 Live from the FIA Barcelona Grand Villa Compensator in Barcelona, Spain, it's The Cube at HP Discover Barcelona 2014. Brought to you by headline sponsor HP. Here are your hosts, John Furrier and Dave Vellante. Hey, welcome back everyone, we are here live inside The Cube in HP Discover in Europe in Barcelona. I'm John Furrier with Dave Vellante. This is The Cube where we go out to the events and extract the signal from the noise. Our next guest is Chuck Smith, Vice President of Business Development for HP servers, Global Business Unit, welcome back to The Cube. Hey, appreciate it, thank you. Great to see you again. So the server business, a lot of change going on, I know you've taken on more responsibility. The servers coming together, you've got mission critical, UNIX, desktop, I mean servers kind of Intel coming together. But the market's changing with cloud and everything else, huge transition. So give us your quick take on what does that mean to the customers, the shift and inflection point around cloud and how has that changed in the game in the server business? Yeah, you know, you'll hear from us throughout the week that whether it's from cloud all the way to mission critical, many of the use cases or workloads are growing for the compute in the server business. So we're really excited about what we're up to. You mentioned IBM's exiting the x86 server business and their networking portfolio. So we think that's a huge opportunity for HP but it actually signals to our customers that HP's continuing to invest in the space and they're starting to see that our strategy which may have been questioned two or three years ago really is continuing to be the same one on the same course which is to continue to invest in their applications, the new style of IT. And what we're finding is that customers are starting to look at their infrastructure provider and HP is becoming more and more that brand of choice. And that's our program, the smart choice. A lot of people will throw stones at HP certainly, you know, as you guys do in the turnaround because of this happening at your competition. Oh, this is a commodity server, no one racks and stacks and you have to have servers somewhere. But you guys have been doing a lot of conversion for so many, many years now. We've been on the ground with theCUBE and chronographizing what you guys have done. Certainly, you've always had a high end server business. HP's had the big iron boxes and then certainly had the low end servers called Wintel, whatever you want to call it. But as you guys moved into converge years ago you made that strategy change. As people look at this hyperscale, they want to be Amazon but not everyone can build their own boxes. You have open compute out there. So the shift in servers where I want the benefits of really low cost commodity hardware but I want the performance of large scale kind of cloud like environment. How do you guys speak to that with this dynamic? Because certainly IBM's saying, hey, I'm going to give up that zero margin business or almost zero margin business and focus exclusively on big higher end servers. Yeah, well we think there's a different approach from a strategic perspective and our tagline from a marketing perspective is the right compute for the right workload of the right economics. And there's many of the public cloud customers where massive scale of repeatable infrastructure for what if you will a single app makes perfect sense. But in the enterprise where you have hundreds if not thousands of apps and you have users with varied workload requirements and ever changing business requirements that if you will white box and commoditize server doesn't fit for that particular workload set. So we think that our mission critical platforms for big data or in memory database for large database processing is extremely important. Our blade business continues to be an extremely important part of our portfolio and there's lots of exciting things happening there with our one view platform to manage the enterprise footprint. Our gen nine platforms for enterprise and mid market we're getting a lot of traction there and we've done a lot of work to tune those platforms to the right workload. And then you'll see from us you saw our joint venture with Foxcon and our platforms to actually address the low end of that product set as well. And so customers are looking for that if you will low end of the product set with little to no features from a hardware perspective we can provide that as well. And we have a business model that can support that and actually still be the right economic. So what you're saying is so what you're saying if I can break that down is you can do scale out and scale up. So you can mix and match as you said and you can merge and if you will a single discreet servers for small and medium business. So all four of those use cases make we can support all of them. Dave and I were talking, that's the ding on, that's the ding on the scale out is that if you go commodity scale out too much to rely on that you can not have a lot of leverage on the scale up opportunities where software becomes critical. So that's something that's important to customers. We've heard that. I wonder if we can come. Yeah. I want to understand what's happened in the field and what the market dynamics are. What's happening with the channel? A lot of the channel partners that when that deal was announced we talked to them and they were freaking out. How have you capitalized on that freak out moment? So we launched a program called Smart Choice. We've been working directly with many of our largest HP partners that actually have mixed businesses. We have also been actively working to recruit and engage with IBM partners across the globe. We've got hundreds of partners that we've actually actively recruited into HP with some of the offerings you'll see this week around our mission critical platforms and what we're doing with OneView and our storage offerings and networking. We actually have a portfolio that many of these value partners that IBM did, like you say, we're freaking out actually are very excited to work with HP. So the portfolio, the programs, the engagement and actually getting to go to the customer pole because many of the customers that those channel partners were serving were also freaking out about what does this mean for my infrastructure. And so we've actually been quite successful to turn those IBM partners to HP and get their interest and been working closely with Super Samion and the HP channel team. And many of the partners here in Europe, we actually have a number of receptions with IBM partners here to actually actively engage with them and help them understand the breadth and depth of HP. So you picked up some partners from that? You bet. Like a handful, a couple? Hundreds. Hundreds. Okay. I got hundreds. So now I got to ask the long-term question. So you had a competitor in IBM that never really wanted to be in that business. Let's face it, right? They'd always sort of, well, we're trying it. Rumors and so forth. Now you got a competitor in Lenovo that loves that low end sort of business, so-called low margin business. That's huge margins for them. How do you see that shaking out? What do you see as some of Lenovo's challenges and what are some of the potential blind spots for you guys? Yeah, I mean, I think that obviously Lenovo's been messaging a lot that they're coming after HP and so on and so forth, but building an enterprise business, having the support, having the customer relationships, having the portfolio all the way up to mission critical and really being that kind of a brand that customers trust is something you don't build overnight. And even the PC business, we talk about how they've grown their business, but if you actually look at the numbers, it took them five years to actually get past a certain market share with their acquisition of the IBM PC business. And that was in much different shape than the IBM X-series and Blade business was when they bought it. So, it was their server business was not. Right, so I think that it's a much different game. You know, they obviously have a strong footprint in China and I was actually just there in China and we've been working a lot with the team there to actually go after Lenovo right at the outset to ensure that we're extremely competitive. You know, Meg has been working on our cost structure and our portfolio is better than it's ever been from a cost of price point perspective. So, you know, we're ready even at that low end transactional space and we think they're going to be extremely challenged to build out a true enterprise business to compete with HP in the long run with our portfolio. And then you guys talk about the Foxconn relationship that you guys have. I mean, you see in this whole hyperscale trend that's driven by Amazon and Google and Facebook. You'd love to sell it to those guys directly. Maybe over time you can do that but there's a lot of guys who want to replicate that model. I presume that's the opportunity for you. I wonder if you could talk about that a little bit more. Yeah, I mean, so we have been selling to many of those folks and have relationships in many of those hyperscale customers. And we think that, you know, if you actually look at the breadth of the service provider space not just those, if you will, the brands you recognize there's a lot of, you know, tier two as we were calling or smaller than growing service providers that we are actively engaging with because building out a full service provider business is something that's very exciting to us and we think that that's actually the play. I think secondly, when we talk about, you know, self-building done, you mentioned it, there's a certain scale point that, you know, very few of these providers can really get to. So, you know, we actually have an agreement with Boxconn, we have a portfolio, we have a go-to-market, and we really have the ability to, you know, do many of the joint go-to-market activities that a lot of the service providers do, too. So it's not just about the hardware, it's about the broader ecosystem that we bring in there. Yeah, I wonder if you could talk more about the requirements because, you know, early on the perception was, ah, they just went off the shelf white boxes, but they have, they're more demanding than that it seems to me, and they've got, they want levels of customization, like you said, they want an ecosystem. I wonder if you could talk more about the requirements. Well, I mean, I think what's interesting is we talk about open compute as being a standard, but if you actually look under the covers, it's a standard for each one of the cloud providers. It's an eight different, that one's their custom box, as opposed to being any kind of standard, and so, you're absolutely right. So there's customization for, you know, even for specific tiers within this particular provider. And that takes engineering know-how, that takes, you know, capability, even for those platforms you just stamp out, and that takes an investment, that takes, you know, if you will, attention to those customers, that takes, you know, a lot of work. There's huge growing storage and networking requirements within those service providers, it's not just all about compute as well, and we think that's moving towards, if you will, a commoditized profile that we think is moving in art direction, so there's a lot of opportunity. Talk about the challenges and the opportunities around migrating the workloads into a kind of this new modern infrastructure environment. You brought that up, and I want to kind of tease it out because, you know, I can look from the cheap seats and say, oh man, cloud is so easy. All you do is move your workloads into the cloud, and we're done, come on, it's so easy, right? It's really not that easy, there is some challenges, certainly Greenfield, if you want to go out and say, hey, we're going to build some scratch, mobile infrastructure, and you got clean sheet of paper, okay, I can really look at that architecturally, and it's somewhat straightforward. Still, not that straightforward, but when you have legacy like Windows, you mentioned the migration, you have a lot of legacy stuff, as an enterprise, what do you do? What do I do? I'm a CIO, I say, hey, you know, Chuck, I'm buying into the scale out, scale up flexibility, I love agile, I love converged, but I got this baggage I got to deal with. How do I move over? How do you have those conversations? What do you talk about? What are the top three things you guys address, and what is the roadmap? Yeah, I mean, so, every customer situation is different, so there's no, I can't just tell you here the three steps to do it, otherwise the customer would likely have done it. What's the pattern? What's the general pattern that you see? Well, we actually, we tee up a multi-day transformation workshop where we go in and we have a conversation with the customer, what's the, what are the data needs, what's the application needs, what, if you will, from a Windows perspective, for example, Windows 2003, what's actually driving you to keep this application, and why haven't you moved? Sometimes it's just inattention, sometimes there's actually some real underlying architecture issues, and so we'll go work on that. It could be related to SQL, it could be related to other things they're doing from a, you know, from an infrastructure perspective, their storage, what have you, and so we'll go through and work through that with them, and then actually set up a project to transition and move workloads off of a particular, whether it be Unix or Windows or what have you, that actually moves it to modernize infrastructure, and in some cases you can move those services to the cloud, but in some cases our customers don't even want to move into the cloud, they just want to have it on if you will modernize and support and what? Yeah, and most don't because, you know, that's one of the funny things you squint through all the hype, it's like, look at, you know, on-prem was working for people, so cloud is kind of low hanging fruit, yeah, test and dev, we've been hearing that for five years now, and that's cool, you know, it's a non-mission critical stuff in the cloud, I guess I get that. But I want to go into a different direction and ask you, what's going on here at the show? I know it's day one, you had the CIO event you mentioned before we jumped on the air here, what's happening in HP Discover this year, your perspective, share with the audience, what's happening here, what's the big theme, what are you guys talking about, what activities you're getting involved in, and what are some of the cool things going on? Well, I think, you know, just the, I mean, first of all, the feeling, the buzz is just, I mean, it's happened, we have our largest, you know, attendance from a European show yet for Discover, so just the, you know, the perception and the feeling about HP is really positive, so that's actually great, I mean, just from last night's reception and what we're seeing even just this morning, it's, you know, attendance is pleasant for the first day, it's actually quite exciting. If you look at what we're messaging for the show, on the enterprise group side, it's really about the cloud, all the way to mission critical, you'll see announcements around, and I'm not going to steal anybody's thunder, but new platforms from the scale-up perspective, announcements around scale-out, storage, networking, and absolutely the services to drive that. We also, our enterprise services team will announce very exciting, you know, partnerships and relationships, so it's really just about extending our, you know, go-to-market, our capabilities and just proving to, you know, the world and to our customers and partners here at the show, that HP's here, we continue to invest in the best and most innovative roadmap and portfolio in this business. It's the same drumbeat, I mean, it's like, we've been here, now, this is our 50 year at HP Discover, and I'd say five years ago- Stay on message. There was a couple of years ago, obviously some things happened, big data became a big part of it, the autonomy of things going through the system, now you, it's been the same drumbeat all the way through, and, you know, it's just stay close to the knitting and stay close to the business. Well, I mean, I think that the customers are actually seeing that, you know, what we were talking about three years ago, we now have, we're shipping, we're delivering, and we're sticking to that vision, and they actually like that consistency. And, you know, you think back to, when you referenced it a few years ago, there was a lot of questions, but now, we've got a lot of the answers, and actually a lot of the confidence is coming back and the customers about HP, and certainly we've got a lot of confidence that we can solve, you know, those real big problems. Great, awesome, and I see we're in Barcelona, so it's a lot of European, and I see you're involved with the telco business. Big telcos out here, a lot of different telcos, so it's a little bit more, is it more of a telco feel, some more and more different conversations here. What's different from the US to this show from your perspective? Yeah, I think that, you know, when we, you know, the European show, we've got, you know, great customer relationships here. If you actually look at our shared position, Europe is our highest shared position from a server storage and even networking perspective, so there's a lot of respect for the brand and there's a great management team and sales team here that continue to execute extremely well, and you know, you're right, I mean, most of the attendees here from Europe and Middle East close by, so. It's a global business, I mean. Absolutely. The customers, even in North America, have global operations and a lot of companies can't capture those business opportunities because they're not global, and we know if you start up some Silicon Valley that have to do deals because the consumption requirement in cloud and on-prem is global. That's right, that's right, and so we're able to deliver on those types of capabilities that others can't, right? Awesome. Chuck, thanks for coming back on theCUBE and it's great to see you a part of the Scalely announcement on the ground with our CUBE team. Jeff Frick was out there with you guys. I did the Scalely piece. It's a nice little, nice little new CUBE product. I appreciate you coming on theCUBE. Chuck Smith, Vice President of Business Development, HP Global Services here inside theCUBE, kicking off day one of wall-to-wall three days of live coverage. I'm John Furrier with Dave Vellante. We'll be right back after this short break.