 Hi everybody, we're back. This is Dave Vellante of Wikibon.org. I'm here with Stu Miniman. This is Silicon Angles theCUBE, where we go out to the events, we extract the signal from the noise, we scour these shows, we grab the best guests that we can find, we unpack what's really going on at these events. Tom Rosamilia is here. He's the Senior Vice President of STG, the Systems and Technology Group at IBM. The storage business, Edge is a big storage show, although there's much more than that, is under Tom. Tom, welcome to theCUBE. Appreciate that, thanks, Dave. Just 15, 20 years, we've seen function sort of migrate out of the host server, if you will, out to the storage array and the sand, and you're starting to see with flash, and we'll talk about that, move back a little bit. And I sometimes, I rib Zitler when I see him and say, you know, you told me one time that R&D in the business was growing 9%, and the revenues were growing 6%, and something had to give, and what gave within STG was storage. And then you guys had to make some acquisitions and have had to refocus on that business. Now we're seeing a major inflection point. Ambuj Goyal, I think has an excellent vision about storage moving into a data platform. I wonder if you could talk about your observations there a little bit, that whole shift out and shift back and how IBM is going to capitalize on that. Yeah, and it really was less about offloading things and more about just where a lot of the new work was going. So if you think back in the day, we had a lot of centralized functions and then we got a lot of it distributed, which created some value for lots of people and got things done, but it also created a lot of islands of automation and things that really had to be remediated. I mean, we were just as guilty as anyone else of spreading things all over the place. And then when you really want to get a full picture of something, you've got to gather all that information back up. And so in some cases, it makes sense to do things in a distributed way and some things that make sense to do them in a central way. We've done a lot more centralization within IBM of driving utilization rates way up on our servers, just like our clients are doing. I mean, these are assets you already bought. These are licenses for software that you already have. Why not get the most out of them? So by doing a level of centralization, you can really drive, and virtualization, you can really drive utilization, which says I paid for it, now I get to pay less per unit by really consuming 80, 90. In some cases on our mainframe, 100% of the system's 24 hours a day. I mean, they're running at very high utilization rates. So that's part of the shift back towards centralizing where you can when you can. Do you see that changing now with big data and analytics? Do you see companies looking at IT as a competitive advantage? And do you see that spend metric change? And let's face it, we all take the IDC numbers. I used to be at IDC, I used to do those numbers and you guys, you know, munch them up. And at the end of the day, you come up with a forecast and nobody's going to forecast, you know, the return to double-digit growth, right? You just, you'd be out of your mind to do that. But isn't it possible that with new sources of business value, new models that are driving, whether it's cloud, whether it's flash, that we're actually going to see a return to growth in this business? Like, it certainly hopes so. And I'll tell you, probably the two areas that give me the most hope for that is if you think about it, there are still massively underserved countries in the world. You know, I was just down in Africa earlier this year and went once last year. I've been in Nairobi now and I've been in Nigeria. And, you know, leapfrogging technology. They'll never put in the landlines that we have in the Western world. You'll never see the volume of bank branches that you see in the Western world. I mean, they're just going, you know, faster than you might imagine. So, growth opportunities really abound in places like that, not just Africa, but in the next 11, as financial term is called, you know, after the BRICS. We're still obviously investing in the BRICS, but the next 11, the ASEAN, places Latin America, all kinds of interesting parts of the world. So, growth markets for us is all about that. We go into places where we don't see the level of IT that exists in the Western world to mature more major markets. The second one is, from a source of spend, is, you know, the other IDC data that you can quote, is that their prediction is by 2017, CMOs, Chief Marketing Officers, will outspend CIOs on technology. And so, when you think about it, they're not taking the CIO's budget. They're actually taking their marketing budget and they're trying to get down to what I call the demographic of one. They really want to get at an individual. They don't want to say I want to sell to white males over 30 who live in this part of the world and make this much money. They want to market to you. They want to market to me. And they not only want to do it with knowledge of where I am physically, but where I am in my life, you know, journey. I mean, am I buying a house? Am I moving somewhere? Am I, you know, about to have a baby? Am I, you know, something going to happen in my life that's going to cause me to shift my spending habits? And if I'm about to do that, then, you know, I'm going to need appliances or I'm going to need a crib or I'm going to need, you know, redo my kitchen. I'm going to, you know, it's all kinds of things that can get targeted to me as a demographic of one. And that is all knowable with this confluence of mobile, social, big data and the analytics that go along with that. It's all knowable and the smart people are really taking advantage of that. The other thing I will tell you is we've been doing our CEO survey semi-annually or every two years for the last eight years. And this year was the first year we saw that front of mind for CEOs was technology. The most important thing they saw was technology. Always had been about cost takeout and all kinds of other things. Now they were very focused on a little concerned about, do I have the right skills in my shop to take advantage of this, to get down to that level of demographic of one. Obviously worried about cyber and all the things that are going on in the world. But really wanting to invest in technology because they saw it for business advantage. So I think that's a major change. Yeah, and may point about the demographic of one. I actually think the, and you're mentioning the CMO, outspending the CIO in terms of technology. I actually think the metric with regard to a lot of this stuff is going to be how much revenue can I drive ultimately. Because if I can take my analytics data and my transactional data and put them together and what traditionally has been impossible because I want to limit my access to my database because it's so darn slow. Right. How much revenue can I drive? Or think about the queries you couldn't do today that you can now do because of flash. So I mean, these things become possible. What was yesterday impossible to do. So it's not just about cost. It's also about the ability to do things. The last thing would be on an SD and I like your choice of software to find everything. That's what I call it as well. That's not what the industry calls it, but I call it that, so I like that. You know, we've been doing this for a number of years, but it's really been about server virtualization for the most part. You know, we're starting, we've been starting the journey around storage virtualization, but also getting to network virtualization. So, you know, SDNs, SDS, and basic server virtualization. So that journey for people has begun with servers and now continues on to the other two key parts of this. I think it gives us massive flexibility. You're not hard coded, hard wired. You can move things around when you need to. It makes people much more agile and to your point can really drive more work and better outcomes for them. So we were talking about Lou Gerson's book before and in the book he talks about how IBM is a recovering alcoholic. And I want you to talk about open source and the role that open source plays specifically in your business. We're tiered to four. It's been big, obviously, in the software business. You guys made big investments in Linux. How will it affect your systems and storage business? Well, as you correctly pointed out, IBM's been investing in open platforms for a long time. I think, you know, we, I think our endorsement of Linux really helped drive that marketplace. Not alone, but you know, with the combination of others. So really a positive step for us. And Linux really is about my business because I have the operating systems as well. So it's my team that contributes to the Linux community and then we harvest out of that community and build data on, I'm sorry, systems on top of that. So, you know, Linux as an example is running across all our server families. It runs across our x86 business. It runs across our mainframe business and it runs on our power business. So we just announced today, as a matter of fact, the opening of two new power Linux centers. One in New York City and one in Austin, Texas. We announced a month ago, one in Beijing. So, you know, worldwide we're investing in Linux for my business and Linux on power in this case. So it is a fundamental game changer for us. Has been around x, has been around mainframe. Now it'll also be around power and the investment we make. But completely consistent with what we've done with Apache, with WebSphere, with Eclipse, with development tooling, our approach to open stack and open daylight projects. You know, all of these things are built on open and then we build on top of those and differentiate ourselves the way customers want us to do by adding value. Yeah, so that's obviously the corollary question. It's okay, how do you make money on that? So you add layers on top and differentiate from the competition and you do so leveraging the innovation within the industry at large. Yeah, and I think open source is a great development model. And so Hadoop's another good example. We contribute to Hadoop. We build products on top of Hadoop. They run really well on our power systems as an example. So, you know, big insights is the product. We're talking about it here at the conference as well. But it gives us the ability to do the analytics and unstructured data as well as unstructured data like we can do in relational data. So we've kind of had this strategy discussion and very positive. I'm actually really enthusiastic about where the industry is today. But then, let me take the other end of the spectrum. You got Hadoop and you got AWS, like two ends of the vice ready to squeeze your business. Does that keep you up at night or do you feel like you've got the innovation roadmap to keep being profitable in this business? Well, I think, I don't... Well, certainly I don't see Hadoop as something that's threatening our business. I think it's something that we're able to take advantage of. Because when you think about, you know, 80% of the data that's being created is unstructured. We bet, you know, we were embracing Hadoop and we were running it on our system. So no issues there. Certainly AWS, you see them running some businesses and certainly certain use cases are more appropriate than others. So people do an application development. Maybe they'll do it on a public cloud. Maybe they'll take out their credit card and start paying whatever per month. You know, at some point, people are going to realize that how much they're paying. So, you know, the centralized... Interesting thing about centralized systems is you actually have a really good idea how much you're spending on them. When you start spending 150 there and 200 there and 300 there, you really have no idea. Yeah, but it might take a decade for them to realize that. It might, but some of the workload will go that way and that's fine. So that's why we're embracing, we just announce an acquisition intent to acquire, I should say, a company called Softlayers, which gives us the ability to run public cloud as well. Yeah, we've studied that. We love Softlayer. We love the automation story there. It's very, very impressive. Good. Yeah. Okay, good Tom. Well, my last question then is, what does keep you from... No, I had lots of things to worry about competition, but if I focus mostly on our clients, then life is good. So I try to spend my time on the road with clients, like I said in Manila or Nigeria or Bangkok or London or Frankfurt or Munich or in the U.S. As a matter of fact, here with 4,700 people has been a terrific way for me to spend time with clients, with business partners, and with both of you. So, thank you for that. Tom, Tom Rosenberg, I really appreciate you spending time coming on theCUBE, representing your group. We got a lot of enthusiasm about what's going on here, and really appreciate you guys having us. Thank you, appreciate it. All right, pleasure. All right, keep it right there, everybody. We'll be right back with our next guest right after this. This is theCUBE.