 from Las Vegas, it's theCUBE. Covering IBM Think 2018, brought to you by IBM. We're back at IBM Think 2018. This is theCUBE, the leader in live tech coverage. My name is Dave Vellante and I'm here with my co-host, Peter Burris, day two of our wall-to-wall coverage of IBM's inaugural Think conference, Rajesh Nambiar is here. He's the general manager of global business services for application services within IBM. Thanks for coming on theCUBE. Thank you for having me here. So how's this event going for you? You're in from Singapore, we were saying, you must love the fact that IBM's consolidated a lot of its major events in one place. You get a lot done in a week. Absolutely, I think this is four or five days that we want to be here. A phenomenal amount of energy. I mean, when you go around, you see that. I think, as you said, combining some of the events that's made it even more interesting for us. So we're meeting more people, more clients, more productive sessions for sure. So let's talk about what you do with application services and then we really want to get into one of the themes that the Ginny hit on today, which is incumbent disruptors and competing from the core of your proprietary data. So let's get into it. Start with your organization and what you guys do. Absolutely. So as I assume mentioned, and I do the application services for GBS and within IBM and within application services, I think we focus on application development and management, which is a large area for us. And as you know that IBM has been managing applications for many, many large clients over the period of time. And it's a very large portfolio for IBM and what we see truly is enterprises, as you saw, they are going to have an enormous amount of issues with the new age companies if you may, like all of the new companies which are sort of coming off. You can call them born digital or born in cloud or Uberization of the organizations, whatever. So you would find that enterprises are going to have significant issues maintaining their competitive advantage over a period of time. And one of the ways they could regain that leadership or competitive advantage would be by ensuring that they are digitally reinventing themselves. The problem is, and again Forbes recently had an article around saying that about 80% of the digital transformation projects really fail. There are multiple reasons as to why they fail. And I want to argue saying that one of the, and you heard from Ginni this morning, that you have the sort of the business architecture and the technology architecture. If you focus on the technology for a second, you will find that many of these new incumbents that you mentioned, well if they try to compete purely on the digital side of the equation, they will have a harder chance or they may not even get where they want to go. We want to argue saying that if they kind of pay attention to the core they have, and I want to sort of define what the score and digital is going to be. So think of it this way, I mean core is what, if any company has been around for a while, then they would have had a significant amount of core systems, systems of records if you want to call it. Where they have the business process embedded into that. They have the customer data embedded into that. Now what's happening in the other side, of course everybody wants to get there, the whole digital reinvention. On the digital side of the equation, you do have systems of engagement, right? Where you truly understand and engage, I want to say customers, but then you can also have employees of your own organization. So you're going to engage them in the last mile if you may. What touches the customer, touches your employees, that's what we call systems of engagement in the digital. Now organization tend to see these two as two different things, and if you do not build your digital ecosystem leveraging what you have in core, I believe that the chances of you failing in your digital transformation is very, very high. Why is that? Because I believe the intersection of these two worlds if you may, the core and the digital, is not that easy for people to leverage. And I believe that we as a company, we help our clients sort of leverage that intersection if you may. Okay, so where do you start? Is it application modernization? Is it allowing them to develop applications that are more sort of more native as you say? Where do you, when you talk to customers, where do you see the starting point? Okay, so when you look at these two, fundamentally there are synergies between these two worlds and there are discordant. Synergies are natural, why? Because as I mentioned before, in the core or the systems of records you'll find business process getting embedded, customers data getting embedded, and then on the other side in the digital system you always have the user experience, which is what we all want to drive. I mean the user experience is all about everything. I was talking to a bank recently based in Asia. So they said, we built this phenomenally wonderful, user friendly mobile app for our customers. What happened was, the app was fantastic and it was great user experience and everything was fine. It's just that for every transaction it took like a minute for the balance to show up on the mobile app. That's not what you want because why is that? Because you're focusing on the digital only. The fact that it has to go to your core systems, get the customer data, then bring it back to the watch app or the mobile app, whatever. That wasn't from the right way. And hence our point being that if you look at the synergies which is great, there are lots of discordant because the way the old systems are being built is very different. They're using a waterfall. The new systems are getting built in a different way. If you leverage the synergies, manage the discordant in a nicer way, so great example would be, so do you have microservices coming out of your core systems to enable your digital systems? You have the right APIs getting built from the core systems to enable your digital systems. If you are able to manage this intersection well, then I think you have a play and that's how I believe that we should do. So again, to your point, do you do modernize? I believe we do do three things to get the synergy right. One would be you have to optimize your core systems for efficiency because more and more the systems get older and older, you're going to have challenges in maintaining them, more expensive to maintain them, so you optimize those systems for efficiency. Then you modernize them to build in or to enable new capability. So second, as I said, modernize, what do you really do? You're making sure that it is easier for the digital systems to get to you, to understand what you're doing, to get the customer data. So that was a modernized piece. The third is that you have to innovate with the sort of co-create, if you may, and make sure that you're able to build those newer systems, digital systems, using the core and enabling the core for growth. So if you are an organization, if you want growth, you're not going to get it if you don't do these three things in my opinion. So Josh, many years ago, I did a research project for a client and we looked very closely at the consequences of increasing the functionality and automation in systems of engagement and how that drove work back in the core. And we found that every successive generation of enhancement in the system of engagement drove the number of transactions back at the core, sevenfold. Are you seeing relationships like that? Is there rules and thumbs that people should use now as those systems of engagement get even more powerful, more human friendly? What is the new kind of expectation these days? So the ratio is roughly what you said, right? For every, you know, about seven or eight times is what you want to drive for every single transaction which is arising out of systems of engagement. However, one of the way to make it more efficient in the systems of records, in the core systems, if you may, is by usage of all of this modern, you know, stuff that we're talking about, whether it is, you know, if you have designed your core systems and enable microservices in the right way, maybe instead of having seven or eight transactions, you could be able to do that in two or three, right? Similarly, the- Unstage them. Unstage them, yeah, in a certain way so that you're not getting into the performance issue which I talked about in this banking example as, you know, you know, you don't want to build a wonderful digital app, but having that to go through a significant performance issue over the period of time. So that is one of the things. The other important element of what you just now said is also the talent piece of it, right? We underestimate, I think, you know, we said one of the reasons why many of these engagement fail is also because people don't think talent is a big deal in all of this. Because when you really see, if you're a, been a company, been around for a while, you have a very strong core and your people in the IT organization are going to be wired somewhat to the processes which are sort of the old age, if you may. And how do you move to this new world of digital? So there is a fundamental difference from the talent point of view. Two things, you have, as an organization, you're moving from process-centric to user-centric. Now you want to build something for your customer, for your employer. When you do that, the talent base, of course there's a mindset change, but also a simple example. We always hired people for skills, right? We still, some of the companies still do for skills. But I believe that's a passe, right? Because what you now need is a tenacity for learnability or tenacity for a lifelong learning for the people whom you're hiring. Not necessarily a skill that you value today because what happens in today's world after six months, that skill is no longer valuable for you. So what do you do with them? But if you have a tenacity for lifelong learning, the ability for you to pick up new skills and then transform yourself will be so high that we're not stuck with people who have old skills for a long period of time. I was talking to a senior, a guy who runs development and he said one of the biggest impacts of open source over the last few years was that it bought the notion of responsibility, recognition, reputation, and changed the way that developers started like collaborating with each other. Not just in the open source world, but overall. I think collaboration, new collaboration agile also has to be part of the equation. What do you think? Without a question, in fact I was about to say collaboration is very, very key because again, when you move from process-centric to user-centric, you also find, traditionally our organization is very role-based. So everybody had a role. I mean I'm a developer, I'm a tester, I'm an architect, but in the new world, this is going to be changing into maybe parts of people who are sort of working on a garage method. I mean everybody does everything. We have a smaller group of people who are able to deliver something very, very quick in an agile fashion, as opposed to the traditional way of saying I'm sort of role-based. I have an organization and that's how I operate. So I think there's significant difference and again, I would probably say to leverage the talent for the newer market. Again, there are about two or three things that one could potentially do. One would clearly be this learnability. Skills are no longer what is valued, it's learnability. The ability for you to sort of quickly move from one to the other would be valued. Second would be diversity of skills. Today we hire more people with user experience, with psychology major. We never thought of this 10 years ago. We never hired anybody from art school, but we do that today. I was really happy. My son's a music major. My son is a psychology major. I was just telling you in the University of Colorado. So they get hired probably as well as probably the STEM students are going to be, right? So that's good. And the last one is of course, you know, I have this notion of digital labor. I don't know that you've heard this term before. And then Gini talked about today, right? So you're going to have man and machine when you do that. Automation is a great influencer in all of this. And I think there are going to be the digital labor and the human labor going to coexist. So we're calling it hybrid labor. So any task that we're going to do, we're going to have people which is sort of higher order capability now, leveraging bots, which is the digital labor. So that's another important thing in the talent market. And the labor will increasingly require sort of multi-tool skills, not only domain expertise, but also digital skills. Absolutely. Or at least being able to understand how to leverage the machine intelligence. I want to ask you, and I know Peter, you got to go soon, this trend with IoT, blockchain, we saw the IBM MERSC example today where they're attacking inefficiencies where there's a third party trust involved and it's creating a trustless system. Do you see a trend toward sort of putting token economics embedded inside of applications, things like blockchain, increasingly going into core applications? Does that's a trend you're seeing yet? Yes. I think not as much as we would like to see, but I think it's beginning to sort of develop over a period of time. I think blockchain is still, as I said, there is more in the experimentation phase and there are a few companies who have leveraged it fully. Great examples, as you saw this morning with what we're doing with the APMM, MERSC, the fact that we were able to do the distribution systems within shipping. And anywhere you're finding that there's going to be a significant amount of paperwork or transactional arrangements that being done outside of the normal systems, I think blockchain would be a great way to solve those issues. I want to tease your session a little bit. You're at a talk, you've got a CIO panel. When is that? Well, the talk is actually going to be, I think unlocking the value of the core system. So there's going to be something similar to what we talked about. You've got great session with three CIOs who are going to be on the panel. We're going to have the Carhartt, CIO, John Hill is going to be on the panel and they've done a lot of good work in terms of truly making sure that they understood that if they don't leverage the core, they can't really get to the digital. Was that Carhartt? Carhartt, yeah. The only brand I wear? Oh really? Yeah, they'll be interesting. Then KLM, I mean with their, I mean, Air France actually owns KLM now. So the Air France KLM with their history of the core that they've had for several years, how are they really moving into the new digital era and then being a very customer friendly airline. So he's going to talk about some of that. And then we also have the TPX, which is the communications organization, which they've gone through about 12 acquisitions over the last 12 years, so one a year pretty much. How are they integrating all of those companies and how are they really putting them together into sort of one system? And when is that session? The session is on Thursday morning at 1130. I hope you guys are there to watch that. I'm worried because it's the last day. Getaway day, but listen, it's a good day to go down and check it out because that notion of what incumbents should be doing and competing from the core is very, very important idea. So we're just, thanks for coming on theCUBE and explaining that. Best of luck to you tomorrow and great to see you. Thank you so much. Thanks for having me. You're welcome. All right, keep it right there, but we'll be back with our next guest. This is theCUBE, you're watching live from IBM Think 2018. Right back.