 Live from Las Vegas, Nevada, it's the Cube at HP Discover 2014. Brought to you by HP. Welcome back to Las Vegas everybody. This is Dave Vellante with Jeff Frick. We are live here at HP Discover 2014. Tom Bradich is here. He's the vice president of server engineering at R&D at HP. Tom, it's a pleasure to have you on. I'm really excited about this segment. We want to go deep. We're going to geek out a little bit. We're going to ask you a bunch of Colombo questions. You're going to explain the world to us. Keep it. All right. Well, first of all, welcome to the Cube. Thank you very much. Thanks for coming on. So a lot going on inside HP. We covered the Moonshot announcement two years ago, which was sort of a concept announcement, even though you had real things to show. It wasn't a product announcement. And then we covered the product announcement. You guys have made some progress. We're going to talk about that. But I wonder if we could step back a little bit. What's happening in server technology over the last five years? And what are you most excited about? Well, the Moonshot platform has come a long way, as you point out two years ago when it was announced. We have customers in deployment now. It's battle-hardened. And it has some very dramatic technological advances. Several of them that I would put into the categories of the seven benefits of the Moonshot platform. One of them, which is really highly technical, is what I call the local rack fabric. And that is a fabric of interconnection of the server nodes within the chassis. That is protocol agnostic. It's also very high-speed, and it has many, many lanes to do many, many things. It also has a 2D torus and mesh architecture. Well, what does that mean? Well, that means there can be high-speed communication among all the workers on the job, which are the server nodes. Up to 180 servers, individual servers, with their own software stack, can be interconnected in this local rack fabric. And that's just one of the distinctives of the Moonshot platform. Now, how does this apply to the customer demands and what's happening in the IT industry? Well, foremost comes to mind is cost. And cost is also the purchase cost, the total cost of ownership, the cost of managing the power and the cooling of the technology as well. And the integrated platform with so many servers and a small 4.5U or 4.3U form factor is addressing those cost issues very directly. I wonder if we can talk a little bit about the culture of HP R&D and server engineering. I mean, HP wasn't, you know, to go back to whatever it was, 40s and 50s, HP really wasn't a computing company at the time. It was, you know, kind of an instrumentation company, and then sort of found its way into semiconductors and obviously, you know, got into computers and made a lot of acquisitions. Yes. And had server chops from the likes of certainly digital and compact and tandem and, you know, wherever else. And of course HP. So what's the culture like? How did you bring those pieces together and how does that manifest itself into innovation today? A very good question. And I think my predecessors who created the culture and created the acquisitions did a very good job in selecting key attributes and key core competencies to put together to form what is a very broad portfolio offering. The culture is characterized, in my view, by technology innovation as manifested by the investment we're making in Moonshot. Secondly, the breath. It's a company with our HP labs combined with our server development, storage development, software development has tremendous breadth. It's hard to find someone not working on something advanced technology in the company and when you need help, you can call on the worldwide global interconnection of HP technologists. And then we also have something very distinct is we have CTOs, chief technology officers that are dedicated to our clients, to our customers and they provide the technology leadership for the customer also back into the labs where I reside. So is the model one where you've got the product groups developing innovations which I will call no pejorative intended but incremental innovations to extend the product line to give customers a road map and you've got leapfrog types of innovations happening inside of HP labs and then you've got all kinds of other stuff that sounds like happening at the customer level. Is that sort of loosely how it's organized and how do you bring that all together? That's an excellent question and let me say the two bifurcation that you just said that is the incremental advancement on existing technology combined with revolutionary breakthrough is a very potent combination for customers and here's why. Because of investment protection and the installed base that many times an incremental advancement on an existing standard or an existing installation is what customers desire. On the other hand, there's a combination of really breakthrough technology such as Moonshot where we can take the total cost of ownership and the power consumption and make it greener and make it better and make it more efficient but that's the potent combination that I think sets HP apart. Now, you've been really focused on organic innovation now for a while for a number of reasons. I mean, HP's not been a super-requisitive company in the last couple of years. Meg, I asked Meg at the analyst meeting it wasn't last year actually two years ago when you're going to start acquiring it she said not that we pay down the debt we might make some tuck-ins but we are not going to make the big moves and acquisitions until we deal with that. So as a result, you've got to focus on organic innovation. A lot of people believe it's hard for large companies to focus just on organic innovation. That's why I see a lot of companies, several examples, IBM, Oracle, EMC have to complement with acquisitions non-organic innovations. You've not had the luxury of doing that. Has that hamstrung you? Has that sharpened your focus? Talk about that a little bit. That's an excellent point and to be able to innovate and be an entrepreneur within a company is a challenge but as I pointed out, there are some benefits for example, access to customers who help you guide and hone your investment so you get it right the first time or at least very quickly, that's a benefit. Second benefit is the breadth of technology and experience that we could tap into. When it comes to Moonshot, though, we've organized more like a startup inside a very big R&D facility and we characterize it by a term called high-velocity rigor. So we have to move fast, that's a high-velocity part but we have to be very rigorous in the business value that we bring to our customers and making the technology unique and making it matter for the customer. It's actually working out very well. We have right here at Discover several companies who have deployed this new and advanced technology and it's very exciting to see it in process and I would mention, for example, PayPal, IncaBinka, as well as MyLock all in production now, very exciting with this new breakthrough technology that we were able to get out to the market very, very briskly based on our high-velocity rigor philosophy. So Tom, I have a question for you too. You do a good job, you've got the incremental innovation, you've separated kind of the earth-shattering, leap-frogging innovation, just like Clayton Christensen says, one is driven by the customer, one is not. So that's great. I think the more difficult part for an organization is to be willing to say some of this new stuff is going to start eating into what we've been doing on the other side and how have you found or how is HP dealing with kind of that dichotomy because if I've really got a breakthrough innovation at some point, that's going to either eat into, displace or wipe out something that we've got a business already built on. What are some of the dynamics there? That's a very good point. And to summarize what you're saying is a notion of how does new innovation eat into the occurrence and even create an innovative dilemma? Exactly. In the classic, do you eat yourself or do you let somebody else do it within that old-mind business that needs to be impacted? The approach we're taking and the approach I'm taking is a very managed approach to that and being very careful. It's all about being extremely sensitive to three things that are happening. The customer, the competition and, of course, the company. I call them the three C's inside. What's happening with the customer, what's happening with the competition, what's happening inside the company dynamic because we are a business, as you point out. We have to make sure we're sound for our stockholders as well as for our customer. Now, balancing all those three takes a lot of skill and this is the winners in this business are going to be able to do that and be able to know how to pace that which would interfere with other lines of business. So the way we do it is I would have to add a fourth C. First thought of communication. We communicate big inside the company. In fact, all the R&D vice presidents of which I'm one, meet together under some very good leadership to decide what are we doing and how do we position. But we're always keeping an eye on what the customer wants. Not necessarily what is always best for us in the way that you have to position but will the customer want this technology even if in fact it isn't necessarily the best business decision for HP because in the long run it will be. And we know that for sure. Right, the classic, Bob introduced the cheap trades. They were killing themselves and Dave Potrick came out and said hey, we're going to have these cheap trades that's going to hurt our business in the short term but in the long run we think this is where we're going to go. The competition was going there and ultimately you'd rather take your own business and give it to somebody else. The other thing I think is pretty interesting about HP is the reinforcement and the support of just really smart guys and gals that don't necessarily go down a management track but are very, very good technically at what they do. Maybe someday you'll have one of them on your show. Absolutely, right here. He's a doctor. If you didn't catch that on the lower third hopefully we got that up there. So just talk a little bit because I think that's a very different culture. Not all companies have that. A lot of them are up or out and don't really support just really smart guys that are really focused on an individual area or a small group area and they can really execute at a much higher pace without kind of the management overhead that you might have at a more traditional or a more hierarchical structure where you've got a lot more junior people that are organized at the top. That's a very good point and remember the assets we must protect are our customer base obviously the good name of HP of course the brand as well as the technology that we have and being able to move fast and quick and manage the risk. It's all about managing that risk where you can move quickly but still be prudent obviously to the assets that you have and earn the care of us as an executive team but we're more and more valuing that sometimes called wild duck sometimes called the person who might not fit in the traditional stereotype corporate role but is a brilliant technologist as you point out and the invention that we can extract from that that skill set that we have by making sure that there's an environment where they feel they can do that with only positive consequences as they contribute to our business. Last question, if I may we got a lot of time here unfortunately thinking about the roadmap and I know you have to be careful because you've got the hall monitors listening everywhere to say but generally speaking when you talk to customers without divulging any sort of NDA stuff what should we be looking for in terms of the roadmap of things like Moonshot? This notion of microservers with cartridges that you can put in with different personalities what's the roadmap that we as independent observers should be paying attention to? We are seeking to aspire to be the leader in that microserver and highly scalable and even hyperscalable segment so because we seek to be that and because of the assets that we just discussed we feel we're the best to step up to that leadership role. The industry does crave leadership to drive down cost does crave leadership to drive up utilization and efficiency and then eventually to be able to move faster than the competition. So I think to answer the question more directly what you will see is continued innovation continued enhancements in our quality continued enhancements in our total cost of ownership value proposition as well as some really amazing things happening and the reason it's so important to do that is because many customers will appreciate doing business with you not only based on the current product but also based on the roadmap. Where can I go in the future? And we seek to make those customers feel comfortable that if they go with HP they do have a future and they will have a leadership advantage over their competition. All right, thank you very much Tom. Appreciate you coming on the Cube and good luck with Moonshot. We're very excited when we first saw the the announcement and the product and it looks like you guys are at the forefront of innovation there. Thank you very much. Appreciate your insights. All right, keep it right there everybody. We'll be back with a special segment. We're live. This is Dave Vellante and Jeff Frick from HP Discover 2014. This is the Cube.