 Live from Las Vegas, it's theCUBE, covering AWS re-invent 2018. Brought to you by Amazon Web Services, Intel, and their ecosystem partners. Okay, welcome back everyone. Live here in Las Vegas for AWS Amazon Web Services, re-invent 2018. I'm John Furrier with Dave Vellante. Dave, our sixth year covering AWS. We've been to all the re-invents, except for the original one, watching the progress of cloud computing, and it's a lot of new things happening, more compute, more power. For here, our special guest, Ray Jean Schiller, who's also known as RJ, inside Intel, vice president of the data center group, and the general manager of the cloud service provider, platform group at Intel, good to see you again. Nice to see you again. So we have a headline on SiliconANGLE.com right now, in a blockbuster move, Amazon jumps into the data center on both feet, which really validates kind of some of the commentary we've been seeing on theCUBE for many, many years, and our analysts and you guys are involved in the data center. The data center's still going to be a big part of computing. It's not going away. That's your business, and the cloud service provider, which is also growing. So, take a minute, explain. It is growing. I've been personally covering the private cloud, or public cloud at Intel for a decade. And when I started, I'm not sure I had any concept how big this was going to be. And the one thing I'm positive about is we're just still at the beginning, because every use case you see, all the development, all the IoT, all the business transformation, we're just starting, right? So this is a good place to be, but there's more coming. And if I look at just 2018, I'm a little competitive at work, but we were proud to announce earlier this year at the end of the summer that the cloud is now 43% of the data center group's revenue. So, coming from when I started 10% or something like that little, it's now to be the number one contributor. And we've, in the first half of the year, had a 43% year of revenue growth. This industry is booming. And I wish I could say it was my hard doing, but I mean, if you come to an event like this, you know why it's growing. And the TAM is increasing, the total market availability with the cloud is requiring more and more horsepower. You got the IoT edge, you got the data center, you got the cloud, and software is being written specifically to take advantage of something. So, huge market opportunity still. What are some of the innovations? Take us through a little bit of your mindset on how you guys are attacking this growth, the surface area of the market. You start to see specialized things, the general purpose, compute is not going away, storage, compute, networking, still very important. You got FPGAs out there, amazing amount of opportunities. Where's the innovation? You know, and you hit so much of it, and I really agree with some of the comments you made. It started off for us with silicon technology, but what a lot of people don't know is we have core compute, network, storage, FPGAs, purpose-built accelerators, and we can create custom basics for any one of our customers. We also have a unique availability to not only just customize uniquely, but you talked about the many different use cases from edge to data center. It's because every workload demands a different set of technology capability if you want true optimization at the TCO per TCO level. And so that's why it's so important for us to work with customers like Amazon, not just to customize one skew, but many skews. And you know, I was surprised at this number. Out of our latest Xeon processor, the Intel Xeon scalable processor, there's actually 54 instances on just that one CPU generation alone. And 51 of those are from a custom CPU that were tailored for unique workloads and instance types. So that's part of it. But you also talked about the software and that's another thing I think people think Intel's a hardware company. Okay, we make hardware. We're a huge software company, thousands of engineers. And what I love about my job is I built a team and call them the Cloud Ninjas, but they're software and hardware engineers that go on site with customers. And whether it's performance tuning and optimization or we are co-creating cloud services, new cloud services with our customers that innovation up and down the stack is, you know, that's where real innovation can happen. Two heads together, not just one. So the cloud is now the number one consumer of your technologies. There were a lot of misconceptions early on about the cloud. Everybody thought, okay, the cloud's going to be just one big cloud. It's actually quite diverse. It's global in scale, it's a services business which has always been sort of fragmented and global. Despite Amazon's dominance and infrastructure as a service, the data center itself, the players are kind of consolidating, which is kind of interesting. So how has cloud affected the way in which you guys look at the market, go to market? Everybody also thought everything was going to be standard off-the-shelf components in the early days of cloud, now you're driving toward customization. So what's happening there? What are the big measures? Yeah, I think we learned a lot along the way. You're right. One of the things, I mean, these cloud service providers are pushing me off the roadmap. They want more than we can deliver. So that's where we bring so much in hand to do about it. But I'd say, well, a lot of big players are getting bigger. The market is still really in a healthy way diversified. The Super7, as we call them, the world's largest, they're growing fast, about 35% around the world. The next wave around the world are growing almost as fast, about 25, 27%. Consumers has already been, you know, Twitter's and Facebook's and Uber's, right, has been a large part of the cloud. It's now 50-50 with business, and they're both growing at the same caggers going forward. So you're going to see the diversity, not just big players, but also small, not just consumers, but business services. And then that's finding a lot of global growth and a lot of, if you see the wall of logos in any Amazon presentation, it's because they have partners all over the world. Reggie, and I want to get your perspective. I talked about this a couple of years ago on theCUBE about the power law distribution of cloud providers on the top of the head is the big guys, and then it kind of narrows down. But then I was predicting a cloud service provider market was going to expand. And I want to get your thoughts because that's kind of happening now. You're kind of saying, but I want to get specific on this. You got core cloud, Amazon's of the world. Then you got hybrid cloud, kind of data center. Then you got the business cloud, business SaaS. Salesforce, Twitter, you mentioned those guys. They run clouds and enterprises are now going to be cloudified with on-prem and all this commonality between them. This is changing the nature of the business. Do you see it that way and talk about this business cloud? It's not competing with core cloud. It's just an expansionary. It's so interesting because there is certainly some competition or cannibalization within the cloud. But what I tend to see is whichever part of this, cause you'll hear like a business SaaS company, oh, some of it's running in the cloud, some of it's running on their own premise. They're doing that for a reason and both are growing. And then you talk about like infrastructure service, but what really happens, especially when an NMRI moves their business into the cloud, there is some part of it that's just a move day to be. But what we're finding is about 30% of it is TAM expansive because there are things that when you move to an Amazon or you move to another cloud service provider or take a mature SaaS provider, right? There are just things that they can do that you never would have been able to do in your own IT shop. So that's driving TAM expansion on top of it. That's also creating a lot of new market entry points for new businesses to come in and innovate around security offerings, verticalized offerings, geo-based specialized offerings. So, yes, there's some friendly co-op addition, but even when I ask somebody who would say they might be the little challenger to a big infrastructure service player, they say, but you know what, we actually get so much business by working with them too. It's hard for me to say, are they competition or partner, right? That's the industry we live in. The co-creation, you mentioned that earlier, a big part of it. And the other big TAM expander is you've got the data, you've got AI and machine learning. You've got the cloud for scale, and then you got Edge. And these are not, it's not a zero-sum game where you're moving stuff from the data center into the cloud. I mean, these are all incredible. New, all new. So what are you seeing there? Yeah, and I'm really excited about the Edge. One, for me, it kind of feels like that next uncharted frontier. Everybody's investing. Everybody's doing amazing things. We're getting the 5G out. We're getting better technologies. We're learning how to store data and move it faster and quicker and cheaper. We're getting set up, but the use cases are just yet to be really fully defined. And I'll be honest, when I look at my market modeling over the next five to 10 years, I always put a little disclaimer. This does not comprehend what's going to happen when billions of devices come online and we activate. So I think when people say it's a cloud, oh, it's been going so fast, it's going to just slow down. I'm like, why? Because innovation's not stopping. I think you nailed a point that we try to clarify on theCUBE here is that a lot of people are misunderstanding what cloud is and what cloud service provider is. As it grows, it's a rising tide, floats all boats. So everyone tries to squint through, oh, they're winning in the market share here and there. It's just a different game changing. So that's a great point. I want to, as we get rid of the end of the segment here, get you a chance to talk about the relationship with Intel. You guys, again, cloud service providers growing, big part of your business, but you guys been working with Amazon for a long time. Talk about the relationship between Intel and AWS. Yeah, it is, it's a privilege to be able to, these, the folks at a company like Amazon and specifically the ones at Amazon I work with, they have the ability obviously to track some of the most amazing talent in the industry and these people move fast. And they have a lot of choice. And you can either be there with them ahead of them and do the customization and differentiate them and give them what they need or they're going to leave you in the dust. So I'd like to say we have a great partnership because they've given us the honor over 12 years and we have so many from the data center to the edge, the car, the racer car, deep lens, so many things we're doing together, SageMaker or machine and deep learning. But it's a, if we slow down even for a bit, we're going to get left behind and so my job is to just keep running and trying to get ahead of them and every time I think I get there, you know they come, no, but we're working together. So it's a great challenging partnership but one that I can guarantee there's better innovation from Intel coming out of it because of getting the opportunity to work with Amazon. And you guys are contributing to them too. It's a good win-win scenario. I believe so. They said some really nice things about us at the show about our platforms and technologies. I mean we're, our products, seven generations of our products are in, they're in, we're in every availability zone, every instance, right? We're just, we've got a great position. Well congratulations on the business performance. I love the cloud service provider expansion. Love the data center focus that's really relevant and acknowledging by Amazon that's good news to see and just great stuff and thank you guys for your partnership with the Cube. We're here at the Cube, Intel Cube, Intel's big sponsor of the Cube, really appreciate that. I'm John from Dave Vellante. Stay with us for more AWS coverage, reinvent our six year in a row. I covered all the action, all the value being created. Stay tuned for more after this short break.