 Live from the Frederick P. Rose Hall, home of jazz at Lincoln Center in New York, New York. It's theCUBE at IBM Z Next, redefining digital business. Brought to you by headline sponsor IBM. Hi everyone, we are here live in New York City for IBM Z System Special Announcement. This is theCUBE, our flagship program. We go out to the events, expect to see them from the noise. I'm John Furrier, my co is Dave Vellante. Our next guest is Tom Rose-Emily I'm Senior Vice President at IBM. Welcome to theCUBE. Thank you guys. Great to see you. Appreciate it. Good to be back. Very impressive announcement here. But I've got the word mainframe in it which has a lot of legacy within IBM and you guys built the computer industry with the mainframe and the rest is history from there. What is the essence of this? You guys talk about digital business. It's a real technology performer. What's this all about? Give us the high level. We've been working on this now for five years as you've heard and we've really been collaborating with a lot of our clients, about 60 of them on the design of the Z13, the next. And really key points that I'd like to make is that we designed this thing for the mobile economy. It's the first server built from the ground up for the mobile economy. What does that mean? How do we connect smartphones? Well, if you're doing any kind of enterprise application it's going to land somewhere. Typically it lands on one of my servers and the mainframe as we know runs a lot of transactions. Well, you think about what mobile's doing to those transaction volumes. It's incredible to see what we saw in the fourth quarter and RF is reporting that they got more mobile transactions than they got online transactions. So retailers, banks, travel, booking companies all have to be ready for that onslaught at that wave of mobility. We can do 2.5 billion transactions a day which is the equivalent of 100 Cyber Mondays every day on one Z13. The second area is really about cybersecurity and we read about that all the time. The president's actually off with a task force on cybersecurity and you can no longer ring fence your data center. I mean, it used to be the moat and castle strategy. You build the moat, bad guys can't get in. You now have to assume they're in and so what we do on the mainframe is we actually encrypt the data from end to end so it's not just data at rest, it's data in motion. So if the bad guys do get in they can't make any sense of the data so having that encryption end to end is really terrific and there's... Or if the queen wants to leave her castle then you've got her covered. She can get out. And then the third thing really is about analytics and it's traditionally been difficult for people to do analytics and transactions on the same system because it actually was one of the greatest ways to bring a system to its knees was to throw analytics and transactions out at the same time. We can do that on the mainframe on the Z13. We've got built in analytics in the transaction so it happens in line. And so instead of having to do a pay and chase in a fraudulent case, you can actually prevent the pay so you prevent the fraud rather than detect it after the fact. You can only do that if you do it in the transaction. So those are the three things that the Z13 was built for. You know, I love the old ghosts of mainframe pass kind of a history lesson here but the word glasshouse was the term that used to be used for mainframes. You put them in the big data center and that's obviously changed but now the data centers are cloud. You see the big data centers the cloud providers are all powering are huge data centers. So the cloud is a big part of this. You got the mobile piece, you got the data piece. How is the cloud for your customers as they expand their data center capability? It's about more hardware for them currently. Is this a solution to that problem? It is, in fact, we can run 8,000 virtual machines on one Z13. So the ability to host all of those workloads on the same system at the same time is unprecedented. So yes, the internet data centers for the scale out environments but a lot of these workloads also require scale up environments. So the ability to actually move resources underneath running applications to be able to turn them up to give them a turbo charge when they need it. The mainframe can do both. So the virtualization component and the server compute are key parts of this. They are and I would say the memory is another key piece of this. In fact, the reason why the reason you could used to be able to you can still bring servers to their knees with analytics and transaction processing as you know transaction processing has to run quickly. Analytics takes a lot of memory. So the first thing that happens when you throw analytics in there is it takes over all the memory space. It takes over all the cache. And so now you got transaction processing that has to happen in sub second response time going through its knees because it gets kicked out of the memory space. It's not, the data's not in cache. I gotta go fetch it. I gotta go read it in. Everything takes time. We've tripled the memory space on the Z13. So it's an incredible memory space and cache size so we can handle simultaneous analytics and transaction processing. So it's actually a lot of people throw in kind of like, oh IBM, it's the old school but talk about the modernization and more poorly in context to customers. You guys spend a billion dollars with thousands of customers over multiple years to get this out. What are some of the power use cases that you're seeing right out of the box that people are using with it? Is it large banking? Is it all the above? What are the top customer and what's the modern element of this? So the key to me is it's multi-industry. We get, yes, we absolutely support the banks and you see most of the world's largest banks run on mainframes, large insurance companies, airlines, telco providers, retail. So all of those industries do some level of commerce. They're all touched by mobile. They're all being affected by the bow wave of mobile transactions. And so with that bow wave of mobility, so you think, well this is a smartphone meeting the mainframe, meeting the middle and allow that system to run on a system of record. So we get the beauty of the system of engagement, the modern application interface that people love to use landing on a system of record where stuff happens once and only once, guaranteed delivery, high availability, disaster recoverable, all the built-in features of the mainframe. But the ability to link the two to me is really the special sauce here is the ability to have that integration point between systems of engagement and systems of record. And oh by the way, doing the analytics at the same time. So to me the innovation here, the real modern stuff is leading edge encryption. We're able to do encryption lightning fast speed so that therefore you can encrypt all of the data. Being able to do fraud prevention on 100% of the transactions, most people today only do sample, they do sample, they say I'll check every third or whatever. You can do it on 100%, we guarantee it. And the challenge here is real time, right? So the sampling is a kind of like a stop gap to say we can't do real time so we'll analyze it and hope we don't miss anything. So this kill sampling essentially. So I wonder if you could talk a little bit more about that because everybody's talking about in memory, real time, you hear it, we go to Hadoop World, you hear about Spark, everybody's sort of chasing this windmill. What gives you confidence that what you've come up with with the Z13 is either a leapfrog or really that instantiation of what everybody has been trying to get to? So without getting into too much of the technology, underneath saying I can do analytics and transaction processing in the same system, I mentioned the memory, I mentioned the cache, but you've also got the math models built into the system. By the way it can run either in DB2 on the main framework or run in our database accelerator and IDAA attached device. In either case, I can do real time analytics during the transaction. And so the technology underneath that the investment that we've made with the math models, whether it's Bayesian regression or neural networks or whatever it might be, that's all built into the system. So customers can take advantage of that immediately. They don't have to go built with themselves, it's really what you're saying. They can use the math libraries that are already there, they don't have to design it themselves. And that is what allows them to do real time in transaction checking. Another theme is open. We've heard a lot about Linux today. We heard more about Docker, Node.js, KVM coming, OpenStack. You're making announcements there. How important is open? Can you quantify open workloads running on Linux? Give us a sense as to how prominent it is. I made the decision back in 2001 to bring Linux to the mainframe and it's done really well for us. It's enabled us to capture workloads on the mainframe and allow clients to run on Linux on the mainframe. Easy portability from one Linux implementation to the next. So we have a lot of capabilities built into our Linux system and 80 of our top 100 customers run Linux and break next door to their ZOS implementation. What did you learn during that time table? That was a good callback because you were looking back. I got one right. Well, maybe more than that. I mean, I think that's key. Linux is the engine, right? It's tier one resource now. And back then it was kind of a cheaper alternative. But what did you learn over that time on the mainframe? What was the number one thing before we're using it for? Well, the great benefit that Linux on the mainframe brought was the ability to have quick portability. The reason you would port was because you had lots of virtual machines. So the combination of virtualization and Linux on the mainframe really made a profound difference. And then in that fact that we could deliver near enterprise class computing, near ZOS level computing on Linux was a profound statement back then. And I think it did a lot to advance the Linux market back then. You guys could run the table on the telco market. I mean, they need it over the top. They got to be competitive. NFV's now hot, so virtualization's coming down at that level. So I got to ask you on the go-to-market, what's the sales page? So my sales guy for IBM, I come in and say, hey, big bank, or hey, enterprise, you're kind of behind the curve a little bit. You can up level with this? Is the value proposition that with the Z system, you can now go, hey, you can go right to the top of the pack for capability? Exactly right. They're all feeling the heat from the mobile wave. I mean, they're all seeing, I've got banks in the world now where more than half their transactions are being initiated from a mobile device. We've got grandmothers in the UK hitting the refresh key to see whether the deposit cleared. I mean, that's just driving a starbursting effect on the back end. These companies need to be ready for that bow wave and it's just beginning. I mean, we've seen a dramatic growth from 2004 to 2014 and the number of mobile transactions people do a day, 37 times increase in transactions. The predictions are that's going to go even higher. So more and more mobile driving, more and more back ends. These companies need to be ready for the catching those transactions, securing those transactions and analyzing those transactions. I think about the mainframe history and some of the big bets you guys have made. CMOS is the one that comes to mind but a lot of other innovations. LPAR, Global SysClex, you mentioned Linux and even 370 itself. What's the big game changer in this announcement? When we look back 10 years from now, what are we going to be looking at? Any one of those three, I think it'll be the combination of mobile analytics and the ability to secure the system, to do inline encryption on 100% of the data, analyzing 100% of the transactions. I think that will be the headline. And are you seeing, and I know that we talked to one last night at dinner, Ron, who's going to come on here. Actually, people moving back to the mainframe, bringing mainframe in, sweeping the floor of some of their so-called open systems. Are you seeing that as a trend that is going to be sustainable or is that sort of a one-off? What are you seeing there? Gosh, I hope so. I think we've made it compelling for people and not only the technology, but in the economics. It's cheaper to actually run things in a centralized environment. Uses less floor space, uses fewer people. People are 80% of the cost of IT. So if I can simplify things, if I can take costs out of the equation, and I've done it for my clients with the changing economics, but also the changing technology. So we've got some of the banks in emerging countries. You're going to see one here today in Kenyon Power running the African Power grid on their mainframe. So there are good examples in banking, good examples in utilities, good examples in travel. As we spoke last night, you're going to talk to the guy today, great story about him taking out x86 and putting it all on a mainframe. So it seems like you've got a lot of use cases out there that are low-hanging fruit for this one trend. It's not like a one-trick pony. You have banking, you have, you solve server sprawl, virtualization sprawl. I mean, you're essentially removing problems for clients with kind of like the baggage of growth. That's exactly it. So they're seeing this growth, they're having to deal with it. We're giving them a way to manage it much more simply than they would any other way. So talk about the go-to market. You guys going to, I mean, it's a product. Is it a whole team? I mean, is it a box? Is it a big machine? Is it a software? I mean, talk about the solution and what gets shipped to the customer. I think it's a combination because if you think about what we're talking about with inline transactions, it's a combination of hardware and software. It always has been. In fact, my role at IBM now is managing middleware and servers and storage. I think that bringing all that together is the same thing we do with our clients, bringing that technology together so that they can get the value from the combination. It's not about just the hardware. It's about the combination that we can give you. It's interesting, people are retooling. I can see this being in the mindset of the customer, like, okay, I got all this stuff going on. Let's just clear the decks, get the solution, level up, get some developers on the case, get the mobile apps. It seems to be the vibe I'm sensing. Is there a certain configuration at the big customer base where they have a certain emphasis on certain investments? Is it development? Is it IT refresh? Are you seeing a pattern and a certain consolidation? I think it depends greatly on the client where they are in their life cycle. It depends on the industry. We've seen some that have really embraced mobility. You've got governments promising mobile apps to all of their citizens. Some are doing it. But so far we've seen almost 80% of them have plans to do it, but less than 20% have actually done it. It's a lot higher when you get into retail and into travel booking, but there's still a long way to go when it comes to really being able to fulfill the promise. And remember, the data would suggest, the IDC data, I'm sorry, the Gartner data in this case, would suggest that 80% of what we deal with nowadays is self-circ. There's no person on the other end. Remember, we used to talk about the fact that your call center person might be the only contact you had with your client. Well, now you don't have that call center person. What you have is the mobile app. And so the experience that company, only through your mobile experience, it better be darn good, it better be personalized. That's the other thing we can do in transaction analytics is personalize those transactions. And so you better have a really good customer experience. It's a new expectation for the customer too. They have new expectations. And what's interesting, we were talking earlier about this is the first time in the history of business in the world that everything can be measured. So if you think about it that way, it's kind of mind blowing, you go, okay, that whole, what do we have here? Is everything, if everything can be measured, then there should be 100% certainty on any question. So we always use the term data driven on theCUBE. And someone made a quote on Twitter, how can you be data driven if you're not data, if you don't understand the data? So that brings up a good point. Are people really ready in this digital business? So I like this digital business message, but where is it? Is it really super early? I mean, what's your take on this? Because it seems to be, what does my data say if we go completely instrumented business models? Well, if you think about it, we've been talking about marketing to a demographic of one now for a couple of years. It's still not there. I mean, we're all dealing, we've gone from lots of hard copy mail to lots of spam emails. So we're still doing the spray and pray method of marketing to people. And when I say we, I mean the world. And so the more personalized we can get, the better we'll be. The better experience for the consumer, less cost for the client, my client to have to do that to push up that information much better return rate. And so the business success for them is about how do I optimize to deal with you, where you are in the world, where you are in your life, something relevant to you right now. You just built a new house, you just had a kid, you just did something. So there's something relevant to you right now, whereas I just don't spray and pray and hope. So that's where you see the in memory or the in processor analytics to be killer. Sure. The other thing I see is it's real time data. I mean, whenever you're making copies of the data, there's always going to be some built in lag. And so if I want to deal with real time data, it's got to be on the system of record. It's got to be where the data is being created. People on average make 11 copies of their data. So from a security aspect, you've just opened up. I thought it was higher when you said that last time. Yeah, so it's like, you know, while on average, there are some. Yeah, yeah, right, right, right, right. But you're opening yourself up and you don't have to do that anymore. The encryption's big too. I mean, I think there's encryption thing. Can you expand more on that? Because with cloud and APIs and a notification economy that we're living in, the buzzword, I mean, people getting notifications via mobile. So you got always have an API based system. So how do you guys deal with that perimeter list like concepts? So we deal with it on the mobile device because as you know, we don't make mobile devices, but we provision them, we secure them, we connect them, we manage them. So our mobile first platform running on, you know, one of the different OS's that's out there, we've got partnership with Apple, we support others as well. It enables you to encrypt the data on the device and then the integration point in sending the encrypted data to the backend system allows you to do that end to end encryption. But we've got special technology, the latest and greatest encryption technology built into the Z13 that allows us to do encryption much faster and that really is a key as well. I was going to ask about the Apple. You brought that, I'm glad you brought that up. How is that relationship going? Are they involved in here? Obviously the news about their watch leaking and all kinds of stuff, people are really obviously fascinated with Apple on the consumer side. But real enterprise commitment from Apple, how is that going? And what are clients telling you about that? It's a great partnership when you think about because we've got lots of good enterprise experience. We don't necessarily have as much of the consumer side. So building really great apps for enterprise users to connect to their backend systems to me is where all this comes together. Unique apps, unique apps. And just saying if I'm a pilot and I need to calculate how much fuel I need, if I'm a flight attendant and I want to rebook you in flight because I know this flight's been delayed, let's do the rebooking right here in the air instead of on the ground. There's a rush for the get on the queues or get on your phone to rebook something. You can do all that online. And so if I can enable the employees of these companies or insurance agents to be able to write policies on their iPad and connect to a backend system, that's the beauty, it's the marriage of the consumer side and the enterprise side coming together. And the developer outreach is through sort of normal Linux channels, no JS channels, open stack, right? So we'll talk about the developer outreach. What are you doing there? As you say, and as you just talked to where you've been, we're growing the next generation of developers and people who can run these machines. But to me it's about reaching the developers for sure. Having the latest technology, open technologies that you just mentioned, supporting all these open standards, open stack, no JS and all these things really give us the ability to say it's not just about cobalt apps, although it's still very important to our world economies. It's also about the new ones. Well, Catherine brought up the whole Java aspect of how efficient this box is not only with other technologies, but Java in particular. We're seeing a great performance leap in the Java performance. We continually delivered better and better Java performance, I would say 10 years ago, not so great nowadays flying. Tom, congratulations on a great announcement. I mean, I'm really impressed by the box. And again, we've seen this in the DevOps movement, abstracting away the performance hardware from software developers, but making it integrated and seamless is the trend. Final question, what is the coolest thing about this announcement that you like on this product? I think the fact that people are getting the connection between the new economy and what they're relying on to run their commerce today, that's a beautiful thing. All right, we're getting the hook here. I'd like to have you on as long as possible, Tom. Thanks for coming on theCUBE. We'll be right back live in New York City here at theCUBE. I'm John Furrier with Dave Vellante. We'll be right back after this short break.