 Live from Palo Alto, in the heart of Silicon Valley, it's theCUBE, covering I-O, brought to you by I-O. Now, here are your hosts, John Furrier and Peter Burns. Hello everyone, welcome to theCUBE. We are live in Silicon Valley on Sand Hill Road at the famous Rosewood Hotel for a special CUBE broadcast with I-O data centers systems here for their I-O Conversations events, thought leadership conference around the data centers of platform. I'm John Furrier with Peter Burris kicking off the event here. They got a panel discussion we're going on, we're filming that, putting that on the SiliconANGLE channel. This is theCUBE, our flagship program. We go out to the events and extract the signals and noise. Peter, I-O data centers, it's not a startup, but they're in the meat and potatoes data center facilities they do hosting, a lot of good stuff. They're in Arizona and they're connecting all these different systems together. But the notion of a data center, absolutely changing, we know it's been under pressure. We see Amazon essentially saying, why should anyone ever build a data center? The cloud being one big data center. So data centers aren't going the way, they're shifting their role, they're being architected differently. Why should we care? What's the impact to enterprises? Obviously, this cost involved, this power, it's changing, what's your thoughts? Well, John, at the end of the day, data centers in many respects are this enormous transducer that turn energy into information, right? So none of this happens for free. Data center is one of those places where the physical reality of what it means to do computing is manifesting itself in a big way. Now, the advantage of the good news is that a lot of the technologies that we're seeing being applied to a lot of different domains, whether it be an e-commerce or factories or shipping or whatever else it might be, a lot of those technologies to do a better job of using digital to handle control and management and administration can also be applied to data centers and energy consumption. And so in many respects, what we're seeing is a resurgence in the understanding or in the interest, I guess I should say, a resurgence in the interest of data center design, deployment, administration and management, precisely because of the enormity of the demand for compute power on a global basis and the unbelievable requirements data centers have for pulling energy from the grid. And the whole notion of cloud and the transition we're in as an industry puts more emphasis on the notion of a platform and just breaking down the word data center. That's a center where the data is, it used to be you bolt on a data center in your headquarters and everything would come in there but to be data centric is a philosophy that many are taking, the startups being born, companies are changing, to be data centric and the role of what a data center used to be is certainly flipped upside down. Your thoughts on that and how should customers who have traditionally built their own data centers to store their data now are facing a new reality? What is the new realities and what is the impact of customers? Well, the new reality is that networks are becoming very, very, they're obviously ubiquitous, they're becoming increasingly performant. So you could at least conceptually put a data center almost anywhere. But because you can put a data center almost anywhere, it means that the design specifications or the overall determinants and constraints of what you do are being driven by a couple of things. Proximity to energy is a big one. If you can locate a data center where there's a rich energy source, then that's gonna be better than not. Now, one of the things that we are seeing is we're seeing new renewable energy sources actually become more portable themselves. And so we're starting to see that constraint start to evolve a little bit. The second one is that at the end of the day, physics still matters. To the best of our knowledge and all the research that we've done, nobody in the computing industry has yet figured out how to abrogate the laws of physics. If it requires local processing, if it requires that the processing be local to the event, then we need to move this enormous processing power out closer to the actual processing work that's being done. We're calling that edge centers and the idea that edge IoT and data centers are on an intersection where we have prepackaged. But obviously the final one is that data centers have historically become a significant capital expense for a lot of businesses, a significant operating expense because of all the energy that they're pulling down and essentially or increasingly essential to the operations of the business, not just in the back office but even in how they engage customers. And that is driving a whole new class of business person to start to think about what their long-term strategy needs to be to get access. Do I build my own data center? Where do I put it? Do I go to the cloud? Do I have supplemental capabilities? Do I manage my own edge? A lot of institutional factors have to be considered by business people today. And the whole power equation really is a big one too. And I think you've ready to highlight that. And I think this not only is impacting the companies themselves but society because there's now a global issue around the big mega data centers that are being built. But before we get to the whole cultural intersection between energy industry and IT industry. And business. And business, which is an interesting dynamic. I know you've got some research. I want to get your thoughts on what Pat Gelsinger said at VMworld. He said, and this is on datacenterknowledge.com who we'll be interviewing here today. Pat Gelsinger thinks the days of the data centers as we know it are numbered. Quote, increasingly companies want to get out of the job of building their own data centers and operating their own data centers, providing a huge opportunity for service providers. Highly instrumented, modern efficient, cloud-scale data centers is how he went on to describe this new future picture. And 2016 is the crossover year when that becomes a dominant way data centers are built and operated. So he's pointing to the fact that people won't be in the data center business. Your thoughts on his comments and who's in position as an industry to really take advantage of that trend? Yeah, look, I think Pat's a smart guy and is right in the main, you know, but at the end of the day, this is gonna be one of the situations where the exception's gonna be the rule because some businesses are gonna say, there's some data that I don't wanna move over long distances. I wanna put some degree of process in close to where those events take place. Some businesses are gonna say, I need to open up a new market or new capability or new source of labor or new source of materials. I wanna control my own processing destiny and there may not be the infrastructure that I need. And then finally, I mean, let's be honest, here in the U.S. anyway, we have not seen an enormous net new investment in a lot of crucial infrastructure. Now, that crucial infrastructure includes things like roads and whatnot, but it also includes the grid and the telecommunications fabric. Now, none of us are gonna predict that there's an impending disaster, but there's no question. We're seeing failure rates start to go up and businesses that have become they've had the telecom fabric. In the telecom fabric and in the the grid, the electrical grid fabric, we're talking to a very, very smart guy, Natalago, who said that at least in the electric grid here in the U.S. we're seeing 10% increase in the number of failures a year. That is gonna be factored into all the equations about how those prescriptions about, we're all going to the cloud and it's all gonna be mega centers that actually turns into reality on a business-by-business case as they look at their specific, increasingly strategic needs for their processing. It's interesting. I want to get your thoughts on a trend that we're tracking. Obviously, the word data center implies data. It's in the center as the location. It used to be called data processing back in the day and they're in the mainframe days and mini computer days. Now we hear IOT, Internet of Things, all have data at the center of their value propositions. Okay, so I know that you have an opinion on this, but I'll want to get your opinion, but also connect the dots of what that means from a data center architecture standpoint. Obviously, there is no one central data. It seems to be not the case where you're going to have one place where everything lives, maybe stored, archived, but what's the impact of this whole data-centric philosophy? What's your opinion on this? So I think the most important thing in many respects you kind of alluded to it, John, is that the data center is not a physical statement anymore. Data being at the center does not mean it's all physically in one place. It means that from a business decision-making standpoint, increasingly we're going to factor how data impacts our business. In many respects, even design certain business activities and maybe the entire business around what data is, can and cannot do. So that's definitely happening. But as we talked about earlier, virtualization doesn't just happen. There is always something physical somewhere that's taking place that makes it possible to do computing. And whether it's a central location, that's the fundamental role of the data center, is to create an environment in which these things, computers, can actually operate, that we can administrate them, that we can secure them, that we can optimize the amount of money that we have to invest from an infrastructure standpoint in their utilization. So there's always going to be this simple reality. You've got to put the computer somewhere and you're not always going to use everybody else's computers to do it. Yeah, people watching that aren't necessarily in the data center business. And the ones that are know that when you go in, look for space to co-locate or build out a data center. Footprint and power drives everything. So it's very clear that power- And distance, and distance. And distance, power and distance. Well, power, on this point, I want to connect to your data analysis. Power has been validated as a scarce, valuable resource to design around. And data centers, you agree, is moving down that road to identify that power, to create all these new things. We'll talk about the culture later. Okay, now if you believe that, then you have to believe that data is going to be a very valuable piece to design around. So the question for you is, I know you're doing research on the value of data. I don't think the market has yet recognized, or might have recognized, but hasn't figured out, how to design around data. So I want to get your thoughts. We're designing around power efficiency. Are companies thinking and designing around data value? Not yet, John, at least not mostly. And there's a couple reasons for that. The first most obvious reason is that energy is a classic good. If I'm using energy, you're not. So there is some scarcity associated with it. And we have systems set up to ensure that I get what I need, you get what you need, I pay for what I need, you pay for what you need. We're really not sharing it. Data's a different thing. I can pull data down and use it. You can pull down the exact same data. You may use it the same way. You may use it a different way. It doesn't follow the traditional laws of scarcity. Now this is really important because there's a lot of stuff, a lot of talk out there about what digital business is. And everybody's like a blind man in the elephant trying to figure out exactly what it is. We have a very simple way of looking at it. From our perspective, a digital business is the use of data to differentially create sustained customers. That's how I think Peter Drucker would describe it. Might as well think like he does, right? So it's how do you use it? It's a process improvement oriented. Not just process improvement. It's any way that you might use data. You could use in process improvement. You can also discern patterns of customer activity. You could use it to do a better job of fraud detection or to reduce the amount of reversals that you have if you're in retail because you've got the right product to the right person. I mean, we're talking about billions and billions and billions of either revenue or savings that are gonna happen as a consequence of using data better. But any way you look at it, fundamentally, the reason why the notion of data center becomes important is because in the context of digital business, we have to put data at the center, increasingly at the center of our designs and recognize that just because we can buy virtualization and the cloud everywhere, that it just kind of, all this just kind of happens, there is always gonna be a physical place, a big, huge transducer that's taking energy and turning it into another type of output in this case. So great distinction, not scarcity, like energy, but valuable, as you pointed out, in a variety of different use cases that a customer would render it, almost like a painter with a canvas and paints. Whatever they do with it is their value. So the next question is what are you seeing in terms of companies and how they're approaching this digital business, as you described, and how are they designing around it? Because it seems to me that the common thing that we're kind of dancing around is, are companies designing around that data value? Are they recognizing it? Are they actually putting things in place? And what are some best practices that you see today? A few are. Amazon certainly thinks about these things. I've got knowledge of customers. How can I apply that knowledge differently? IBM's got cognitive. IBM's got cognitive, is trying to sell it as a service, they're having a hard time, I think, making it relevant to as many customers as they would. They'll figure it out, but they're having a hard time. Certainly financial services business has been thinking about this for quite some time. So some businesses are absolutely starting to envision the role the data plays at the center. From our perspective, John, it all starts with understanding what contexts you enter into with your customers. And this is something that we do at SiliconANGLE all the time. What are you going to do with your customers? That's what we mean by context. What are you going to do? Identify that and identify the role the data plays in ensuring that when you enter into those contexts, you do it better than anybody else. Some of that can be done digitally, some can't, but increasingly you want to understand how you can bring data to the communities that you're going to serve defined by the context that you enter. And I love the term that you use and that Wikibon team looks at as data as a digital asset. The word asset means is value. So the question is, will there be financial modeling around this and how do you get that on the balance sheet? Or if any? That's a great question, John. And I think that one of the problems that we have is that we spent too much time thinking about how to put data on the balance sheet. Because the balance sheet is set up to talk about, tell investors about, okay, here's the resources I've had, I have. And I've appropriated these resources uniquely to this different set of applications or uses. And I made, and as a manager, I made a decision to do this and not do that. So it's still based on scarcity. Now, will we get there? I'm confident we will. In the meantime, what we're telling customers to do is to step back and as they consider how to deploy their people, how to deploy their machinery, how to deploy their capital, how do they deploy their stocks and materials, et cetera, their inventory. They also start thinking about what data do I need to succeed at this and do it better than anybody else. What data is necessary for me to win in this context? You can always get the story from Peter and myself. On Fridays, we have a new podcast, audio program called Cube Fridays, where we wrap up what's going on in the week, extract the signal from the noise, and then talk about the impact. And you can go to iTunes and search Cube Friser, go to SoundCloud slash Cube Cast with an S, Cube Casts with an S. Peter, great kickoff here at the Rosewood and the heart of Silicon Valley. The famous Rosewood on Sand Hill Road, this is where all the VCs live. Final thoughts with the VC all around us. We can feel the VCs, the mental energy, all that, the people that write in big fat checks right here in Silicon Valley. Investment climate in this area, obviously clean tech has been a darling and then went through the, kind of down, they'll kind of out and what's the thoughts around? Energy, data, investment in thesis, you've seen any clarity? No, data center's one of those things that everybody's bored by, but at the end of the day, as we talked about, there is going to be a physical reality that people have to accommodate. I anticipate, I think we anticipate and our research suggests pretty strongly that what we're gonna see over the next few years is people go off and try to build new types of software, big data, IOT, all these other things, that the rubber's gonna meet the road in how they think about locating the stuff that they need to get this done and the guys across the street, they'll get there eventually. Yeah, I don't see much coherency and clarity around the multi-threaded disciplines around this data center explosion, data center as a service or platform as a service, as IOT data centers looks at it, but what's interesting and what I see is the trend from an entrepreneurial tinkering standpoint and startups actually coming out is, you're gonna see the old school 80s systems guys from the Berkeley's and our generation that build operating systems look at the network as an operating system, so the notion of systems meets software, I think is going to create, that's to me where I see the movement of converging in these disciplines and that's gonna be concepts from computer science back in the day where, okay, if you look at it as a system, energy, data, it's a whole nother leveling and it's a complete paradigm shift, I see that clarity, I yet don't see the investment. You see the problem clearly, you don't see the solution. People are tinkering but there's no money coming in yet and this data center movement is relevant to me because this is the transition to what the UNIX open operating system model, how that level, the operating systems and then ultimately open networking with TCPIP as compliance changes, so to me, that's what we're looking at still in the media, that's what we're gonna be dissecting and continuing to understand the impact. So to build on that just very quickly, John, that another way of putting that is technology is being embedded more deeply in business. Therefore, all of the things that business has to worry about, energy, physical location, rules, regulations, employment, all those other stuff is increasingly gonna impact how we think about deploying technology. It's a virtuous cycle. We talked to this on our last Friday podcast show which is, if you think about IT as being a back office function, you actually made the comment that it's now in the front office, which means the notion of a business is an operating system. It is by its own entity in operating environment. You have function, so if you believe that it's connected and digitally enabled, the digitization means the company is the operating system. Hey, some businesses, their IT is literally on the customer's device. Every company is a software company in this new front office, future of the data center. So we're gonna continue the programming here in the heart of Silicon Valley and Sand Hill Road. Of course, our office is right down the street in Palo Alto. Check out Cube Fridays. We'll be right back with more live coverage from IO Conversations after this short break. Very the co-founder.