 Covering Interconnect 2017, brought to you by IBM. Hey, welcome back, and we're here live in Las Vegas with Mandalay Bay for the IBM Interconnect 2017. This is Cube's exclusive coverage. Let's look on the media. I'm John Furrier, my co-host Dave Vellante here all week. We missed our kickoff this morning on day two, and because the keynotes went along with Ginny Rometti, great star lineup. You had Mark Benioff, the CEO of AT&T, the CEO of H&R Block, which I love their ad with Mad Men's Guy in there. Dave, let's wrap up day two. Big day, I mean, traffic on the digital site, IBMgo.com was off the charts, and site just performed extremely well. Site about that. Also, the keynote from the CEO of IBM, Ginny, really kind of brings the themes that we've been talking about on theCUBE. I want to get your reaction to that, which is social good is now a purpose that's now becoming a generational theme. And it's not just social good in terms of equality of pay for women, which is great, and of course more STEM. It's everything, it's society, it's a global impact. But also, the tagline is very tight. Enterprise Strong has a Boston strong feeling to it. Enterprise Strong, data first, cognitive tips of the core. Pretty much hits their sweet spot. What did you think of her keynote presentation? I thought Ginny Rometti nailed it. I've always been a huge fan of hers. I first met her when she was running strategy. And the question I used to always get, because IBM, 19 quarters of straight declining revenue, how long is Ginny going to get? How long is Ginny going to get? When is her tenure going to be up? My answer's always been the same, it's long enough to prove that she was right. And I love her presentation today. I thought she was on, she was engaging. She's a real pro, and she stressed the innovation that IBM is going through. And this was the strategy that she laid out, five, six years ago. And it's really coming to fruition. And it was always interesting to me that she never spoke at these conferences. And she didn't speak at these conferences because the story was not great. It was coming together, the big data piece or the analytics piece was not. So you think she didn't come to the events because the story wasn't. Yeah, I do. I think she was not programming. That's not a fact. You should believe that. No, this is my belief. She was not ready to showcase the greatness of IBM. And I said, about a year ago, I said, you watch this whole strategy is coming together. You are going to see a lot more of Ginny Rometti than you've seen in the past. You started to see her on CNBC much more. We saw her at the Women in Tech Conference at the Grace Hopper Conference. We saw her at World of Watson. And now we see her here at Interconnect. And she's very good on stage. She's extremely engaging. I thought she was good at World of Watson. I thought she was even better today. And then a couple of notable things. Took a swipe at both AWS and maybe a little bit at HPE. I'm not so sure that they worry about HPE. Sam Palmasano, before he left on a Wall Street Journal interview said, I don't worry about HPE. They don't invest at R&D. I worry about Oracle. But nonetheless, she said, it's not just a new way. Cloud is not just a new way to deliver IT, right? That's kind of the Amazon way. And HPE. And certainly new way of, new style of IT is Meg's line. She also took a swipe at Google, basically saying, look, we're not taking your data to inform some knowledge graph that we're going to take your IP and give it to the rest of the world. We're going to protect your data. We're going to protect your models. They're really making a strong statement in that regard, which I think is really important for CIOs and CDOs and CEOs today. What thoughts? I agree. First of all, I'm a big fan of Ginny. I always kind of question whether she came and never put it together like you intuitively around her not seeing the story, but you go to all the analysts things. So I think that's legit. I would say that I would buy that argument. Here's what I like. I mean, her sound bite is enterprise strong, data first, cognitive to the core. It's kind of gimmicky, but it kind of hits all their points. Enterprise strong is core in the conversations with customers right now. I've seen it on theCUBE all the time. Certainly Google Next was one event. We saw this clearly. Having enterprise readiness is not easy. And so that's a really tough code to crack. Oracle and Microsoft have cracked that code. So has IBM of their history. Amazon is getting faster into the enterprise through some of the things they're doing. Google has no clue on the enterprise. They're trying to do it their way. So you have kind of different dimensions. So that's the enterprise. Very hard to do. Table stakes are different than having pure cloud native all the time, 100%. Lift and shift, rip and replace, whatever you want to call up. Data first is compelling because they have a core data strategy analytics, but I thought it was interesting that they had this notion of you own your own data, which implies you're renting everything else. So if you renting everything else, infrastructure and facilities and reducing the cost of doing business, the only thing you really got is data highlighted by blockchain. So blockchain becomes a critical announcement there. Again, that was the key announcement here at the show was blockchain. IoT kind of a subtext to the whole show, but it's supported through the data first. And finally cognitive to the core is where the AI is going to kind of be the shiny, sizzly marketing piece with I am Watson, I'm going to solve your health problems, kind of showing the futuristic aspect of that. But under the hood there is machine learning. Under that is the real analytics algorithms that they're going to integrate across their business, whether it's line of business in verticals and they're going to cross pollinate data. So I think those three pillars, she is a genius in strategy because she can hit all three. What I just said is a chock full of strategy and a chock full of execution. If they could do that, they will have a great run. So I go back to Palmasano's statement before Ginny took over and it was a very candid interview that he gave. And as I say, you look at when he left IBM, it was this next wave was coming like a freight train that was going to completely disrupt IBM's business. So it's been a long turnaround and they've done it with sort of tax rates and stock buybacks and all kinds of financial engineering that have held the company's stock price up and cash flow has been very strong. And so now I really believe they're in a good position. To get critical for a second, yes, there's no growth but look who else isn't growing. HPE's not growing, Oracle's not growing, Dell's not growing, Cisco's not growing. Microsoft's not growing. The only two companies really in the cartel that are growing showing any growth really are Intel, you know, a little bit and SAP. The rest of the cartel is flat to down. Well, I got to get into new markets. I mean, the thing is new market penetration is interesting. So blockchain could be an enabler. I think it's going to be some resistance to blockchain. My gut tells me that but the innovative entrepreneurial side of me says I love blockchain. I would be all over blockchain if I was an entrepreneur because that really will change the game on identity and value and all that great stuff. That's a good opportunity to take the data in. Well, the thing I like is IBM is making bets. I mean, big bets, blockchain, quantum computing. We'll see where that goes cloud, you know, clearly. We can talk about, you know, you said it at Interconnect like two or three years ago. Well, you know, software is kind of hosting. True, but blue mix, the investments. Well, the sun-setted software is now all blue mix. Yes, right, well, yeah. So, but anyway, the $2 billion bet that they made on software has allowed them to go to clients and say, we have cloud, Watson, and AI, analytics, you know, IoT. These are big bets which, you know, I think you're going to pay off. You know, we'll see what, if quantum pays off in the near term, we'll see about blockchain. But I think a lot of the bets that they're making are going to pay off, Spark, et cetera. So let's talk about the CUBE interviews, Dave. What got your attention? I'll start while you think of some good for your notes. I loved, really, Tahara, I've talked about this. They're putting into these cloud journey pieces which is not a best practice, it's not a reference architecture, but it's actually showing the use cases of people who are taking a cross-functional journey of architecting cloud solutions. I love the quantum computing conversation we had with, believe it or not, the tape person. From the tape, DS, whatever it was, DS800, or what's it? DS8000. DS8000. Storage engineering team. But in terms of key points, modernizing IoT relevance was a theme that popped out at me and it didn't come out directly. You start to see IoT be a proof point of operationalizing data. Let me explain. IoT right now is out there and people are focused on it because it's got real business impact because it's either facilities, it's industrial, or customer connected in some sort. That puts the pressure to operationalize that data and I think that flushes out all the cloud washing and the data washing people who don't have any solutions there. So I think the operationalizing of the data with IoT is going to force people to come out with real solutions. And if you don't, you're gone, right? So that's how you're dead. The cultural issue is interesting. Trust as a now table stakes in the equation of whether it's product trust, operational trust, and process trust. That's something I saw very clearly. And of course, I always get excited about dev ops and cloud native, as you know, and some of the stuff we did with data as an asset from the chief data architect. And a couple I would add from yesterday, Indiegogo was, I thought, a great case study and then Muhammad Farooq talking about cloud brokering. 60% of IBM's business is still services. So service is very, very important. And I think that when I look at IBM's big challenge to me, John, it's to take that deep industry expertise that they have that competes with Accenture and E&Y and Deloitte and PwC, can you take that deep industry expertise and codify it in software and transform into a more software oriented company? That's what IBM's doing, trying to do anyway and challenging. To me, it's all about differentiation. IBM has a substantially differentiated cloud strategy that allows them not to have to go head to head with Amazon even though Amazon is a huge factor. And the last thing I want to say is, what IBM calls the clients, it's the customers. They have a logo slide. They bring up the CEOs of these companies and it's very, very impressive. Almost in the same way that Amazon does at its conferences, they bring up great customers. IBM brings in the C-suite. They're hugging Ginny. You know, it was a hug fest today. Benny off up on stage. It was a pretty impressive, you know, lineup of partners and customers. I didn't know AT&T and IBM were that close. That was a surprise for me. And seeing the CEO of AT&T up there really teased it out. And I think AT&T's interesting. And Mobile World Congress, one of the things that we covered at that event was the over the top telco guys got to get their act together. And that's clear that 5G and wireless over the top is going to power the sensors everywhere. So the IoT on cars, for instance, and life is going to be a great opportunity for the telcos to finally get a business model. So it's interesting to see his view of digital services from a telco standpoint. The question I have for AT&T is, are they going to be dumb pipes or are they going to actually move up the stack and add value? Interesting to see who's the master in that relationship? IBM with cognitive or AT&T with the pipes? And you know, you're in Silicon Valley. So you hear all the talk from the Silicon Valley elites. Oh, well, you know, Apple and Amazon and Google and Facebook, much better AI than Watson. I don't know, maybe. But IBM's messaging, okay, so yes, fine. But IBM's messaging and positioning in the enterprise to apply their deep industry knowledge and bring services to bear and solve real problems and protect the data and protect the models. That is so differentiable. And that is a winning strategy. Despite the technical advantages. Anyone is doing serious AI attempts. AI, first of all, is a whole bastardized definition. It's really machine learning that's driving it and data. Anyone who's doing any serious direction to AI is using machine learning and writing their own code. They're doing it on their own before they go to Watson. So Watson is not super baked when it comes to AI. So what I would say is Watson has libraries and things that can augment traditional custom-built AI as a kernel. Our 13-year-old guest, Ted May, was on. He's doing his own customers off, then bringing it to Watson. So I don't see Watson being a mutually exclusive Watson or nothing else. Watson right now has a lot of things that adds to the value, but it's not the holy grail for all things AI, in my opinion. The innovation is going to come from the outside and meet up with Watson. That to me is the formula. Going back to Mohamed Farouk yesterday, he made a statement, roughly, don't quote me on these numbers, I'll quote myself. For every dollar spent on technology, $10 is going to be spent on services. That's a huge opportunity for IBM and that's where they're going to make Watson work. If I'm IBM and Watson team and I'm an executive there, an engineering lead, I'm like, look it. What I would do is target the fusion aspect of connecting with their customers' data. And I think that's what they're kind of teasing out. I don't know if they're clearly saying that, but I want to bring my own machine learning to the table or my own custom stuff because it's my solution. If Watson can connect with that and handshake with the data, then you've got the governance problem solved. So I think, you know, Seth, the CDO is kind of connecting the dots there and I think that's still unknown, but that's the direction that I see. And services remains critical because of the complexity of IBM's portfolio, but complexity has always been the friend of services. But at the same time, IBM's got to transform its services business and become more software-like and that is the winning formula. And then at the end of the day, from a financial perspective, to me, it's cash flow, cash flow, cash flow. And this company is still a cash flow company. So the other thing that surprised me, and this is something we could kind of end the segment on, is IBM just reorganized. So that's been reported. The people shifted a little bit, but it's still the same game. They kind of consolidated the messaging in a little bit, but I think the proof point is that the traffic on the digital side for this show is 2x World of Watson. The lines to get in the keynotes yesterday and today were massive. So there's more interest in interconnect than World of Watson. And we did. And that was a huge show. So what that means is, this is hitting an interest point. Cloud and data coming together. And again, I said it on the intro on yesterday. IoT is the forcing function. That to me is bringing in the big data world. We're just a strata Hadoop at our event, a big data SV. That's not Hadoop anymore. It's data and cloud coming together. And that's going to be hitting IoT in this cognitive piece. So I think certainly it's going to accelerate my- And IBM's bringing in some outside talent. Look at Harriet Green, came from Thomas Cook, Michelle Paluso, marketing chops. And they sort of shuffled the deck with some of their larger businesses. Put Arvin Christian in charge, brought in David Kenney from the weather company. Moved Bob Pitchiano into the cognitive systems business. So as you say, shuffling things around, still a lot of the same players, but sometimes the organization- By the way, we've got to talk about Don Tapscott, who came on, my favorite of the day. Blockchain revolution book, we interviewed him. Check out his book, Blockchain is going to be great. Tomorrow we've got a big lineup as well. We're going to have some great interviews all day, going right up to 5.30 tomorrow for day three coverage. This is theCUBE here at the Mandalay Bay for IBM Interconnect 2017. I'm John Furrier and Dave Vellante. Stay with us tomorrow, join us tomorrow, Wednesday for our third day of exclusive coverage of IBM Interconnect 2017. Thanks for watching.