 Live from Boston, Massachusetts, it's theCUBE. Covering Red Hat Summit 2019, brought to you by Red Hat. Well, good morning, welcome back to our live coverage here on theCUBE of Red Hat Summit 2019. Along with Stu Miniman, I'm John Walls. We're in Boston, a delightful day here in Beantown, even made more so by the presence of Jim Whitehurst, the president and CEO of Red Hat. Jim, thanks for joining us, number one. Number two, what else could go right for you here this week? This has just been a great show, great keynotes. You had great regulatory news on Monday. I mean, you've got a four-leaf clover in that pocket there, I think, Fred. I tell you what, the weather's holding up well for us. You're right, with great partnership announcements, amazing product launches. You know, I've been at Red Hat, what, 11 years now, and this is only my third rel launch, right? When we deliver it, we commit to long lives and so, but it's awesome to be a part of that. And we had all the engineers on stage. I can't imagine how it can get any better. I guess I could win the lottery. Yeah, well, yes, just one step at a time here. Rel 8 and OpenShift 4, we'll get to those just a little bit. Let's go back to the keynote last night. First off, you have the CEOs of IBM and Microsoft. They're very big statements, right? We know about the IBM situation. I think a lot of people got a charge out of that a little bit, you know, Jenny commenting about, I don't have a death wish for this company. I have 34 billion reasons why I wanted to succeed. But a very good message, I think, about this linkage that's about to occur, most likely, and the thought going forward from the IBM side of the fence. Yeah, I thought it was really good to have her there, not only to say that, you know, we obviously bought it to make it grow, but also really making a statement about how important open source is to the future of IBM, right? You know, what became clear to me early on when we were talking is this is a major, major, I don't want to say Beth, the company might be too strong on word, but it is a major kind of largest possible initiative around open source that you can, you know, imagine. And so I can't imagine a better kind of validation of open source with one of the largest technology companies in the world basically going all in with us on it. Well, to talk about validation of open source, Satya Nadella up on stage, if you had told me five years ago that within a week I would see Satya Nadella up on stage with the CEO of VMware and then a week later, up on stage with the CEO Red Hat, I'm like, are we talking about the same Microsoft? This is not the Microsoft that I grew up with and worked with. So talking to your team and walking around, it wasn't just, you know, he flew in from Seattle, he did the keynote and left, he was meeting with customers. There's a lot of product pieces that are going together. Explain a little bit the kind of the depth of the partnership and what it means. Yeah, we've made just tremendous progress over the last several years with Microsoft. You know, it started back in 2015 where we, you know, cross-sortified hypervisors and that's kind of a basic, you know, let's work together. Over the last couple years, it's truly blossomed into a really good partnership where, you know, I think they've, and we've both gotten over this, you know, Linux versus Windows thing and, you know, I say we've gotten over, I think we both recognize, you know, we need to serve our customers in the best possible way and that clearly means is two of the largest infrastructure software providers working closely together and what's been interesting as we've gone forward, we find more and more common ground about how we can better serve our customers. Whether that's, you know, what might sound mundane, but it's a big deal, SQL server on RHEL and setting benchmarks around that or .NET running on our platforms, now all the way to really being able to deliver a hybrid cloud with a seamless experience with OpenShift from, you know, on-premise to Azure and, I mean, having Deutsche Bank on stage to 25,000 containers running in production, moving back and forth to Azure. You know, getting customers to change is challenging. You know, it's a little surprising even after that, this morning, to be like, oh yeah, let me pull up Windows and log in and do all this stuff. We've talked to you a lot over the years about culture, you know, loved your book. We've talked a lot about it. What I really enjoyed last night is, I mean, you had some powerful customer stories talking about how Red Hat's helping them through the transformation and, like, the Lockheed one for me was like, and here's how we failed at first because we tried to go from waterfall to scrumfall and, you know, he definitely had the audience enraptured. Yeah, you know, I really wanted to make my keynote talking about, I call it the howl. We have so many great what's to talk about, you know, RHEL 8, OpenShift 4, bringing in all those capabilities from CoreOS, but I really wanted to talk about the howl because that actually is the hardest part for customers. And so having kind of customers back-to-back talking about success stories and failures to get there, and it really is about culture. And so that's where we call the open source way, which we kind of coin, which is, you know, beyond the code, it's, you know, meritocracy and how you get people to work together and collaboration and that's what more and more our customers want to talk about. In fact, I would say 90% of the customer meetings I'm in, which are, you know, more CIO level meetings, they're all about, tell me about culture, tell me how you go about doing that. Yeah, we trust that technology's going to work. We don't have that issue with open source anymore. Everybody assumes they're going to have open source. It's really, how do you actually make that effective? And so that's what I really wanted to highlight over the course of the evening. Yeah, there was a lot of conversation too, and you're talking to Jenny about culture last night, that you had multiple discussions over the course of the negotiation or of the conversations. So it wasn't just some cursory attention, I mean, both of you had a really strong realization that this has to work in terms of this, you know, merging basically of philosophies and whatever, but you've had great success, right, with your approach. So if you can share a little bit about how those conversations went through, how they transpired, kind of how we got to where we are now that, you know, it's around the cusp of a successful moment for you. Yeah, sure. So, yeah, I mean, from day one, that was the center of the discussion. I think early on, so a year ago, IBM announced containerizing their software on OpenShift. And I think that's when the technical light went off about, hey, having the same bits running across multiple clouds is really, really valuable and OpenShift's the only real way to do that. And you know, so Arvind was here from IBM on stage talking about that. And so I think technically it was like, okay, ding, this makes sense, nobody else can do it. And IBM with their capabilities and services integration, et cetera, just a lot of strategic logic. I think the difficult part, even before they approached us now, kind of looking back on it and having all these discussions with them now, it's okay, well, culturally, how do we bring it together? Because, you know, we both have strong cultures. I mean, IBM has a famous culture we do that are very, very, very different. And so from the moment Jenny first approached me, literally, you know, hey, we're interested in this, let's talk about culture, how are we going to make this work? Because, you know, it is a lot of money to spend on a company with no IP. And so, you know, I think as we started to work through it, I think what we recognized is we can celebrate the strengths of each other's cultures. And you know, the key in this is to not assume that there's one culture that's right for everything. We have a culture hyper-optimized for collaboration and co-creation, whether that's upstream with our open source communities or downstream with our customers or with our employees and how that works. And that's great, and let's celebrate that for what it is. And you know, IBM kind of runs some of the big, most mission-critical systems in the world, you know, on mainframes. And how you do that looks and feels different. And that's okay, and it's okay to be kind of different, but together. If we can share the same values, if we can, you know, share the same desire to serve our customers and put them first, how we go about doing it, it's okay if those aren't exact. And as we got more comfortable with that, that's when I got more comfortable with it. And then most importantly for me is we can talk about culture, but a lot of our culture comes from the fact that we're truly a mission, kind of a purpose-driven company. We are all about making open source, the default choice in the world. And you know, to some extent, I remember having these conversations with the senior team, it's like, hey, if we're going to think we're going to change the world, you know, how better can we propel this forward? This is such a huge platform to do it. And yeah, it's going to be hard, but aren't we here to do hard things? Yeah, so you talked about it, you know, it's always been difficult selling when you don't have the IP. There's been a lot of discussions in the ecosystem today as to companies that build IP with open source and some of the models have been changing and some of the interactions with some of the hyperscale companies. And just curious when you look at that, it's, you know, related to what you're doing, what feedback you have and what you're seeing. Yeah, and look, let me first I'll say, I can talk about that as an interested observer because our model is different than a lot of open source software companies. You know, Paul talked about in his keynote today and we talk a lot about, you know, our model is 100% open source where we take open source code, typically getting involved in existing communities and creating life cycles, et cetera, et cetera, et cetera. And so that model's worked well for us. Other open source companies where I think this is more of a challenge with the hyperscalers, write more of the software themselves. And obviously they therefore need to monetize that in a more direct way. You know, our business model, I always say, it's a really bad business model to write software and give it away. You know, that's not what we do. We're 100% open source, but you know, if you look at big communities, we're, you know, 10 to 20% of the contribution because we want to rely on communities. The issue for those companies that are doing more of the code contribution themselves is there's a leakage in the open source license, which is, you know, the open source, the viral license is, you know, if you make changes and you redistribute, you have to also, you know, redistribute your code as well. And redistribution and how it's defined in a hyperscaler is just different. So there's kind of a leakage in the model. I think that ultimately gets fixed by tweaks to the licenses. I know it gets really controversial when companies do it, but you know, Mongo's done it. And I think you'll see continuing tweaks to the licenses, which still allow broad use, but kind of close that loophole if you want to call that a loophole. Yeah, well, it's something that, you know, as observers, we've always watched this space. And you know, when you talk about Linux, you know, you've created over a $3 billion company, but the ripple effects of Linux has been huge. And I know you've got some research that we want to hear about. When we looked at like the Hadoop space, when you look at the impact of big data and now where AI is going, you know, the Hadoop distribution was a very, very small piece of that, so you know, talk a little bit about the ripples and some new research that Red Hat underwent. Yeah, we had some research that was, that we commissioned to say, well, what is the impact of Linux, Red Hat and Press Linux? And now we were all blown away, $10 trillion. I mean, so this isn't our number, so we had real experts do this. And I mean, it really blew us away. But I think what happens is, if you think about how pervasive it is in the economy, it's ultimately hard to have any transaction done that doesn't somehow ripple into technology. In technology days, primarily built around Linux. So in Red Hat and Press Linux, it's the leader. So it just pervades and pervades when you look at the size and the aperture. And you make a really good point around whether it's Hadoop or Linux. I mean, we could look at Red Hat, the leader in Linux and we're, you know, less than $4 billion of revenue, but we've created this massive ecosystem. Same thing with Hadoop. If you think about how big and impactful big data and the analytics that built on it are, massive. The companies doing it are only a couple hundred million dollars and I will say, I've become comfortable with that. I'd say five years ago, I used to say on my glass half empty day, I'd be like, we're creating all of this value, yet we're just only getting this little tiny sliver. I've now flipped that around and say, on my glass half full days, I look and say, wow, with this lever we have, with this little bit of investment, we're fundamentally changing the world. And so, everybody's benefiting in a much larger scale around that. And when you think about it at that aperture, it's something you get really, really, really excited about. Yeah, well, you talk about where the impact will be. Talk about cloud, the wave of containerization. You know, where do you see that ending up? You know, I look, you know, Kubernetes is one of those things, there's a lot of excitement and rightfully so it was going to change the market, but it's not about a Kubernetes distribution. It's going to be baked into every platform out there. Yeah. OpenShift's doing quite well and, you know, all the cloud providers, you're partnering with them and working with them. It's less fighting to see who leads and more as to how do we all work together on this? Well, yeah, I think that's the great thing about a well-functioning, mature open source project is it behooves everybody to share. Now, we'll compete ultimately, you know, kind of downstream, but it behooves everybody to share and build on this kind of common kind of component. And, you know, like any good open source project, it has a defined set of things that it does. I think you hit on a really important point. Kubernetes is such an important layer. Doesn't work without Linux, right? I mean, Linux is, you know, containers are Linux. And so how do you think about putting those pieces together, manageability and automation, things like Ansible? And so, you know, at least from our perspective, it's all right, how do you take these incredible technologies that are cadencing, you know, at their own pace and are fundamentally different but can't work unless you put them all together? Which to us, you know, that creates a big opportunity to say, how do I take this incredible technology that thousands of really technically sophisticated people are working on and make it consumable? Our traditional model has been like Linux, simply saying, we're going to snapshot, we're going to create a defined life, we're going to backport, you know, do patching, blah, blah. And we still do that, but there's now an added source of value of something like OpenShift where we can say, okay, we can put these pieces together and lifecycle them together. And, you know, we see instances all the time where an issue with Kubernetes requires, you know, a change in Linux. And so being able to lifecycle them together, I think we can really put out, you know, a platform where we literally now are saying, in the platform, you're getting the benefits of millions of people working on, you know, over time on Linux with tens of thousands of people working on Kubernetes and the learnings are all then kind of wrapping back into a platform. So our ability to do that is it kind of, open source continues to move up the stack, it's really, really exciting. You were talking about transformative technologies and how great it is to be a part of that, you know, right now. You alluded to that last night in the keynotes that you're talking about this, you know, your history lessons, you know, how much you love doing that, your keynotes and, you know, the scientific method, industrial revolution, open source. Just without asking you to recount or recount all that, just give us an idea about how those are philosophically aligned and how you think those are open source follows that lineage, if you will, where it is fundamentally changing the world, it is a true global game changer. Yeah, and so the point last night was to really kind of illustrate how a change in thinking can fundamentally change the world we live in. And so what I talked about just kind of quickly is, so the scientific method developed in kind of the 1500s-ish timeframe was a different way to discover knowledge. So it goes from kind of dictates coming down from, you know, on high to very simple, hypothesis, experiment, observation of the results and the things that go through that process and stand the test of time and become what we consider knowledge, right? And that change led immediately to an explosion of innovation, whether that were the underpinnings of the industrial revolution or enlightenment, what we've done in medicine, whole bunch of areas. And the analogy I came to was around, well, the old way we used to try to innovate constrains us and a more open approach is a fundamentally better way to innovate. But what I found so interesting in it, and I think you just picked up on it, I didn't emphasize as much as I wanted to because I didn't have it out a lot of time, it's many of the same characteristics of scientific discovery. So the idea of, you know, independence, anybody can actually do this, the importance of experimentation and learning, those are core components of, you know, DevOps and Agile and open source, right? It's very, in the end, the characteristics are actually quite similar as well. I think that's just fascinating to see happen. Yeah, so I think about that, and if you can bring it back to the customers you're talking to, you have a lot of executive conversations that you focus a lot on the how is really challenging. We understand, you know, the organizational structure of most companies goes back, you know, over 100 years to military. So, you know, what do you see as some of the, kind of the biggest challenges that, you know, the executives are facing these days and how are they getting past that stuck? Yeah, and so, you know, I think the simplest way to state the problem, which I hear over and over again, is we tried an Agile transformation and it failed because our culture wasn't ready. And culture is more of a, I always tell the executives when they say that to me, it's like, okay, but recognize culture is an output, not an input, and it's an output of leadership behaviors, beliefs, values, what's been rewarded over time. So if you want your culture to change, you actually have to think about changing the way that you lead and manage. And broadly, the structures, the hierarchies, the bureaucratic systems that we have in place today are really good at driving efficiency in a static environment. So if you're trying to slightly take a little bit of cost out of building a car, you start with what you did last year, you get a bunch of scientists or consultants to look at it and then you direct some really small changes. So the structure we have in place, there's nothing wrong with them. When value creation was about standardization and economies of scale, the hierarchies work really, really well to distribute tasks and allow specialization and optimization. The problem is, now most value creation is requiring innovation. How do I innovate and how I engage with my customer? You know, the example I used a couple of years ago at Summit was, you know, the average cars use 90 minutes a day. So if you think about how to reduce the cost of transportation, is it taking 2% out of the cost of building a car? Or is it figuring out whether it's ride sharing or other ways to fractional ownership, whatever it is, to increase the average utilization of the car? It's clearly the latter, but you can't do that in a bureaucratic hierarchical system. That requires creativity and innovation. And the model to do that requires injecting variance in. That's what allows innovation to happen. So as leaders, you have to show up and say, all right, how do I encourage descent? You know, how do I accept failure? Right, so this idea of somebody tries something and it fails, if you fire them, nobody's going to try anything again. But experimentation by definition requires a lot of failures and how you learn from it. So how do you build that into the culture where as executives you say, holding people accountable doesn't mean, you know, firing them or beating them up if they make a mistake. It's how do I encourage the right level of risk taking and mistakes? You know, even down to the soft side. So, you know, how do you hold somebody accountable in an agile scrum? Right, your leaders have to be mature enough to sit down and have a conversation. Not around, here are the five things you were supposed to do and you did four of them so you get an 80. Right, now you can't say exactly what they need to do because it's a little blurry. So you have to have leaders mature enough to sit down and have a conversation with somebody as, I think you got an 80. I think you got an 80 because here's what you did well and here's what you didn't, but it's subjective. And how do you build that skill in leaders to be able to have those subjective conversations? Right, that sounds really, really soft, but agile's not going to work if you don't have leaders who can do that, right? And so that's why, and it's hard because, you know, changing people is hard. And so that's why I think so many CIOs and executives want to talk about it, but that's what I mean by it's a soft side and how do you get that type of change to happen? Because if you do that, pick ours, honestly pick somebody else's, you know, agile or dev out some of the methodologies. They'll work if you have a culture that's accepting of it. But before I let you go, there were two things, two quick observations about last night. Number one, Rahul Samant, hit you up on the licensing. So I know you got your hands full on that. Good luck with that. You mentioned licensing a little bit ago. And I learned that $34 billion is a good deal. Well, right? That's what you said, I heard it from, from a good deal. Absolutely. Well, two things, we're a separate entity. We don't have licenses, so I don't know how we would go into an ELA, given we don't have a license to sell. So we've got some expectations setting we need to do with our customers. Absolutely. And then, you know, but separately, you know, I think people do forget that Red Hat is a not only a really fast growing company, we're also a really profitable company. Most of the other software companies that are growing at our pace on a gap basis make little to no money. We have, because we get the leverage of open source, we actually generate a very large amount of free cash flow. And if you actually got to get the details of the financials, but if you look at our free cash flow generation and our growth, I would argue it was a smoking good deal at 34. I was asking for a lot more than that. You could add smoking good, lastly. That would work too. Jim, thanks for the time. It's great to be here. Great week. Thank you for hosting us here. Great opportunities on the show floor. I know that's exciting to see too, but continue success. We wish you all the best. Thanks so much. Thank you for being here. It's great to have you. Jim Whitehurst joining us. Back with more live coverage here on theCUBE. You are watching our coverage here in Boston of Red Hat Summit 2019.