 Okay, welcome back everyone, we're here live in Las Vegas for IBM Pulse, SiliconANGLE and Wikibon's theCUBE, our flagship program where we go out to the event extract a signal from the noise. I'm John Furrier, the founder of SiliconANGLE, joined by co-host Dave Vellante, the co-founder of wikibon.org and our next guest is Lance Crosby, the CEO of SoftLayer, an IBM company. Welcome to theCUBE. Thank you. Great to have you on. The SoftLayer acquisition, big news, people were scratching their heads saying, did IBM overpay all the critiques, is it bare metal, it's just a hosting company. I was one of those folks saying, I don't get it, I don't get the cloud play here, it's just a hosting company. Honestly, you see what's happening here at IBM. It's a cloud play. What's your take on that? I mean, the conversation pre-acquisition, narrative during the acquisition and now, what's to be cleared up and what's the position? Sure, you know, IBM had made a lot of acquisitions over the last four or five years in the cloud space. They bought over 70 different SaaS and past solutions and we're putting them all together and they try to build their own infrastructure as a service at the time they called it SCE and just simply weren't able to build something that's scaled and went out and found SoftLayer and when they brought us in, we became sort of the underpinnings for the entire cloud stack inside of IBM. So it made a lot of sense because not only do we bring a lot of value, a lot of customers, a lot of revenue to IBM, but also the ability to bring all of the SaaS and past properties over to the SoftLayer platform, which is in excess of 150 total today and being able to bring those across, make them, you know, geo-diverse and then be able to sell services literally in any country, continent or world. So what's driving the value? What's interesting about you guys and this announcement that kind of ties everything together and the dots connect when you look at the scale, right? Everyone talks about scale and the cloud is a huge deal, but you guys kind of cracked the code on the diversity angle, which is, you know, having infrastructure at scale for a variety of different use cases at a bare metal level and up to whatever the customer wants. So you had your line was, essentially we'll standardize and be flexible at scale. That's an interesting value for IBM because they have all the other stuff above that and the relationships and also the industry formation around the news today with Cloud Foundry puts you guys in a good position. So can you talk about that scale piece? What made SoftLayer so successful on the scale and how does that translate into the IBM relationship now that you're an IBM company? Sure, so when we started, we came from an enterprise background, so our DNA is different from our competitors and we knew that the compliance and regulatory and data residency in scale was going to matter. So we went out, we went out with enterprise grade services at internet scale and that being able to do bare metal, public clouds, private clouds, there's no distinction with us. You can be single tendency, you can be multi-tenancy, you can mix and match, you can share and we really want the customer to pick what technology they're trying to achieve versus what we have, you know, on the truck and all of our other competitors are only a multi-tenancy shared type solution set and we have just found because of the types of customers that we attract, the more sophisticated, born on the web customers, the enterprises, the governments, most of the time they prefer to be single tendency and most of the time they like to run on the bare metal and run their own stuff in private clouds. So obviously the news here is obviously expansion. You guys brought about 13 data centers, IBM had 12, you guys are building out more. Talk about the build out plan and the expansion internationally. Sure, so we brought 13 at the time of the marriage. IBM had 12 cloud facilities so we're bringing those onto our global backbone. That will be complete by the end of Q1 this year and then by the end of the year we'll have 15 new data centers. We have Hong Kong coming live in about two weeks, then we have London and then Toronto, Mexico cities, Melbourne and then we continue to go every continent, every country throughout the world for the rest of the year. And the genesis here is we want to have a major footprint and all of the major continents and all of the major countries in the world as companies can pick and choose where they want to go because we have all services and all data centers and our customers when they buy services they can pick what data center they want to go into. Have you guys looked at some of the work that customers are wanting on-premise solution and we've seen the success of IO data systems at the Open Compute Summit talking about they will ship data centers to you. Some have that requirements basically prefabricated containers. Are you guys looking at that model? Are you gonna just house your 40 and data centers? Will you push data centers into premises? We will for larger clients. We have the concept of a software pod which is our smallest footprint. It's about 10,000 square feet, about 150 racks, roughly four to 5,000 physical servers depending on whether they're one you two you four you how many sockets they hold. But we have some large enterprise customers that consume four to 5,000 servers in a very easy fashion fast. And so they can build their own pods internally they can use them externally. We can use technologies like OpenStack so they can burst in and out of those beyond the walls and drag and drop workloads. So it's really becoming very efficient and easy to use from a customer's perspective. So let me talk about some of the customers you guys enabled. We were talking before we started that you guys have a lot of customers outside on the software platform now on IBM. IBM has a ton of customers that have huge channel, great go-to market, kind of a perfect storm for both businesses and developers to bring stuff on top of infrastructure. You see Facebook by WhatsApp out there. A new modern era is here. I mean, I would just get your take, someone who's been in the built-up business, sold it, but now operating a huge part of IBM's cloud, you're enabling a lot of that change. What are some of the success factors that you've seen for the WhatsApp? I mean, they're transforming a telecom industry, other developers have other opportunities. There isn't a lot of disruption going on in parallel to this new innovation strategy. So what's your take on it? What are the key things that you look at and say, hey, that's exciting? What's your personal perspective on all of that? Yeah, when we started software, what we wanted to do is we wanted to build the ingredients for our customers to build the next generation IT companies on top of. And for the first five years from 2005 to 2010, we basically catered to the born-on-the-web internet-centric customers out there. Names like Tumblr, WhatsApp, Yelp, OpenTable, Dropbox, those companies that were on the drawing board 24, 36 months ago, and now huge organizations that are catering to enterprises all over the world. And the last 24 months, we've seen a shift into the enterprise because now the enterprise is saying, well, hold on a second, maybe I can use that platform to build a new generation of services for us internally. So not only are we shifting traditional workloads out into the cloud, but the real shift here is, what are they going to do and what are they going to build next? The valuation discussions with WhatsApp was interesting. I think $19 billion, obviously three of it was retention, forecash, and then rest the paper for Facebook. That's a great example of people scratching their heads going, well, first of all, it's a huge number when it's draws, drop, but if you look at it, I mean, what's your take on that valuation and why is it so high, and what does that mean for the future of future applications that could be disrupting? Yeah, I mean, I think you need to look at what WhatsApp has achieved in a very short period of time. I mean, they created, they came into a market with a messaging system that basically broke all the rules of traditional Toko messaging, right? Allow you to create groups, send more than 10 messages, easy to use, didn't cost you against your plan, and, you know, they scaled over the last three years to a company that sends three times as many tweets or messages a day than Twitter does. They send more texts every month than all the Tokos in the world combined, so they basically displaced a $100 billion industry in the last three years by creating an application that end users wanted. And so you had the Tokos who were sitting around getting fat dumb and happy on charging $0.25 a text message, and lo and behold, you had somebody like WhatsApp show up and completely displaced the entire. I haven't seen Zuckerberg's keynote in Mobile World Congress, I'm sure that's, we'll get to that news later today when we have a break, but that to me is exactly what's happening. I think that's so disruptive, and there's also the privacy angle people love to have that kind of the privacy aspect of it, but here you have an over the top service just disrupting an industry. There are thousands of more use cases like that, not $19 billion, but in all verticals, don't you think? I mean, is that the whole message we're hearing here at IBM? Yeah, I think there's not only the new generation companies that you're going to see built on top of the platforms like WhatsApp and Tumblr and those guys, but also what can enterprises build? Because historically, enterprises bought hardware and they bought software and then they had to adapt it to their business model. That's the way it's worked for the last 20, 30, 40 years. Today, they can buy the services with all the APIs exposed and then they can custom build their IT solutions for what they want to achieve going forward. So not only are you going to see commercialized products like the drop boxes in the world for backup, but you're going to see organizations build their own particular use cases for them to consume internally. Nathan, I wonder if we could talk about, you mentioned off camera, your sort of new vision post acquisition. First of all, congratulations on the acquisition. Thank you. It wasn't $19 billion, it's still pretty good. We were sort of joking about that, but you had said all services and all data centers. We talked about 40 data centers totally worldwide. This is sort of near term target. What do you mean all services, all data centers and how is that a differentiator? Yeah, from a cloud perspective, from a customer's perspective, it's all about convenience, predictability, transparency. They want to see the price. They want to see where it's available. They want to pick where it's going. They want it to be frictionless sign up. They want to consume it now. That's what cloud is. And so a lot of our competitors have built these service regions around the world where you have to go here to get this service or here to get that service. And we just want to complete predictability from a customer perspective. So all services worldwide have all, or all data centers have all services. And it becomes important because, again, going back to the IBM stack, having that at the fundamental layer at the bottom, all of the other properties that we bring across can also have those attributes as well. Why the strategy of many data centers around the world versus fewer mega data centers? A lot of people are taking the latter approach, claiming it drives efficiencies. Why are you choosing the sort of many data center approach? Sure, it's security, compliance reasons, regulatory reasons, and of course, data resonance reasons. A lot of countries like the EU and Canada have passed laws where the data has to reside in country for those residents. And so you can't have a large footprint service all of Europe. You're literally going to have to have a cloud presence in every country in Europe because they all have specific laws. And so once you step outside sort of the consumer realm and step into any sort of business users where you get into financial, healthcare, banking, anything like that, then you're going to have these residence requirements and you're literally going to have to have a location in all those countries to do business. So I wonder if we can take a specific example. So you take Amazon, for example, doesn't have a data center in Germany. Germany's got very strict laws about maintaining data within that country, certainly for certain industries anyway. Amazon responds as well. We have a data center in Ireland and that's part of the EU. And so that suffices. I'm inferring you don't buy that. It will work again for some consumer models, but when you get into those regulated industries it just simply doesn't work. To take that one step further inside Germany when you get into the more sophisticated industries they require two sites. They require active active or active passive type solutions. So when we go to those countries we're actually going to have two sites in two different major metropolitan areas. So when we start talking about locations in Germany we're going to be in multiple cities so that we can service those types of customers which you can't do from a single site outside of the country. And I presume you are predicting that the requirements are going to just be continuously getting more and more stringent as these countries and organizations mature. Is that the premise that you're working on? Sure, I think it'll become, as cloud becomes water-adopted it'll become more regulated. And also when you look at the types of customers historically that IBM has had, I mean this is the Fortune 1000. These are the most sophisticated companies in the world that deal with the biggest dollars in the sense of information. This is not consumer-oriented type stuff. And so having that footprint is going to be really important for IBM. What if you talk about the SaaS business for a minute? I mean many people don't realize how many SaaS properties IBM owns. I mean I think it's in the three figures anyway, right? Now you're bringing those together you mentioned at the top of this spot here. I wonder if you could talk about that a little bit. You see some mega SaaS action going on, a lot of disruption. You certainly, Salesforce everybody knows about. Workdays valuation is roughly the same as WhatsApp recently. It's doing pretty well. And you've got Oracle doing its thing and sort of its RedStack app. So how do you bring together, two-part question, how do you bring together all these 100 plus SaaS apps at IBM? And how do you accommodate some of these more popular SaaS applications like Workday? Are you competing with them? Do you embrace them? I wonder if we could talk about that a little bit. Sure, so the born-on-the-web SaaS properties which are in excess of 100 of, 110 plus, those will be easy to bring across the software and then populate them throughout those 40 data centers worldwide. And again, give them those attributes of single-tenancy, multi-tenancy, and wherever they need to be. The other properties that are more legacy in nature that aren't really a true cloud SaaS as we consume them today, that were more enterprise-type software that was exposed to the internet. We're bringing those across to BlueMix. That's a platform. So as we bring them across, what we're going to do is we're going to make them consumable, we're going to give them APIs, and we're going to make them very cloud-like. And so, at the end of the day, by the end of 2014, we want our customers to sit in this chair and see the IBM Cloud portfolio and see hundreds of services that all have common attributes. They're consumable, they're downloadable, they're API-driven, they're by the month, by the hour, by the seat, and then they're available in 40 GAOs worldwide. And then, as they say, hey, I need this widget or that widget, they can dive in and find those. Now, what about some of the mega SaaS apps or some of the more popular stuff, like Salesforce or Workday, who's got tremendous momentum, or others? How do you embrace them? Do you compete with them? What's the point there? We actually embrace them. You can't be everything to everybody, right? And so, inside of IBM, we have an app marketplace where you'll see blue elements, those things that we deliver, and then you'll see other elements by other companies that are leaders in their space. And really, we're focusing on the customer experience here. So we know at the end of the day, it's going to take some of what we do and some of the external resources out there. But one of the things that we've been hyper-focused on in the last 12 months is helping customers build a cloud strategy. We have those professional services to come in and say, look, if you're using Salesforce and you're using Dropbox, and then you want to consume SoftLayer or some other IaaS services, how do you put those all together so you don't have cloud sprawl and end up in a situation five years from now that you're a different situation you're in now? I mean, it's a lot of different vectors to nail. The cloud sprawls one. The other one is the developers. And one of the things that IBM just doesn't have a foot in is the developer community, what I call the new modern DevOps developer. You guys have that cloud and brings that to the table. That's really just develop over the past five or six years. I mean, that whole focus. Amazon has certainly popularized it, integrated stack concept. So what does IBM have to do to win the developer, the new developer? And our data shows they just don't have the presence. They have an ecosystem potential. So they have to win the developers with the right code and platforms and they need to build an ecosystem. It's a big challenge. What does IBM need to do to do that? So if you look at the world, there's about 20 million developers worldwide. Out of that, about 25% are born on the web, cloud developers. The other 75% are more legacy developers. And so the 25% are the ones you just described, but those are the ones that everybody's talking about because that's the next generation developers. You know, obviously they know companies like software and cloud, the recent acquisition. So they're becoming aware of IBM. It's the other 75%, as we bring IBM's middleware into Bluemix and we enable it to be cloud. We're actually going to teach them how things become cloud enabled. And we're going to give them a transition path of familiar software they've been using delivered in a cloud like manner. And so you're going to see an entire, you know, generation of developers who's going to have to shift. You know, I make the cobalt analogy. There were a lot of cobalt developers out there who had to change their skill set. And we're at that same point here now. They're going to have to change that skill set to be cloud developers. And it's not a zero sum game either, right? I mean, it's not like you got to get the sort of old legacy developers into the new, that's part of it. But the other part of it is, you know, you get platforms like Node.js coming out, you're going to expand the developer base as well. And IBM just doesn't have a lot of traction there. But that's a good point of that 75%. Maybe 25% will be the old, never move, but the rest want to be, want to get there. So what are you guys doing right now program-wise to make that happen? Blue Mix part of it. What specifically are you doing in market to build that ecosystem? So Blue Mix is a big part of it. The app market place is a big part of it. And then obviously just exposing them to the new tool sets. You know, teaching them the right to the API. It's going out and doing trainings with these new level of developers and showing them, you know, here's the shift. And so we have, you know, we have the born on the wet camp that is growing rapidly. We have the transition camp of more legacy developers that are moving that way. And you've got to be able to cater to both environments. And I think that's why IBM is in a unique position because historically that has been our customer base and has been our middleware. And as we pull them to cloud, there'll be a much easier transition versus them just trying to wake up one day and trying to figure out how to develop on top of SoftLayer. We're here with Lance Crosby, CEO of SoftLayer. Not only is he a tech athlete, senior executive, entrepreneurial, now with the big company. SoftLayer is an infrastructure platform and the base of their cloud, which gives you a great perspective. You could see up the stack because you're working with the folks and was WhatsApp a customer? Were they a customer? Yes, they are. They are a customer. So, you know, you get to see these awesome things happen. So I have to ask you for the enterprise, you guys say your enterprise grade, you have the enterprise in mind. What in your opinion is the most disruptive opportunity for entrepreneurs and developers out there today in the enterprise? Given what you know about the market trends, what's going on with IBM, it doesn't have to be confidential. Just anecdotally, what is the most disruptive opportunities for developers to seize in this new landscape? Sure, I think it's building cloud enabled applications that cater to the enterprise and completely displace those things that will not be able to be brought across. You know, Silicon Valley is full of companies that are doing this cloud and is a recent example. But you've got, you know, like in monitoring services, you've got New Relic and App Dynamics and all these new companies out there that are basically, you know, have totally replaced the need for on-premise monitoring. And if you look up and down the stack, there's that need everywhere. And so, you know, that's why we believe the next five or 10 years are going to be a gold rush for developers and new businesses as they come in and cloud enable these applications that historically enterprises have used for a long time. And you guys are playing the open card very strongly. And let's face it. I mean, the guy you're going after there is Amazon. There's no other proprietary public cloud that matters. And so, what is open to you guys? And why does it matter to the customer? You know, open is giving the customer a choice. So that's what open is. And, you know, at the end of the day, we want to give them access to commercial software, to open source software, to all the APIs. We want to be able to give them, you know, do they want to spend the CapEx and buy the serial numbers? Do they want it in OpEx and rent it by the month? You know, we want to give the customer complete transparency and predictability on what they want to buy at the end of the day. Because we don't believe everything's going to be a 100% public cloud. We think there's always going to be some on-premise and then there's going to be off-premise. And what's the magical number? People ask me all the time, is it 50%, 80%? I think it's going to be broken down by industry. I think a lot of industries will be able to go almost to 100. And some industries, I think, will be lucky to get 50, 50. But you're saying that proprietary API to a gazillion services is not open or not as open as what you guys are planning? You know, when you say proprietary, there's no open standard in APIs, right? Unfortunately, you know, our APIs are very similar to Amazon's, very similar to Azure's, very similar to Google's. You know, would it help if we built them the same? Yes, but you know, who's going to be the governing body to get us there? I'm not sure, so, but you know, everybody makes a converter kit to switch to everybody else's APIs. But at the end of the day, the customers have a choice and they can move from service to service if we fail to deliver. And that's really what it's about. So it's options and be able to get your data out at some kind of reasonable cost without getting preamed. At the end of the day, as long as you deliver the service, you will keep the customer. You can't keep the customer on contract. You can't keep the customer on widgets or customized software. Keep them on the service you deliver. This is the thing that we were talking about earlier about the consumerization of the world is that the product sucks, no one will use it. WhatsApp is a great example of a product that worked. There's a ton of mobile apps out there that people don't use because they're not good enough. Same with IT. So I think, you know, we've been saying on theCUBE here that all the old tactics of standards bodies are moot at this point because you can try to do a land grab and slow down progress, but given that APIs are open and there's different versions. People have different APIs. This doesn't mean that one's closed, per se. The best solution will win. So with that in mind, I don't think there's much debate on that. I want to get your take on OpenStack Cloud Foundry, the new Cloud Foundry Foundation, CloudStack, all these frameworks in this past layer. You got Blue Mix into the mix. What's your take on all this? OpenStack in particular has got a lot of momentum. So we embraced OpenStack. We put 400 developers behind the OpenStack project because we want customers to use OpenStack internally. They can use it externally on software. They can be able to drag and drop workloads back and forth with the comments that APIs without any, a lot of headaches without getting workloads inside and out. Same thing with Cloud Foundry. They can run their own versions of Cloud Foundry internally for special applications, industry specific applications they do inside. Their own shops add APIs to it, make it consumable. We're doing the same thing externally. Cloud Foundry is a very effective way of making any enterprise application consumable in a Cloud fashion. Did you guys sit down with Paul Moritz on Cloud Foundry? Absolutely, we're one of the top partners with Pivotal and IBM is here to back the project and we want to be one of the top contributors. Lance, thanks for coming on theCUBE. We really appreciate it. Congratulations on your success. It's pretty clear where the picture's kind of forming now. The cloud is rising out above the software. As you can see the parts, the engine, innovation and how it all fits, congratulations. And it looks like IBM's going to do quite well on the multiple, with the synergies involved and kind of stitching the numbers together with a $7 billion target in 2015. They already got over a billion in the mid-market. 4.7 last year, you know. Let's just see if you can bring the developers to the table. The key is can you bring the developers to the table? No question on the scale. Can the ecosystem flourish? That's the question we'll be watching. And this is live in theCUBE here at IBM Paulson Las Vegas. We'll be right back with our next guest after the break.