 Live from Las Vegas, it's theCUBE. Covering Discover 2016 Las Vegas. Brought to you by Hewlett Packard Enterprise. Now, here are your hosts, John Furrier and Dave Vellante. Okay, welcome back everyone. We are here live in Las Vegas for HP Discover 2016. This is our six year covering HP Discover. HPE Discover, we used to be called HPE Discover. This is SiliconANGLE Media's theCUBE, our flagship program where we go out to the events and extract the signal from the noise. I'm John Furrier. My cohost, Dave Vellante. Our next guest is one of our favorite guests, Keeve Lump, Sargillai. Welcome back to theCUBE. Senior Vice President and General Manager of the Communication Solutions Business, aka the Telcos, NFV, whatever you want to call it. Growing more. Great to be here as always. Great to see you. Got to say, happy birthday. Recently, I had to celebrate your 50th birthday. I want to say to you guys, you look like you're 40. Going on 30. We killed this guy now. We're live, you can't take it back. In all seriousness, pleasure to have you on because you have a good perspective. You've seen a lot of different things going on within HPE, particular. And now you took over the group around NFV. That was the telco. Back when the telcos kind of realized they had to look down the barrel of digital convergence, digital transformation, digital services. What's the update? I mean, how far have they come? I know your group's grown. Certainly you've got a good head count of staff under you now. What's the update with the telcos and the whole service providers? Yeah, I mean, look, the first thing to understand is this is a huge industry, it's a trillion dollar industry. So when we talk about the telcos and also telcos includes things like the cable providers, it's all converging, right? You got cable guys buying phone companies, phone companies buying cable guys, buying content. They all realize they need to become more digital service providers. The basic stuff that they've done in the past which is connectivity, that sort of baseline, they now have to do more things in order to monetize it. What they've monetized before is getting more and more threatened by some of the other players coming in, like for example, what's up, right? You can use that for text messaging a billion users a day, nobody pays anything, right? So they have these entrants coming in and so they have to transform to be digital service providers. They've been very successful, but they need to transform to leverage some of these new technologies. And so I think in the last few years, that's been sort of called NFV, but really it's more than just NFV, it's really transforming. I think at this point, it's more about the how, like there was a discussion before about the why for a while for a few years, then there was a discussion of what it is, why should we do it, and so no one's asking those questions anymore now. It's like, okay, how do we go about doing it? I don't know, we're in the center of that. So I got to ask you, one of the things that we hear all the time from these big providers is that, yeah, table stakes is connectivity, but they still got to ramp up that too, because the demand with phones and people doing Snapchat, I mean, hell, my bills or family bills going through the roof, my kids, but that's just video, more video, more connected IoT now coming, so they got to ramp up the investment on connectivity and then have over-the-top services on top of it. How do they do that? Do they blend them investments together? Do they have a strategy? What are some of the use cases that you've seen that have been successful around, how to balance that? Yeah, well, you hit it on the head, right? They have to do two different things. I mean, demand is growing, but then you got to monetize it, right? Because they're getting less and less dollars per bit, so they have to keep on adding capacity, but they don't get as much money for it. And parallel to that, they also need to figure out new monetization streams that they can make money off of at their margins. So it's a sort of a dual-pronged thing. First of all, they need to figure out how to improve their cost structure by leveraging some of the new capabilities that have shown up with cloud and IT, right? If you look at what cloud has enabled to happen over the last decade and some of the big web providers, right, it's all about automation, right? It's all about things that usually had 10 or nine hands touching are now automated because that makes it faster and also saves a lot of cost. So they need to sort of transform to that. Well, on the same thing, use that technology also to roll out new services. The good news is it's sort of interrelated, right? If you, we are a view of all this and the industry in general talks about the transformation to the telco cloud, which means you take the traditional telco infrastructure, which is very dependable, been around for the basic architecture and hasn't changed since they moved to TCPIP, but monolithic, siloed, even if it's virtualized, it's still very siloed and move that to leverage a lot of the technologies that the cloud has brought to us in the last decade. And again, it's not like these guys didn't know about it that they were building, busy building their networks. And so that's really what they need to go about doing. That will address two points for them. One, it will enable them to have a more agile platform, therefore enabling them to roll out services and be more in the cadence of the cloud where you move things very quickly. And two, it will improve their cost structure so they can continue increasing their capabilities for lower costs. And you mentioned reliability. It's old, reliable TCPIP. Is there a willingness on the consumer to somewhat sacrifice that reliability, that stability in order to get speed and agility? I mean, it's a mix, again. So the consumer, first of all, if you think about the consumer, we know there's a willingness in the consumer, right? Because we all moved from a landline to mobile. And without due respect, mobile is not a dependable landline, right? But it's mobile. So you're willing to put up with it because you get the benefits of having a mobile phone. So the consumer in general is already there. I think for them, it's more complex because there's a big regulatory environment. They've spent 30 years optimizing for the five, nine situation across silos and they have to do two different things. First of all, in the cloud, as you guys know, there's ways of achieving the same reliability, but it's done by replication, not by monolithic stacks. So it's a different culture. Yeah, and I think you mentioned mobile phone. I would argue that, I'd say mobile computer that makes phone calls. So that's really the trend that we see because it's more robust. And now you see Verizon making a bid for Yahoo for three billion that was newsed this morning. Yahoo once- Well, they want to become a digital provider. I mean, when you're looking at the strategies that people have, there's a technology strategy of moving your stack to what we call the new stack, right? Which is really a telco cloud environment. And again, where it's P because of our heritage both in network and in telco, but our capabilities in cloud, obviously, and as IT, we can go drive them there. And in parallel to that, they need to look at new services, like digital service provider, which is where you see Verizon doing some interesting things. So I got to ask you a question. Back in the old routing days and the networking days, because you know a little bit about that too, is the word differentiated services was a specific network term. You use differentiated network services to provide different costs per routing pass and then it kind of creeped up the stack. Is something like differentiated services where the digital world needs to go, where a telco could provide differentiated security, differentiated connectivity, differentiated movies? I mean, obviously over the top Netflix, you see all this stuff kicking ass. So how do they create a differentiated services model? And is it network driven? How do you see that playing out? Well, I think you raise a good point, which is we keep on talking about all this technology. It's a business, okay? So you got to start with the business. Sometimes I laugh and say, look, you're going to have a monkey behind it doing whatever he's doing, as long as it's fast and agile and cost effective, nobody cares. Now reality is you need technology. You need to make it happen. But you want to watch movies on their phone or device. The differentiated, you know, in the US especially is a bit of a difficult term because of a net neutrality. But in general, they need to be able to provide agility, right? So when you talk about differentiated, it's about flexibility using one platform. So, you know, one of the things, for example, you look at and you say, okay, look at IoT, for example, right? So today there is, I don't know, eight billion subscribers. I think we have about 10%, we control, you know, our subscriber system, HLR is probably responsible for about 10% of the subscribers in the world. But there's about eight billion, right? With IoT, you're probably going to get to 80 billion by 2020, maybe 60 billion, right? So you're going to get less per subscriber dollars because IoT is the lower art pool. But if you can figure out a platform that's flexible enough, that allows you to scale to that at a lower cost point, you can still make a lot of money off of it, right? So it's really about building a platform that's the more cost effective per services. Now, there is differentiation. You can of course do a lot of differentiation. You can also, you know, if you look at what some of these guys are doing, let's look at some of the enterprise use cases, right? So you hear a lot about virtual CPE, right? So traditionally, you know, more and more the telcos are looking at providing value out services to enterprises, right? If you're SMB, why do you need to do all the IT? You can just go to telco, they'll give you the whole thing. But for the telco to be competitive, they have to be able to do that without a truck roll, right? So one of the things that they're doing now, and we did a, you know, we have a win that's public about this in Swisscom, where you know, you put a box in there, it's all virtualized, and you can turn off and on services as you want. You put the box there once, and you can add enterprise services. So they need to figure out how they can do a lot of what they're already doing, but faster, cheaper, right? At the cloud cadence, right? The customer today, right? When you think about your experiences, when you want a service, forget about the friendship as service, right? You don't want to talk to this person. You want to go to the web, press a button, pay as you go and move on, okay? Just having that is a big difference, right? Just moving to that kind of consume model where everything is agile and easy. Now again, it's not like the telcos don't understand this. They understand this perfectly well, but they have an installed base of, you know, billions of dollars. Let me give you another example, right? Let's talk about voice, right? Nobody talks about voice anymore, right? Voice is gone. Voice is a $550 billion business, okay? It's contracting at about 8% a year, but it's $550 billion, okay? If they can figure out how to do some of their voice features in a cheaper way and move some of their voice infrastructure, which is probably based on 15-year-old technology to more converged technology based on an efficient... Well, that's unified communications business is kind of pivoting that whole... Yeah, but if they can figure out how to do that in an agile fashion, that's $550 billion you can make margins on. Sorry, you mentioned regulation, net neutrality. How is public policy affecting, supporting, stalling progress? And how does it differ in Europe versus North America? Yeah, I mean, I think in the... Well, first of all, Europe is a bit different because it's a lot more of a competitive environment, right? There's a lot more players. I mean, there's consolidation happening, right? There's a whole discussion about, so, you know, what's the right number of providers per country, right? If you have five providers, they kill each other on costs and the service goes down. If you have two providers, then it becomes a monopoly. Maybe three is the right number. So Europe is a lot more dynamic. In the U.S., I mean, I think the big players are investing heavily, but, you know, we got to be careful with the regulation. If we over-regulate them, they won't have an incentive to invest because at some point they have to be able to provide to get money for their differentiation while making sure. So I think it's hanging out there in the U.S. Is it, in your opinion, is public policy striking the right balance or are they still trying to figure it out? I think they're still trying to figure it out. I think it is a very fine balance because, again, you got to make sure that, you know, it doesn't get to the point where the network, you know, since it sets a key part of the infrastructure of services today, I mean, you can't consume any digital service without the network, so it's a big control point. On the other hand, you got to create an environment that incents the service providers to add value, if they can't monetize it. Well, it's an investment, right? They haven't... Yeah, they're going to spend dollars if everyone, if someone else is always getting all the money for their investments, they're not going to be incentive to invest. On the other hand, since it sets a control point, you got to regulate it. So it's a balance. I think it's getting there. And whoever owns the pipes wins. And I think that's why, you know, I talked about the differentiation services back in the day, the packet sniffers were really taken to the cleaners when they were going in and the service providers and the MSOs were essentially monitoring and throttling packets that weren't from their network. And then you have different networks and traversal... I think, look, the reality is, though, if you look in general in the digital economy, right, agility is the name of the game, okay? You can, if you roll out fast, there's the fast and the dead, essentially, right? I mean, over time, that's what you end up with, right? I'm going to tweet that. High and off. And that's true across the board. And they, again, they understand that. The question for them is, how do they continue running their existing business which they can't, you know, it's very easy to say, well, why don't you just go do this? Well, you know, I don't know, I'm running like a, you know, 50 billion dollar business or 100 billion dollar business, 150 billion, if you look at AT&T, they can't stop everything. So it's a question of how do you adapt the right culture and put in new infrastructure and put in new mechanisms to gain agility because you're going to have to have that agility, which, and what I mean by agility, I mean things like the ability to roll out services quickly, test them and turn them on and off, right? And charge for them and make money. In the past, right? When you wanted to do a service, and this is really a key understanding of how this works, right? You'd plan it, like you'd have, you'd plan it for three years, then you'd run an RFP for three years, and six years later, you'd roll out a service, okay? Today, can you imagine the service being planned for six years? I mean, the technology would be like two generations ahead. And so it's about, you know, quickly figuring out what you want to do, rolling it out on your software, composable infrastructure, seeing what sticks, making modifications in agile fashion and going back. This is not how telcos operate, okay? And it's not because they're bad. It's because historically, they haven't had a technology enable that, so that's not how they've operated. Their business model is pretty slow-moving, too. They only have to go very fast. So they need to get to that. They fully understand it, but it's a question of how do you get to that in a fashion that allows you to continue, you know, using your old business? And that's where, you know, we do a lot of work on. So that's infrastructure? That's a, what, a development culture? Skillsets? Starts with culture, first of all. Number one is culture, right? Because it's, you know, it's a different culture. It's not a siloed in the past. The same as the idea a decade ago, right? You created all these silos in order to ensure that you had stability because no one silo could affect the other silo. There's, you know, there's benefits. These things were not done because people didn't know what they were doing. They knew exactly what they were doing. It was the right thing to do at that time. Now it's all horizontal. So different culture, you know, more horizontal culture as opposed to siloed culture, all software, you know, premium on speed, right? Leveraging cloud-based infrastructures and also very business-focused, okay? Monetization. I need to figure out how to monetize stuff. A lot of the agility, agility across the board in terms of, okay, roll out a service quickly, see if it sticks, try it out, make modifications. You can't have, you know, the, you know, to your RFP process. But it takes time. Sorry, thanks so much for sharing that great thought. Leadership, just to give you the final word on the wrap here. What does HP do in to solve that problem? HPE, I still can't shake HP, HP Enterprise. What is HP Enterprise doing to solve that problem to make them fast so that they don't become dead? Yeah, well, I didn't say they will become dead, first of all. They are doing quite, I mean- You imply that they would be dead if they didn't move fast. And what I'm saying is that, you know, again, they're sharp. They've been around for many years. I think it's a question of helping them. But look, the key for them is they would like to work with someone who understands telco because their business is different. You can't just take a bunch of IT stuff and stick it there. But they do know that they need to transform. And so they want to work with, you know, less of their traditional folks who's going to keep them where they are and more with folks who understand the private cloud, open source. Is there one weapon that you have that you go in there and say, this is a big gun, you need to use this? Or is it a combination of technologies? Again, so there's two different things that matter. First of all, they like working with HP because we have been working with the telcos for many years. So again, 10% of the subscribers in the world go through some sort of HP software. And they like working with HP because we are a partnering company that is specialized in private cloud and IT. You know, we have our open stack. We have our orchestration stack, service director. And so I think our key weapon is that, you know, we are a leader in IT and cloud that has a strong telco heritage. And so, you know, we are the ideal partner for moving in this direction because we are sort of where they want to go to as opposed to maybe their historical partners that are themselves trying to figure out how to get there. And that creates a good environment for us. They are usually seeking us out and saying, hey, it's me, I really want you to come and help me here because I know you're going to push the envelope. But you know, they're transforming, but it's a process. Sargalai, SVP general manager, the communication solutions group, the telcos, we all have our phones or our home connectivity goes through these telcos and providers. Again, they're the ones powering the network. And thanks for their thought leadership. And thanks for sharing the insight. Appreciate it. This is theCUBE here live at HP Discover in Las Vegas. I'm John Furrier with Dave Vellante. We'll be right back. You're watching theCUBE.