 Live from Las Vegas, it's theCUBE covering HPE Discover 2017 brought to you by Hewlett Packard Enterprise. Welcome back everyone. We're here live in Las Vegas for HPE Discover 2017. This is theCUBE's exclusive three days of coverage, day three here on the floor in Las Vegas. I'm John Furrier with my co-host Dave Vellante with SiliconANGLE theCUBE. Our next guest is Denzil Samuel. So it's a global chief channel officer for HPE. Welcome to theCUBE. John, thank you. Good to be here, thank you. So we, Dave and I always like to talk about the channels. We have a history with the HPE. Everyone knows I've worked there for a good, almost nine years and in a lot of the time in the channel business, a lot of people also know that HPE has always been channel friendly. Really for a long time. Absolutely, we were born in the channel. Now more than ever with the cloud here and the cloud really being multi-cloud and pervasive, the channel partners have a huge opportunity and they're close to the customers. They're on the front lines. What is the mix of business? What is the strategy? How are you guys taking the transformation message, the digital transformation to the channel and what are they doing with it? Wow, there's a lot of questions thrown in there. Let me start with the channel business. It's, the channel business is 70% of Hewlett Packard's revenue. We have 87,000 channel partners around the world, every region of the world, many, many countries. And you're right, John. And we were born in the channel, right? So we're channel-centric, we're channel-friendly. We've got the best partner program in the world. And it's not us saying that. It's the partners telling us and industry analysts telling us that as well. In terms of the opportunity right now, the cloud wars are still going on between the cloud players. But I think that what that's done is it's changed the model with respect to the fact that we're now looking more at a consume model, right? Where customers want to buy on a consume basis, pay as you go, pay as you use it. And that represents an incredible opportunity for the channel. And the channel has really embraced that. They've realized that they've got to be more than just value-added resellers. They've realized they've got to morph and evolve into being service providers as well. And we're seeing that transition occur at a fairly accelerated pace. I'm assuming the channel guys would, and you see the global system integrators clearly lining up. They see that opportunity. A lot of transmission conversations. But as you go into the long tail of the channel, as you said, a ton of partners, they've always been hungry for services because that's where their gross profits are. So they take in hardware, the solutions, very solution-centric. But as the business model shifts to the customers renting versus buying, per se, they're kind of teed up for the services. How has that specific transition taken place? I'm sure that they've probably been eager for being more of a service provider. In the sense of actually maybe having their own cloud service or a variety of other services. What's the make of it? How is that going? Well, what they love about our message is the fact that we know that customers are not only going to go to pure cloud. We also know that customers want a choice. They want to know if they can actually have their processing, their compute done, not just in their data centers, or maybe even on-prem, but even at the edge. And so because we have really the only simple IT, hybrid IT strategy out there, that's why the channel partners love us. Because they're giving their customers a choice. They're saying, it doesn't matter where you're processing this, whether it's on a consumption basis, whether it's on the edge, in the cloud, on-prem, off-prem, we can do that for you and we can do that with HPE. So they're embracing that. They love the consumption model. They love our flex capacity offerings and our HPE financial services offerings as well. So it's exciting for them. So my simple mental model of the channel, you talked about transformation before, is you've got box sellers. I know it's kind of a pejorative, but it's still probably the largest component of the business. You've got solution providers and then I guess cloud service providers. Maybe ISVs are sort of a separate channel. You could make that argument. Maybe the hoodies are becoming a new channel as well. But thinking about box sellers and solution providers, the box sellers have to transform. We all know that. They've got big boats, big houses. A lot of them are happy, they're going to retire, but the up-and-comers, they better transform. Solution providers, it used to be, okay, it was SAP, Oracle, now it's VMware, but now it's IoT solutions and different solutions. My specific question is, what's happening with that transformation from box seller to solution provider and how is HP sort of helping its channel get there? Great question, Dave. I think one of the things that I love about it is that it's been going on for a few years. So it's not new. I talked, for example, to a partner yesterday in New Zealand and I said, hey, how's your transition to service provider been going? Because they were a traditional evaluated reseller, a box seller, as you say. And they say, oh yeah, we became a service provider nine years ago. And then I talked to a distributor in Germany yesterday and they said, I said, how many resellers are you actually converting to or helping transform their business into becoming service providers? And they said, about 20 a week. So the shift has been going on for a few years and there's a lot of information out there. There's white papers, there's training, there's sales plans, compensation plans that have been modified. A lot of that material is there. We've helped with a lot of it. We have a playbook for making that transition. We have a service offering that we offer them to help them if they don't know. But for the most part, the distributors and the big value-added resellers, they know it. It's the smaller guys that are making that change. And if we're starting a business, three of us starting a business tomorrow, we'd say, okay, let's build a subscription business and we'll have a monthly revenue stream, okay, which is great. But if you're already used to the heroin of the big gate up front, transitioning that model, and the same is true for Hewlett Packard Enterprise, I would imagine, as your customers shift to a ratable model, you've got to change your financial model and you see a number of cases on Wall Street where companies are trying to make that transformation, particularly software companies. What kind of discussions are you having with the channel with regard to that pay-as-you-go model and how that affects their cash flow and income statements? Yeah, I think that what we're doing is to help that in terms of leasing options with HPE financial solutions, but also helping with our flex capacity offerings. Those are two great triggers for the channel. They love that. They also like the fact that we're trying to be one step ahead of them, right? So I think the power of this is really around what the customer's buying, and they know that if they don't sell the way the customer's buying, they're going to be irrelevant. So can you explain how flex capacity is not just renting? Yeah, I think one of the big, see, when you rent, you're buying a size, right? And you may use to the full size of your needs or you may not. But you're buying that, whatever your capacity is that you're buying, you're buying that upfront. If you don't use it, you lose it. Flex capacity is the opposite. You're actually paying for what you use. And some months you may use more and some months you may use less, but you're paying for what you need. That's a huge advantage to the end customer. And HPE has figured out how to make a profitable business out of accommodating that, because you have to put the capacity there, whether it's used or not. If it doesn't get used, you take the margin hit, right? But you've figured out how to sort of maximize that your profitability in that model. Yeah, we haven't just figured out how to do it. We've actually got a consulting practice that allows others to figure out how to do it. So we actually help our partners morph to that as well. Is that just experience, or is there some kind of magic analytics? I think it's a combination of a bunch of things. But let me tell you one thing that's really important in this transition to service providers. We used to do, when we were dealing with the box sellers, the traditional certifications, right? You get a certification on a product type. And you measure it on that as part of the partner program. We've changed and evolved our partner program to say, hey, listen, it's not just certifications on product, it's competencies, right? Data center analytics would be a competency. Understanding SAP HANA, how to implement that, it's a competency. So as you move a program to embrace service providers away from traditional resellers, having those competencies is huge. Understanding verticals is huge. And that all plays in to the usage question that you asked. This is a really great opportunity, I think, for partners, and this is what we've been kind of talking about on theCUBE on a variety of different events we go to is the cloud is really an amazing enabler because it's horizontally scalable, but you need specialism in those unique domains. Whether it's SAP and big data highlights this. So you got to have that scale and then you can also be specialized. So this opens the door up for a huge opportunity for your partners. So I totally get that. So I want to ask you guys how HP's changed, how you engage with your partners with digital because now you have to then be more efficient with these guys. These are going to be, it's a thousand flowers are blooming in all these verticals in these industries. How are you guys using digital specifically to make yourself more efficient to move the market forward? That's a great question. So first let me answer that by saying in the world of digital transformation, there isn't a single partner category. We're not just talking about service providers, we're not just talking about whether they're resellers or distributors. We're talking about independent software vendors and developers. We're talking about systems integrators, sentiment manufacturers, device manufacturers. IOT opens a huge door. IOT, and let me tell you something. There may be partner categories we don't even know about today, but there'll be partner categories tomorrow. So the program we've built encompasses all of that. It encompasses all of these partner categories, every region, every vertical, everywhere around the world. In terms of the digital piece of it specifically, the transformation. Look, there's some interesting things going on with companies like GE Digital. You know, they've got jet engines now that they can actually transmit information on the wear and tear of every single blade within that jet engine. We can connect that and collect and connect that data. We can analyze it. We can run insights on it and we can feedback powerful information that makes them drive outcomes to the customer, right? And all of that is linked through our IOT technology, our Edge technology, and our hybrid IOT approach. So you guys have to be cloud-like in the sense of standing up programs with automation. So, you know, we see Tesla self-driving cars. You can have a self-driving channel. I mean, at the end of the day, you need to have these agile capabilities. I mean, this is kind of what you have to kind of get on, right? Yeah, you know, I think everyone has to do that. And I think there's no company right now in my mind that's more positioned to do that better than we are. And let me tell you why. We have billions of dollars of cash in the bank. We have no debt. Meg, over the last few years, has trimmed us down to be nimble to take advantage of this. The last thing you want to be in a market that's moving at this speed is be slow. And you know, what we're seeing with some of our competitors is they're getting very, very big, very, very fat, and a lot, and they're burdened with debt. That is not where you want to be in a market that's moving at the pace that this is moving in. You want to have the ability and the cash to invest. And as you say, do things real-time. Do things that are just at speed of light. Well, if you guys can, I mean, you're talking about Dell EMC, obviously, they're the thing bigger is better. But I think your point is, if you can be nimble, and by the way, decentralize the way the organizational structure, you can ride many waves. You can ride many waves. And we don't have the $50 billion of debt that Dell EMC have. Right, right. Denzel, thanks so much for coming on the video. I really appreciate it. And you know, the strategic nature of the channel, again, 70% of the business probably will grow. And again, that's always been the good mix and a lot of leverage there. Cost of sales is lower. Everyone's making money. That's the key thing, too, right? That's the key thing. That is a customer and channel partners profitability. Yeah, I agree. It's a key. 70% of our business, that will continue to grow. What will change, though, is the mix, right? We'll move from the 80% box sellers and we'll move more and more. So that'll be probably 60% of our business over the next two to three years. And we're going to see 40% of the channel business is going to be the value at. Well, we're watching you guys. And of course, as Meg Whitman says, the right mix is her message here. Yes. It's HPE Discover. I can see how that evolves. Thanks for coming and sharing your insights here. Awesome. I really appreciate it. Live coverage here from HPE Discover. I'm John Furrier with Dave Vellante. You're watching theCUBE. Stay with us for day three as it continues our three days of wall-to-wall coverage. Thanks for watching. We'll be right back.