 Live from Las Vegas, it's theCUBE. Covering Edge 2016, brought to you by IBM. Now, here are your hosts, Dave Vellante and Stu Miniman. Welcome back to IBM Edge, everybody. This is theCUBE, the worldwide leader in live tech coverage. Tom Rosamillas here is the Senior Vice President of IBM Systems and one of the hosts of the show here, Tom, good to see you. Thanks, always good to be with you guys. I appreciate you being here at the conference and interviewing lots of hopefully interesting folks so far and I'll try not to disappoint. Many, and you never do. This is our fifth Edge. We were here at the very first one. It was kind of a smallish boutique storage show in Orlando. It's grown to over 5,000 people. Yeah, 5,500 people here this year and you know, Crossall walks a life and it's really fascinating to see so many people investing in themselves because they see the need for technology. They see the need for innovation but they also see the need for reinvention of themselves. I think a lot of people here investing in their skills. And IBM has kind of cleaned up the internal plumbing and divested of the x86 business. Now you've got three very clear businesses. The Z business, the power, A, the open power and also the storage business which is moving to software defined and flash area. So very clean sort of portfolio. Take us through that. Talk about the strategy around that portfolio. And as you said, it was actually two moves that we made, very strategic moves. One was divesting of the x86 business to Lenovo and the other was moving our semiconductor manufacturing to global foundries to do it at scale. I needed an at scale partner. I wasn't at scale. I was woefully below scale when it came to semiconductor manufacturing. In fact, even with all the sewing I was taken in I couldn't get to the level of scale that these guys can do. So it's great to have the partnership with GF and that's going well for us so far which is good. So the strategy for us as you said the three pieces are around what we're doing with our mainframe and we see the world's data and the world's transactions running there. The strategy here is to take advantage of also the new workloads and Linux one and what we're doing with blockchain. I think the blockchain story is going to be dramatic for many industries independent of the mainframe but all by itself it's going to transform a lot of things that are shared agreements today. And so IBM is going aggressively after blockchain contributing to the Hyperledger project and doing a whole bunch of innovation there. But I think it was really telling when we stood up a proof of concept and we've got over 30 customers now running on Linux one in a secure container running blockchain running Hyperledger. Same code, enter through Bluemix, get it on the IBM cloud and we've got over 30 customers kicking the tires on blockchain on Z for lots of good reasons. IBM was one of the first and obviously one of the most aggressive and understanding that Bitcoin wasn't about just being a currency, it was about a technology that could be applied in a variety of ways. Hyperledger is one example but there are really many others like security paradigms and many others. What led you to that? Was it your presence in financial services? Was it the technical guys seeing that opportunity? Was it a top-down thing? I give credit actually to our research team on this. The research team really saw this coming and said this is an amazing technology. We do a GTO every year, a global technology outlook and the team came up and said this is something we really got to pay attention to. I think the reason is, and I'll get back to the strategy, the reason is because we've automated so many things and yet you look at the process of authentication or you look at the process of settlement, so you look, you know, the speed of trade is instantaneous and we'll pay you in a couple days. You know, one of my colleagues was over in Singapore looking at the number of ships out in the port waiting to come in, they've got to clear customs, they've got to go through an awful lot of handshakes and agreements and stamps of approval that says yes, you are who you say you are, yes, this agreement is done, yes, the money has been moved, yes, okay, now it's okay to go through the export and import and do that settlement. So there's an incredible amount of inefficiency of lack of automation built into this system that otherwise runs great, but it's weakest link and the weakest link here is oftentimes on are you who you say you are, have you done what you said you were going to do, is it okay now to take the next step? And so the shared ledger allows that to happen, as you know. So I think in and of itself it was the research team that really spotted this and then the research team working with the mainframe team and the blue mix team to say we want this running on a secure container in an LPAR if you will, but encrypted and secure boot and all kinds of advantages to running it there. Your talk yesterday, and we may not have time to get into all of this, but you broke it down into sort of four pieces of the framework, technology innovation, business value, collaborative innovation and business model innovation. God we could have an hour long cube segment on those. A great structure of a discussion, but one of the things you talked about in technology innovation was data value and the imperative of real time and how essentially data value declines very, very quickly. Talk about the importance of data value kind of touched upon it just then in the blockchain narrative. Yeah and not all data, but the statistic I've seen 60% of the data that's out there is, goes very quickly to zero value. There's a lot, there's other data that you want to have around to mine it after the fact in the next hour, in the next day, in the next week you want to look back at sales data, you can do that. So there is value in that data for long, but some of it this, with the internet of things and the instantaneous on whether it's threat or opportunity, it's fleeting. And so that's where you want to take advantage of I want to know what's happening right now and I want to make the right decision based on all that I can know. And so to me it's about inline analytics on Z, it's about the speed with which power exchanges data between memory and processor, it's about the accelerators that we've put into the power architecture, it's about open power as you mentioned briefly, about opening up that ecosystem to lots of innovation, to lots of partners that can contribute. You mentioned that you've been talking to some of my colleagues about Moore's Law and the tapering that's happening, that there's no tapering for demand for performance, there's just the tapering of supply just based on microprocessor speed. So we've got to do it in other ways, we've got to do it with memory, we've got to do it with accelerators, we've got to do it with network, all kinds of things we can do to deliver systemic performance, not just processor performance. Is what you're doing with recognizing, obviously you guys have been on this for a while, recognizing the peak of the Moore's Law curve. I said to Stu yesterday, you're too young to remember this, but when IBM made the bet from ECL to CMOS, you remember that well, that was a big bet. Is this substantial or is it, what's similar and what's different in that bet? With what you're doing today with power and the innovation curve? It's an interesting parallel, I hadn't thought of it, although I did, I was a part of the transformation and the transition from bipolar to CMOS. And at that point I think that, I'll tell you what the key difference is. We took a major step when we went from bipolar to CMOS in the speed of a single processor and the ability of a single system and what we could deliver in a single image. It was a huge step down temporarily until we could get that new technology up and running and that's what we've been riding and the industry's been riding for years now, but that was a big step down. And so we had to help customers understand that you're going to go backwards and then you're going to go forwards. That was a hard thing to do. And now you're not going backwards. You're not going backwards. I mean processor speed's still improving. It's just not improving at the rate to which they're used to and it's not happening automatically by just mapping to the new nodes, taking advantage of the new silicon and boom, you got outstanding performance. We get okay. We get marginally decreasing is the problem is it's not improving at the rate it was, but it's still getting better. Still getting better. So it's a little bit different in that light but helping clients take advantage of that new architecture about, there's a partner here that's working on GPU databases. So being able to take advantage of that for retail customers as an example, that's a great opportunity for us. Tom, so many of the items that we're discussing here, things like cognitive computing, IoT, are ones that kind of span across a lot of different domains. I'm wondering how that impacts how IBM looks at innovation. I can't just do an M&A and have a little piece that, oh, that solves the problem. How do you look at tackling some of these big hairy challenges? Yeah, I think my boss declared a couple of years ago that cognitive was going to show up everywhere and I think she's been proven correct on that. We see announcements all the time, people saying, I'm adding cognitive to this, I'm adding it to that. For me, it's about building for cognitive. Say what do I need to do within storage, especially within power architectures to deliver for cognitive? So the partnerships that we have around the Open Power Foundation is an example with NVIDIA or with Xilinx or with Melanox or with others, allow us to build for a cognitive era. It's big data on steroids. It's being able to handle all of this learning and all of this processing, but all of this data. So it turns out that machine learning, as an example on ingestion, really works very well with GPUs. It turns out that inference and being able to detect patterns after the fact, after I've done the learning, works really well with combination of Power 8 and Xilinx, FPGA. So there's the things that we call the play on for Open Power actually were designed to build for the cognitive era. So that's the kind of things we're doing. I would say also looking at the speed you get from Flash, just having that data be available and what we're moving to as you said, Dave, around software defined and around Flash, all designed and built for the cognitive era. What about the business model innovation? Our first guest yesterday, we talked to Jacqueline about some of the financing pieces that have to change, but there's so much that goes into making it easier for customers to consume. It is, and the business models we talked about yesterday are everything's changing. Every industry is being disrupted. Couple years ago, you guys were asking me how you're going to deal with the disruption happening in your industry. Now you could ask that to nearly every industry. It's hard to name one that's not in the process of being disrupted. I mean, financial services we said was the stalwart. Nobody's going to mess with that and look at what FinTech's doing, look what microloans are doing, look what payment systems are doing. It's already here, it's already happening. So it's not just the Uber's and the Airbnb's, but it's all happening all over the place. And it is, to me, actually Uber's a great example. Uber used available technology. It was business model transformation of tying supply to demand. That was the breakthrough for them and they've obviously done very well as a result. So those are the changes. Aligning need with how can I supply it? How can I serve it up in a soft layer cloud? How can I use BlueMix to enable all developers to be able to build instantaneously and take advantage of the APIs that are in there? How can I serve up Watson as a series of services so that people can consume Watson wherever they are? So. In our intro this morning, James Governor, I think he meant it as a compliment. He said, IBM's very pragmatic. He said, sure, people are talking about, you know, BlueMix and soft layer, but you've also had solutions that tie into Amazon as opposed to, you know, we hear Larry Elson, you know, throwing down the gauntlet at Oracle Open World, you know, Amazon's got a new competitor. He's trying to punt at them, you know. How do you look at kind of that diversity choice and an openness? Well, I think you have to look at IBM as being a little bit different. We're in a lot of businesses. We're in a lot of spaces. We still have, you know, a great services business that will partner with pretty much everybody and works in order to serve clients. So if a client says, hey, I want you to do this and I want you to do it on this, that and the other, the services team will come in and do that. You know, I'm selling, I'm an arm supplier to the hyperscales. I mean, I want to be more so. You know, we're doing that today and we want to do more of that. So, you know, if that's the way people want to consume, I want to be the provider underneath that. You know, the software teams around analytics and what we're doing with security, you know, we've got many places where we're partnering and competing in parts, but partnering in others. So that's been the story of our lives as this co-operative. And so I think to me it's not about who we're going to, you know, we're going to kill this person or we're going to beat that person. It's about how do we best serve clients and we're doing it with federations of partnerships. If anything you've seen in our strategy change in the past couple of years, I think it's been to really ramp up partnerships around IBM. So let's follow up on the hyperscale comment. So you talk about arms dealer. So you see HPE basically sell off at software division saying we're going to be an arms dealer. Dell EMC happens. Sell off their software, sell off their printer, sell off their services, sell off their... Quite a different strategy than what IBM is doing. And Dell as well. Dell saying, all right, we're going to be big and supply chain. Okay, great, arms dealer. How do you guys play in that hyperscale space? What's your story there? I think the interesting thing to me about hyperscales is some people think this is a race to the bottom and it's just a matter of, well, all that stuff's commodity. To me what changes is the use cases change for what the hyperscales can deliver. It's not about commodity. It's about innovation and it's about the combinations of innovative solutions that they can get. They have different workloads. They are serving different workloads and they recognize that there's only so much cost I can take out going through standardization. Clearly you want to do a level of standardization, a level of automation. Now it's how can I be different? What unique things can I offer? If you say I want to be able to offer cognitive as a part of what I'm offering you, I better have infrastructure that's really good supporter of cognitive. So what I'm seeing from the hyperscales is a level of their own design innovation that actually is really good for me because they're now seeing differences that they can make not to be just another of. They want to be different from and they see the workload and they see the benefit they can get. That's why Google pushed us on open power to say can you guys get together so I can plug how many GPUs do I want? How many processors do I want? How much this do I want? How much that? We still want to be designing the recipe but now they can do it out of ingredients that are plug compatible. Well so ever since I've been in this business I've heard hardware is dead and I've been around it a long time. It's changed quite dramatically. I mean you guys get out of the disk drive business a long long time ago. You've moved beyond the x86 but hardware is still a good business, right? Why is it still a good business? Why does it give you confidence that it'll continue to be a good business? Well because despite all the virtualization in the world you still need to run on something. So it still requires something behind it and I have to be the best something I can be. So yes take advantage of containers and virtual machines and all the technologies that are there to increase the efficiency and increase the utilization. I mean virtualization has probably been the best breakthrough to utilization ever. You know it really helped rise rising tide and take cost out if you think about it. If you can consume 90% of something instead of 10% of something that something's going to be more valuable to you and it's going to, you're going to be able to spread that that cost over a lot bigger denominator which is wonderful. So you know these technologies still require great hardware and they still have in fact with Moore's law doing what it's doing it's actually requiring us to do more innovation not less in order to deliver the performance that clients whether they be hyper scales or end user customers demand. And people will pay for that value. It's the best. Gosh I hope so. Well they always have and there's no reason why they wouldn't as long as it's delivering business value. You have personally taken on a mission of expanding the ecosystem in your group. It's, I think it's even part of your job responsibility. Talk about what you've done there, the progress that you've made. What are the things that you're most proud of and what needs to still get done? So we're always looking for partnerships and I mentioned that at the IBM level as well. So I think the Open Power Foundation being above 250 members now is a testament to actually to the need for this that we had that many people sign up. Our willingness to be that, to be that licensor not just a partner to say we're willing to go beyond that and actually license the technology has really helped us. And what you got to see yesterday was a number of people taking advantage of the power architecture and it's great to see people recognizing that opportunity whether it's around to dupe or it's around hybrid cloud management or it's around the red hat distributions. It's all these kinds of things that are good examples of people saying, this Open Power thing, this Power thing is interesting to me. So I'm really proud of what the team's done with the Open Power Foundation and with the ISVs or the independent software vendors that are running on top of this. I think we've got great partnerships on the storage business. You go down to the shop floor, you'll see Cisco there showing versus stack. And so I'm the partnership exec for Cisco within IBM. And so we got together on things. We've announced IOT relationships with them. We've announced collaboration relationships with them and I've announced storage relationships with them. So the partnership opportunities out there are great. And I think that I'm very proud of the team for reaching out to Cisco and saying, hey, let's get together on this. And they have. How about things that you still need to get done? What's on your to-do list as far as the ecosystem? If there's always more, we've got thousands and thousands of open source libraries available on Power Linux, but there's always somebody who says, yeah, I need 10 more of these or five more of those. And we're willing to do that. So I think it's about increasing that level of partnership and just getting people to see the opportunity so they do it on their own. So it's great to see IBM's strategy come into focus now, dealt with a lot of the organizational issues, made some big acquisitions, bring it in some outside folks as senior executives as well, your colleagues, I'll give you the last word on edge and what we should expect going forward. I think what's great here is, as we were commenting before we came on, is hearing it from clients is the best way to hear it at all. I mean, I'm biased, right? So you know where I am. But hearing clients talk about their adoption and how quick it was to get ROI on flash systems, two months' time for Red Bull, it's fantastic to hear from the clients. And one of the things we always try to do with IBM is make sure you've got clients up in front of this stage telling other clients their story. So it's about the story and it's about the clients and sure, we'll tell you about the innovation and about the technology behind it, but I want to know what the result was based on all of that and the clients are the best way to tell that. Tom Rosamilia, thanks very much for taking some time with us. Really appreciate you having us here. Keep right there, everybody. We'll be back with our next guest. This is theCUBE, we're live from IBM Edge. Hashtag IBM Edge, check out ibmgo.com. We're right back.