper what is the unique difference between what we do as EMC and our EMC hybrid cloud and how does that plug into software-defined data center? That's a broader conversation, but we want to make sure we're tightly aligned to, if you come through the VMware door and you say, I want a software-defined data center, here's how the EMC footprint fits in it. So what's the action plan for you guys right now? Where do you see the action this year going forward? Obviously, there's some disruption going on. The tectonic plates are shifting, certainly in California, with the earthquake here. In a way, that is the scene in IT, wine bottles being spilled all over the place, you saw the Silver Oak picture in there, but all the wine lovers crying on that, but in all seriousness, there is huge IT convergence happening, a huge opportunity for the folks who don't get ahead of this next wave, will become driftwood as Pat Gelsinger said at EMC World years ago, and so I got to ask you, what are you guys doing to stay ahead of that curve? What is the key technology and services that you're rolling out today? Yeah, so I'll give you the things that we see coming at scale. So we can see the rest of 14 and 15 coming to scale, this whole notion of the enterprise hybrid cloud and helping customers to get there. A year ago when we were here, we were kind of talking about the vignettes of that, that we're getting to scale in the industry around, lots of customers demanding, quite frankly, an accelerated option because they've gotten behind the curve. I talked a little bit earlier around the whole notion of data driven or big data, I think that's the next big wave coming, and then alongside that is the whole applications transformation, so it's one thing to ultimately have a glass of wine when you stand up your hybrid cloud, it's another thing to fully get leverage and utilization of it, and you don't do that till you get to the applications. Either re-platform there or re-written to actually get utilization and scale on that cloud. Final question, give me the final words because we got a break here. What's going to be different this year than last year? I think the mainstream reality that cloud and certainly hybrid cloud and the notion of an IT organization has got to be a service broker, has really come into its mainstream thinking. I think a year ago, people said, yeah, maybe, or they would take it all the way to the extreme and say, I'm going to take everything outside, and I think everybody's starting to swing that pendulum back to the middle to say, yeah, there's probably a bit of that, but it's not the one-size-fits-all. And it's up and down the stack, too, right? That's right. It's really kind of a perfect storm of innovation and uncertainty. Uncertainty, that's right. Hi, Kaler, COO of EMC's Professional Services, he's on the ground, he's talking to customers, sharing his opinion here, the signal from the noise. This is theCUBE, we'll be right back with our next guest after this short break.