 Live from Barcelona, Spain, it's theCUBE. Covering Cisco Live 2020. Brought to you by Cisco and its ecosystem partners. Welcome back to Barcelona, everybody. We're here at Cisco Live, and you're watching theCUBE, the leader in live tech coverage. We got to the events and extract the signal from the noise. This is day one, really. We started day zero yesterday. Eric Herzog is here. He's the CMO and vice president of storage channels. Probably been on theCUBE more than anybody, with the possible exception of past Gelsinger, but you might surpass him this week, Eric. Great to see you. Oh, great to see you guys. Love being on theCUBE and really appreciate the coverage you do of the entire industry. This is a big show for you guys. I was coming down the escalator. I saw, up next, Eric Herzog. So I sat down and caught the beginning of your presentation yesterday. You were talking about multicloud, which we're going to get into. You talked about cybersecurity. Well, let's sort of recap what you told the audience there and really let's dig in. Sure. Well, first thing is IBM is a strong partner of Cisco and they're a strong partner of ours both ways. We do all kinds of joint activities with them on the storage side, but in other divisions as well. The security guys do stuff with Cisco. The services guys do a ton of stuff with Cisco. So Cisco is one of our valued partners, which is why we're here at the show. And obviously, as you guys know, with a lot of the coverage you do the storage industry, that this is considered one of the big storage shows in the industry and has been a very strong show for IBM storage and what we do. Yeah, and I feel like it brings together storage folks, whether it's data protection or primary storage and sort of as a collection point because Cisco is a very partner friendly organization. So talk a little bit about how you go to market, how you guys see the multicloud world and what each of you brings to the table. Well, so we see it in a couple of different facts. So first of all, the day of public cloud only or on-prem only is long gone. There are a few companies that use public cloud only, but yeah, when you're talking midsize enterprise and certainly into let's say the global 2,500, that just doesn't work. So certain workloads reside well in the cloud and certain workloads reside well on-prem and they're certain that can go back and forth, right? Develop it in the cloud, but then move it back on. For example, highly transactional workload, once you get going on that, you're not going to run that at any cloud provider, but that doesn't mean you can't develop the app, test the app out in the cloud and then bring it back on. So we also see that the days of a cloud provider for big enterprise and again up to the 2,500 of the global fortunes, that's not true either because just as with other infrastructure and other technologies, they often have multiple vendors and in fact, what I've seen from talking to CAOs is, if they have three cloud providers that's low, many of them talk about five or six, whether that be for legal reasons, whether that be for security reasons, or of course the easy one, which is, we need to get a good price and if we just use one vendor, we're not going to get a good price. And cloud is mature, cloud's not new anymore, the cloud is pretty old. It's basically sort of version three of the internet. And so I think some of the procurement guys are a little savvy about why would you only use Amazon or only use Azure or only use Google or only use IBM Cloud? Why not use a couple to keep them on? Which is kind of normal when procurement gets involved and say cloud is not new anymore so that means procurement gets involved. Well, that's kind of comes down to the workload. You got certain clouds that are better for you, Microsoft, if you want collaboration, Amazon, if you want infrastructure, for devs, on-prem, if you want family jewels, so I got a question for you. So if you look at, it's early 2020 entering a new decade, if you look at the last decade, some of the big themes, you had the consumerization of IT, you had web 2.0, you obviously had a big data meme, which came and went and now it's kind of AI. And of course you had cloud. So those are the things that brought us here over the last 10 years of innovation. How do you see the next 10 years? What are going to be those innovation drivers? Well, I think one of the big innovations from a cloud perspective is like truly deploying cloud, not playing with the cloud, but really deploying the cloud. Obviously when I say cloud, I would include private cloud utilization. Basically, when you think on-prem in my world, on-prem is really a private cloud talking to a public cloud. That's how you get a multi-cloud, or if you will, a hybrid cloud. Some people still think when you do a hybrid, like literally bare metal servers talking to the cloud. And that just isn't true because when you look at, certainly the global 2,500, I can't think any of them, when it isn't essentially running a private cloud inside their own walls and then whether they're going out or not, most do, but if the few that don't, they mimic a public cloud inside because of the value they see in moving workloads around easy deployment to scale up and scale down whether that be storage or servers or whatever the infrastructure is, let alone the app. So I think what you're going to see now is a recognition that it's not just private cloud, it's not just public cloud, things are going to go back and forth and basically it's going to be a true hybrid cloud world. And I also think with the cloud maturity, this idea of a multi-cloud, because some people think multi-cloud is basically private cloud talking to public cloud. And I see multi-cloud as not just that, but literally I'm a big company, I'm going to use eight or nine cloud providers to keep everybody honest. Or as you just said, Dave, and pointed out, certain clouds are better for certain workloads. So just as certain storage or certain servers are better when it's on-prem, that doesn't surprise me that certain cloud vendors specialize in the apps. All right, so Eric, we know IBM and Cisco have had a very successful partnership with the VersaStack. If you talk about in your data center, IBM storage, Cisco networking and servers, when I hear both IBM and Cisco talking about the message for hybrid and multi-cloud, when you talk about the software solutions you have, the management in various pieces and integration that Cisco's doing, help me understand where VersaStack fits into that broader message that you were just talking about. So we have VersaStack solutions built around primarily our flash systems, which use our Spectrum Virtualized software. Spectrum Virtualized not only supports IBM arrays, but over 500 other arrays that are not ours. But we also have a version of Spectrum Virtualized that will work with AWS and IBM cloud and sits in a virtual machine at the cloud providers. So whether it be test and dev, whether it be migration, whether it be business continuity and disaster recovery, or whether it be what I'll call logical cloud air gapping, we can do that for ourselves when it's on a VersaStack, out to the cloud and back. And then we also have solutions in the VersaStack world that are built around our Spectrum Scale product for big data and AI. So Spectrum Scale goes out and back to the cloud, Spectrum Virtualized, and those are embedded on the arrays that come in a VersaStack solution. I want to bring it back to cloud a little bit. We were talking about workloads and sort of what Floyer calls Horses for Courses. IBM has a public cloud. And I would put forth that your wheelhouse, IBM's wheelhouse for cloud workload is the hybrid mission critical work that's being done on-prem today in the large IBM customer base. And to the extent that some of that work is going to move into the cloud, the logical place to put that is the IBM cloud. Here's why. You can argue speeds and feeds and features and function all day long. The migration costs of moving data and workloads from wherever on-prem into a cloud or on-prem into another platform are onerous. Any CIO will tell you that. So to the extent that you can minimize those migration costs, business case and IBM case for staying within that blue blanket is going to be overwhelmingly positive relative to having to migrate. That's my premise. So I wonder if you could comment on that and talk about what's happening in that hybrid world specifically with your cloud. Well, the key thing from our perspective is we are basically running block data or file data and we just see ourselves sitting at IBM cloud. So when you've got a flash system product or you've got our Elastic Storage System 3000, when you're talking to the IBM cloud, you think you're talking to another one of our boxes sitting on-prem. So what we do is make that transition completely seamless and moving data back and forth is seamless. And that's because we take a version of our software and stick it in a virtual machine running at the cloud provider, in this case, IBM cloud. So the move in the data back and forth where at VR flash system product, even we have our DSA 1000 can do the same thing, is very easy for an IBM customer to move to an IBM cloud. That said, just to make sure that we're covering and in the era of multi-cloud, remember the IBM cloud division just released the multi-cloud manager, second half of last year, recognizing that while they want people to focus on the IBM cloud, they're being realistic that they're going to have multiple cloud vendors. So we followed that mantra too and made sure that we followed what they're doing as they were going to multi-cloud. We made sure we were supporting other clouds besides them. But from an IBM to IBM cloud, it's easy to do. It's easy to traverse and basically our software sits on the other side and it basically is as if we're talking to an array on-prem but we're really not, we're out in the cloud. So we make it seamless. So testing my premise, I mean again, my argument is that the complexity of that migration is going to determine in part what cloud you should go to. If it's a simple migration and it's better than the customer decides, okay, it's better off in AWS, you as a storage supplier don't care. That is true. That's the IBM as a supplier of multi-cloud management doesn't care. I'm sure you'd rather have it running the IBM cloud but if the customer says, no, we're going to run it over here in Azure, you say, great, we're going to help you manage that experience across clouds. Absolutely. So as an IBM shareholder, we want it to go to IBM cloud. As a realist with what CIOs say, which is I'm probably going to use multiple clouds, we want to make sure whatever cloud they pick, hopefully IBM first, but they're going to have a secondary cloud. We want to make sure we capture that footprint, regardless, and that's what we've done. As I've said for years and years, a partial PO is better than no PO. So if they use our storage and go to a competitor of IBM cloud, while I don't like that as a shareholder, it's still good for IBM because we're still getting money from the cloud or from the storage division, even though we're not working with IBM cloud. So we make it as flexible as possible for the customer. The multi-cloud managers about customer choice, which is leading with IBM cloud, if they want to use a set. And again, I think it's a realization at IBM corporate that no one's going to use just one cloud provider. And so we want to make sure we empower that, leading with IBM cloud first, always leading with IBM cloud first, but we want to get all of their business. And that means in other areas, for example, the Red Hat team, Red Hat works with every cloud, right? And they don't really necessarily lead with IBM cloud, but they work with IBM cloud, but guess what, IBM gets the revenue no matter what. So I don't say it's like the old traditional component guy with an OEM deal, but it kind of sort of is, because we can make money no matter what, and that's good for the IBM corporation. But we do always lead with IBM cloud first, but we work with everybody. So Eric, we'd agree with your point that data's not just going to live in one place. One area that there's huge opportunity that I'd love to get your commentary on is edge. So we talked about the data center, we've talked about public cloud. Cisco's talking a lot about their edge strategy. And one of our questions is, how will they enable their partners and help grow that ecosystem? So I'd love to hear your thoughts on edge and any synergies between what Cisco's doing and IBM in that standpoint. So the thing from an edge perspective for us is built around our new Elastic Storage System 3000, which we announced in Q4. And while it's ideal for the typical big data and AI workloads, run spectrum scale, which we have many customers with scale that are exabytes in production, so we can go big. We also can go small. It's a compact to you all flash array up to 400 terabytes that can easily be deployed at a remote location. An oil well, right? Or I should say a platform, oil platform could be deployed. Obviously, if you think about what's going on in the building space, or I should say the skyscraper space, they're all computerized now. So you can have that as an edge processing box whether it be for the heating systems, the security system, you can do that at the edge. But because of spectrum scale, you could also send it back to whatever their core is. Whether that be their core data center where they're working with a cloud provider. So for us, the ideal solution for us is built around the Elastic Storage System 3000, self-contained, two-racu, all flash, but with spectrum scale on it versus what we normally sell with our all flash arrays, which tends to be our spectrum virtualized for block. This is file-based, can do the analytics at the edge, and then move the data to whatever target they want. So the source would be the ESS 3000 at the edge box doing processing at the edge, such as an oil platform or in the, I don't know what it really called, but the guys that own all the buildings, who have all this cuff computerized, so that's at the edge, and then wherever their core data center is or their cloud partner, they can go that way. So it's an ideal solution because you can go back and forth to the cloud or back to their core data center, but due to the super compact, very high performance analytics engine that can sit at the edge. You know, I want to talk a little bit about the business. I remember several years ago, we covered theCUBE, the Z13 announcement, and I was talking to a practitioner at a very large bank, and I said, you're going to buy this thing. This is Z13, you know, a couple of generations ago. He said, absolutely, I buy it at Site Unseen. I said, really, Site Unseen? He goes, yeah, no question. By going through the upgrade, I'm able to drive more transactions through my system in a certain amount of time. That's dropping revenue right to my bottom line. It's a no-brainer for me. So fast forward to the Z15 announcement. In September in my breaking analysis, I said, look, IBM's going to have a great Q4 in systems. And the thing you did in storage is you synchronized, I don't know if it was by designer luck, you synchronized the DS8000 announcement with the Z15. And I predicted at the time, you're going to see an uptick in both the systems business, which we saw huge, 63%, and the storage business grew, I think three points as well. So I wonder if you could talk about that. Was that, again, by design? Was it a little bit of luck involved? And give us an update. So that was by design when the Z14 came out, which is right when I first come over from EMC. One of the things I said to my guys is, let's see, we have the number one storage platform on the mainframe in revenue, according to the analysts that track revenue. When they launch a box, why are we not launching with them? So for example, we were in that original press release on the Z14, and then they ran a series of road shows all over the world, probably 60. I said, well, don't you guys do the road shows? And my team said, no, we didn't do that in Z12 and 13. I said, well, we are now because we're the number one mainframe storage company. Why would we not go out there, get 20 minutes to speak? The bulk of it would be on the Zs. So A, we did that, of course, with this launch, but we also made sure that on day one launch, we were part of the launch and truly integrated. Why IBM hadn't been doing that for a while is kind of beyond me, especially with our market business. So it helped us with a great quarter, it helped us in the field. Now, by the way, we did talk about other areas that grew publicly, so there were other areas, particularly all flash. Now, we do have an all flash 8,900, of course, and the high end tape grew as well, but our overall all flash, both at the high end, mid-range, and entry, all grew. So all flash for us was a home run. I would argue that on the Z side, it was a grand slam home run, but it was a home run even for the entry flash, which did very, very well as well. So, yeah, we're hitting the right wheelhouse on flash. We led with the DS 8,900 attached to the Z, but some of that also pulls through, you get the magic fairy dust off. Well, they have an all flash array on the Z because last time we didn't have an all, we had all flash or hybrids before that was hybrid and hard drive. This time we just said, forget that hybrid stuff, we're going all flash. So this helps, if you will, the magic fairy dust across the entire portfolio because of our power with the main frame. And even, in fact, the quarter before our entry products, we announced six nines of availability on an array that could be as low cost as 16,000 US dollars for a RAID five all flash array. And most guys don't offer six nines of availability at the system level, let alone we have 100% availability guarantee. We do charge extra for that, but most people only offer that on entry product. We do. So that's helped overall. And then the Z was a great launch for us. Now you guys, you obviously can't give guidance. You have to be very careful about that. As I say, predicted in September, that you'd have a good quarter in systems and storage, both I'm on the record now, I'm going to say that you're going to continue to show growth, particularly in the storage side, I would say systems as well. So I would look for that. The other thing I want to point out is, you guys, you sell a lot of storage. You sell a lot of storage that the, sometimes the analysts don't track. When you sell into cloud, for example, IBM Storage Cloud, I don't think you get credit for that or maybe the services, the global services so there's a big chunk of revenue that you don't get credit for that I just want to want to highlight. Is that accurate? Yeah, so think about it. IBM is a very diverse company, all kinds of acquisitions, tons of different divisions, which we document publicly. And no, we do it differently than if it was Zog and Store. So if I was Zog and Store, a standalone storage company, I'd get all credit for support and services. There's all kinds of things I'd get credit for, but because of IBM's history of how the company grew and how company acquired, stuff that is storage that Ed Walsh or GM does own is somewhat dispersed. And so we don't always get credit on it publicly, but the number we do in storage is substantially larger than what we report because all we really report is our storage systems business, even our storage software, which one of the analysts that does numbers has us as a number two storage software company. When we do our public stuff, we don't take credit for that. Now, luckily that analyst publishes a report on the number side and we are shown to be the number two storage software company in the world, but when we do our financial reporting, that because of just the history of IBM is spread out over other parts of the company, even though our guys do the work on the sales side, the marketing side, the development side, all under Ed Walsh, but part of that's the history of the company and all the acquisitions over years and remember it's a hundred year old company, so we don't always get all the credit, but we do own it internally and our teams take and manage most of what is storage in the minds of the storage analysts like you guys, you know what storage is, most of that is us. Well, I wanted to point that out because a lot of times practitioners will look at the data, they'll say, oh wow, the sales person of the competitor will come in and say, look at this, we're number one, but you really got to dig in, ask the questions and obviously make the decision for yourself. Eric, great to see you. We're going to see you later on this week as well. We're going to dig into cyber. Thanks so much for coming back to theCUBE. Great, well thank you. You guys do a great job and theCUBE is literally the best at getting IT information out, particularly all the shows you do all over the world. You guys are top notch. Thank you. All right, thank you for watching everybody. We'll be back with our next guest right after this break. We're here at Cisco Live in Barcelona, Dave Vellante, Stu Miniman, John Furrier. We're right back.