 Okay, we're back. This is theCUBE. This is Dave Vellante. I'm here with Stu Miniman of Wikibon.org. This is SiliconANGLE.tv's continuous coverage of HP Discover. We're live in Las Vegas. We're here with Dave Donatelli, the executive vice president of HP's enterprise group. Dave, welcome back to theCUBE. Hi guys, great to be with you again. I feel like you're a regular now. I really appreciate you taking the time out. One of my favorite places to be. Thank you. So, new name, enterprise group. It used to be ESSN. What's in the name change? Well, really as part of the reorganization we did, one of our real big goals was to make it easier for customers to do business with HP. So, as you're probably aware, we combined the printer and PC group under what we now call PPS. Then we combined our global account sales organization in with ESSN and TS. So, for all of our enterprise accounts around the world. So that necessitated a new name. Thus, now we're the enterprise group. So, you know, a lot of times people don't like to talk about the internal plumbing, because it's internal plumbing, but as an executive, organizational decisions can have a huge impact, can't they? I mean, if you get the organization wrong or right, it can really make a difference. Absolutely, especially a company of HP size and scale. I mean, one of the things I find very interesting about HP is we have so much great technology. We have so many great people, and it's done at such a massive scale compared to most companies out there in the world. So, what we're really doing as a management team is we're really trying to sincerely build the company for the next 75 years. We're trying to make long-term decisions. We're trying to put the right organizational structure in place to then couple that with our great products and services. So, the change I just mentioned, enterprise group, was really meant to make it easier for customers and partners to work with HP, and equally, make it easier for our folks inside the company to get their jobs done, and make it easier for them to get to yeses, and really free up bureaucracy so that they can be much more efficient in what they do. We've listened to Meg Whitman this morning. I thought she did a really good job resonating with our crowd, the enterprise crowd. You must have been happy about that. I'm very happy, yes. I mean, there wasn't a lot of pie in the sky. It was just tried and true. We're HP, this is what we're about, and really strong enterprise messaging. So, I know Wall Street's here this week. You guys, you've been talking to those guys. What are they asking you? Well, I think what we're trying to do is get our message out, which, and you heard Meg talk about it a lot today, which is it's not about transforming HP, despite what you might see in the press sometimes. HP's doing a lot of things right, and we're serving customers of all sizes all over the world in many, many important ways. So, as you saw at the beginning of her talk, she reaffirmed that we're proudly in the infrastructure business, both the enterprise infrastructure business, the things I do is serve our network storage, as well as with PCs and printers. We are also very proudly in the software business, either to enhance what we do in infrastructure or also to help people manage their environments. And we know that a lot of our customers like to consume things by services these days, and we're proudly in that business as well. So, you're right, it wasn't pie in the sky. It was very practical. And I think practical suits HP, because at our heart, we're an engineering-based company. And engineers, as you know, are everything around practicality. So, I wonder if we could talk about that, because she talked about some differentiators, and one of them was engineering. Yes. And so, you obviously have a lot of competition going on, particularly in converged infrastructure. Remember, when we first started talking in theCUBE, I said it's a two-horse race between HP and VCE, and said that for a number of months and probably even a year, and now everybody wants a piece of that pie. We've quantified the TAM at about 400 billion. So, now you've obviously come up with some interesting R&D around Gen 8, some automation that's driving value. Do you feel like from an engineering standpoint, from an HP R&D standpoint, you can compete, get what you have to get done from a competitive standpoint, or do you feel like you still got to make some acquisitions together? Well, I think you phrased that very well. So, if you look at it, we're the ones that came with the term converged infrastructure. And there's the old joke about it, the lead dog has a very different view than the other dogs in a race. And because we're that lead dog, we've staked out our territory very early. If you look at servers, you mentioned Gen 8. You could talk about what we announced with Moonshot, moving the server market to Arm and Atom. We're the first company out there doing it, it's what leaders do. And networking, we're the first major company out there supporting open-flow networking and software-defined networking. So, we believe we're redefining what's happening in the networking industry. And then in storage, you're seeing the great success we're having with 3Par and StoreOnce. But if you look at each individual element, everyone was taking an existing market, redefining the technology that was there in a leadership way. And in doing so, we have newer architectures in our competition. We have newer architectures in storage. We have newer architectures in networking. We have newer architectures in servers. And because of that, we can innovate faster. And because of the fact that we innovate all those products internally on our own technology now, we can bring them together in a more effective way through converged infrastructure. So, we think through our architectures and through the fact that we develop all these ourselves, we're in a position that no one else in our industry is in. And being the lead dog since we identified it first, we are able to drive the industry further ahead and others eventually try and come and copy. Yeah, and as you said, that pie is enormous. I mean, it's everything. It's servers, it's storage, it's networks. Hundreds and hundreds of billions. Now, everybody wants a piece of that action. David, how do you determine whether to go after share and footprint at any cost versus, hey, we got to be more disciplined and chase the profits? How do you balance that tension? Well, I think it's always a balance. I don't think we've ever gone after share at any cost. I mean, you know, because it's, we have to be able to keep the business going for many, many years. But I think at all times, you're always looking for the optimal price point. And I think every business we compete with does the same thing. So really what we find is that it's not just price you charge, but really it comes down to how do you offer a better value through technology? So for instance, if you look at servers, we talked about moonshot servers a minute ago. Those servers cost 63% less money to an end user customer. Puts us in a very advantageous position, but we got to that savings through technology, not just taking the same costs and discounting it more than somebody else. I can give you the same examples of what we do in networking, and we do the same thing in storage, where we guarantee customers they can run twice as much virtual machines on our storage at half the capacity of anybody else. We got that cost advantage through innovation, not through discounting. So I want to ask you about the value that you're bringing through converged infrastructure, because there's clear value there, but it seems like because of the competitive nature, that there's not a huge premium today for that converged infrastructure. Shouldn't customers be willing to pay a premium? Oh, we think customers should always be willing to pay. But they don't seem to have to be paying that, right, because of the competition, and I think that's part of the sort of market share gain and people want to get that footprint, but longer term, you would think that there's value in that, and you can charge for it, or am I wrong? Are you able to charge for that today? Yeah, I think, I would say what we're looking for is the fair balance in the equation, meaning that yes, if we have unique innovation that's driving unique value, we certainly want to get paid for that because that enables us to reinvest in the business and bring out the next innovation that customers want. At the same time, what we do that's very different than others is we do not believe in lock-in proposition. And frankly, if you look around our industry, there's a lot of businesses that have a lock-in proposition that they use to drive an unfair premium, really at the expense of their customers. So meaning they've gotten the value, price, equation out of balance, and they're taking advantage of the fact they've locked a customer in. In our case, if you look at our cloud or our CI, everything's built to open standards. Therefore, customers have that choice, and I think that's very good for customers, and what it does for us is it forces us to make sure that we drive our value through innovation, not just because we got the customer in a place where they can only buy from us. Well, I think that's the number one reason customers tell us that they don't go for the converged infrastructure. They're afraid of pricing power shifting to the vendor, and if you can gain a foothold advantage there, that's significant. So a follow-up on the converged infrastructure, if you talk kind of just out in the industry and discussion, virtual system and app systems don't seem to be a household name. VCE gets plenty of press. We had Paul Miller on earlier today, and he said that over half of the deployments of Gen 8 are at least pitching the new converged systems. Why do you think HP doesn't get recognized in as much of the conversation and kind of the press? Well, I think you have to separate press from buying. Agreed. Because if you look at the pie. If you had to pick one, what would you pick? Yeah, he had something to say. I always tend to measure revenue share is probably most important to me, so obviously the servers being number one, networking number two, storage depending on how you want to look at external or internal, anywhere from number one to number three, depending on how you want to count. So we have pretty strong revenue share across all these major categories. Absolutely. Cloud, we have significant revenue share. And on the marketing side, we've talked about cloud system the most, and that's our highest end offering. Vert system and app system build into a cloud system. And so it's almost a philosophical thing. Do you start with a smaller offering, vert system, and then build up to a cloud system? Our view as we started with our highest offering, which was cloud system that does more than a VCE, it does both infrastructure, and it does heterogeneous infrastructure versus homogeneous infrastructure, and it does applications with that infrastructure. Yeah, it's very easy to measure how many exologics are out there, how many V blocks are out there, but it's a little bit harder to tease apart your converged number. Well, we're a little bit different than that. We break our revenue numbers out unlike others. So I'm a reported segment. You can read it every quarter. Yeah, that's true. Everybody else just talks numbers with no real revenue numbers. I wanted to ask you about, I was walking around earlier and just looking at the various demonstrations and I saw a placard next to a three-par array that said tier one storage for the cloud. And you're somebody who knows something about the traditional tier one storage, the reliability, availability, serviceability, came in in the mainframe days. Is the definition or what we think of as tier one evolving, is it changing? Well, I think it depends what type of cloud you're talking about. I think for your traditional enterprise or government out there, they are running products like three-par because they need the efficiency, they need the multi-tenancy, and they need the ability to have mixed workloads on that array. Traditional arrays were all built about, and you know, back to your mainframe days, which most of those architecture still exist today. And those older architectures were really about, hey, I'm going to run interactive during the day, I'm going to run batch segregated to nights and weekends, the two shall never meet. That was what they were built for. In today's world, for an enterprise or government cloud, especially if you allow users to configure their own, you don't know what's coming at you. It's batch, it's interactive, it's all mixed together, it's small block, it's large block all together. So what three-par's really done is giving you the ability to have the availability requirements of enterprise storage with the ability to handle mixed workloads all at the same time. And that's a very unique offering that is very much built for cloud. You know, before we bought them, as you're probably aware, seven of the 10 largest cloud providers in the world were running three-par, and that's back when three-par is the start-up. And they went to them because they could offer all of those attributes I just spoke about at a price that also made it very affordable for clouds. Yeah, and it hits the very high end down to the, maybe not the super low end, but it's a big, small- Yeah, it covers more than anything else out there. And that had to be one of the things that was attractive to you, obviously, of three-par. I want to talk about networking a little bit. Maybe you can give us an update on that. We have Bethany coming in later, so we can go deep with her, but you know, you're happy with the progress. I mean, you've been thrilled with the 3Com acquisition. You're disrupting the market and making some waves. So give us a quick update there. Yeah, I mean, we continue to see just great growth and opportunity across the networking space. As you mentioned, we did a major acquisition, 3Com, two and a half years ago, so it's been a while now. So now they're a fully integrated part of HP. We talked about a networking that we really wanted to lead the market to new places, and we really believe where that market place is going, is software-defined networking. If you will, the virtualization of the network, just as we virtualize servers. And so we've launched a whole host of new offerings around SDN that we're very, very excited about. We've seen great customer reaction to at this show. I want to talk more about it tomorrow during my keynote, and I think it's going to even get more people excited about what it can do. In short, what it does is it allows people to connect their applications through their network at much higher rates of speed than they ever could before, getting rid of using things like CLIs, and really being able to control quality of service around these apps in a way much different than what's happened before. So we're excited about that, and we're excited to bring in those kind of innovations to that market. What do you think of the whole M&H NM? You have obviously participated very actively, and what is one of the greatest value creations I've ever seen in storage with 3PAR, and you saw Compellent, you saw Isilon, Data Domain, and others. You saw EMC make a move recently with ExtremeIO for a Flash Player. They didn't even have a product to market, spending reported 300 plus million. Do you think that, and you know a lot about this topic as well, do you think that Flash disruption is going to create as much value, going to be as big as that sort of storage disruption that we saw a couple of years ago? But what I think, and this gets back to convergence, and why I think you need to be in all these markets, is what I believe over time is that the server and the storage relationship is going to continue to evolve, and whether it's Flash, or any other kind of solid-state memory, is going to be a big part of that evolution, and so from our perspective, being in both of those markets is critical. That's why convergence is so critical, because if we think you can get the best value and the best product by redefining how those things work together, and the way you really redefine that is if you design them all under one roof. So I think that's what we're doing. It's not going to happen in the next six months, but that's kind of where the market's going to go in the next several years. I think as far as M&A, I think to broadly answer your question, I firmly believe that right now, the market trend and the market trend will play out for many years, is that people want to buy from fewer, larger companies who can take on and serve more of their IT needs. And because that's the environment that's out there, the exit for many, either startup companies or even mid-sized companies is going to be to join a larger organization. So I think it's very important to have a high degree of competency in identifying potential acquisitions, making them, and then integrating them very well. And so I'm very proud of what we did, for instance, with 3PAR and 3Com that we saw them, we bought them, we got there first, and then we've done a good job of post-acquisition. Well, I mean, you're making a great point because you've got five or six large companies with strong balance sheets that can acquire companies and integrate them. I mean, take 3PAR before you acquired them, but 3PAR, I love 3PAR. But I mean, it was struggling to be relevant, right? You guys bring 3PAR in. I heard David Scott said that 3PAR's HP is number one storage product now. Yes, it is. In a relatively short period of time, 18 months. Yes. So- It's been growing 100% year-over-year for six straight quarters. You still, yeah. Right, in a market that's growing at 10% a year. So I think that dynamic has changed since when we started in the business where you could see a smaller company start up and really have an impact. But so what do you make of that? I mean, obviously seeing the consolidation, you've got, it's almost like an oligopoly where a few players control the chessboard, and you're one of them. Now, my question is, do you have to be, you don't have to be first and the fast, even though you're first with, you know, converged infrastructure, people might debate that, that's fine, but close enough to first. And, but those, the big whales can, so to be a little slower to market, and then jump in and act like they invented it. Right. Is that a legitimate strategy, or do you feel like you've got to be, you know, first out there for that innovation? Well, ideally you want to do both. I think, you know, if we try and look at things from the customer point of view inward versus our point of view outward. And so if you look at it from a customer point of view, you know, what they want, as I mentioned, is they want to reduce complexity. They want to make it easier to get stuff done. And part of their way of doing that is they want, again, someone who can supply more of their total needs versus trying to buy a whole bunch of different piece parts, be it software or hardware and put it all together themselves. You know, we went through that trend, we went through the deconstruction trend in the 80s and 90s. And now that pendulum, you know, that's kind of run full force, the pendulum swinging back to fuller bigger. So to do that, you need to have the portfolio. You need to have a go to market engine that is global in nature, that can handle a wide array of products. And we have that. And then you need to have great products. And from a product point of view, yes, we always want to have the leadership products in the market. And as you heard me kind of describe what we're doing across our various infrastructure domains, I believe we're in that position. Yeah, but it seems like the role of the startup is to fill us in white space, try to move faster than the big guys, which they can. Do you spend much time with the VC community? I mean, I'm sure they're pounding you, but do you personally spend much time looking at what they're doing and maybe even guiding them, hey, here's a white space that for whatever reason we're not attacking, you know, it's not big enough for us now, or do you just sort of let that play out? Well, it's interesting about California, you know, where I live now is you're in the VC community at your kid's baseball game, at the basketball game. You're always with the VC community. And I really think startups play a vital role in our industry in that they do have the ability to go after, you know, small markets maybe that might not develop for years. You know, if you look at three part there around a bit of time before we bought them. And so I think it's a vital role. I think they're part of the ecosystem. And I think larger companies like ourselves looking at them, we always do. And we're an appropriate buying startups is a great part that we'll continue on for many years. Great. All right, Dave Donatelli, thanks very much for taking time out of your busy schedule. Always great to see you guys. Looking forward to your keynote tomorrow with the CIO of Intel. So watch that, I think it's 8.30 tomorrow morning. Is that right? 8.30 and we'll have Intel CIO on here after. All right, this is siliconangle.tv. Keep watching, we'll be right back live from HPE Discover.