 from Las Vegas, extracting the signal from the noise. It's theCUBE covering Interconnect 2016, brought to you by IBM. Now your host, John Furrier and Dave Vellante. Hello everyone, welcome back to Las Vegas. We're live here at IBM Interconnect 2016, day two of exclusive coverage from SiliconANGLE Media is theCUBE, our flagship program where we go out to the events and extract the signal from the noise. I'm John Furrier with my co-host, Dave Vellante. Dave, day two of three days of coverage. Day one in the books, day two, more cloud, more infrastructure, more Watson. A lot of stuff happening. What's your thoughts from day one and what's your view on day two? A lot of great people coming on theCUBE. The biggest names in tech here at IBM. What's your thoughts? Well, watching the keynotes this morning on IBM Go and it's all about the developer. I mean, you remember, John, we were here two years ago at IBM Interconnect. When IBM announced Bluemix and it was good concept. It was kind of a shell. And now, as I said yesterday, IBM's on that flywheel. Essentially what they're doing is they're building out a digital strategy or a strategy that allows their customers to build a digital strategy, build digital assets and take them to market and allow their customers to consume them, interact on mobile, et cetera. And what IBM is doing with Bluemix is building services in that are essentially facilitating that transformation for customers. So that's what it's all about. It's interesting. We heard a little bit yesterday from Robert LeBlanc about cheap storage and cheap compute. That's not what the cloud is to IBM. It's all about this digital transformation. So you totally different messaging, which is typical of IBM. Well, first order of business, Dave Kinney who's now running Watson from the Weather Company. He said on stage, very, as a matter of fact, very direct, he said, first order of business is developers. That is the theme, Dave, I agree. But the IBM has to follow through on this. I mean, their narrative is right on. It hangs together. I think they're taking a good approach. And I think that IBM is not behind in this. They see companies like Twitter who blew the developer opportunity. Obviously, they have a deal with Twitter, so that's probably obvious to them. They understand that- Yeah, that's not the playbook as your point though. It's not the playbook. You've got to embrace the developer community. One, two, they actually have so much experience in open source. They're on their, some will argue, multiple generations of open source DNA within the company, yet they're transforming. So you've got this open source ethos, embedded in the roots of IBM. Okay, now there's organizational challenges, but you're seeing blue mix really move faster than I thought it was. I thought it would be slower, longer than it is. They're working hard. They have to follow through on open source and do it right for this new generation. They have to make the developer top priority because, look at the bottom line, we talk to customers all the time. There's not enough people in the enterprises that actually can do the development. So anything to make the developer's life easier, the mobile developers is key. And this Lego Blocks open source build on other people's stuff is great. If you're going to build a building, you don't need to be in the concrete because it's the lay of foundation down. Watson can help there. This is their opportunity in my opinion and I hope they don't blow it. So I want to get your take on something. So we have put forth this premise. You know, we talk about this digital fabric all the time, these horizontal transports like the cloud, there's a data transport, et cetera. One of those transports that we talk about is the identity transport. So you saw today there was news, MasterCard is now accepting fingerprints and selfies, right? One of the things that we predicted and you're seeing now happen is that increasingly organizations are going to use external services to provide things like identity, the data platform, obviously that's happening with the cloud. I want to get your take on that news generally and specifically what you see happening in the business. Well, there's a complete infrastructure transformation going on with the cloud. You're seeing little things from content management systems, API, the identification is changing old stuff. Email marketing doesn't work anymore. I mean, it does work technically, but it's not the preferred user experience. So a lot of this infrastructure software and infrastructure is radically shifting to the preferred new user experience. Okay, and one of them is federated identity but not federated by anyone vendor. Open source will be a leader there. So what I see happening in the Apple back door with the terrorists MasterCard will accept selfies and fingerprints as access is an absolute new paradigm in identity and companies used to have federated identity across their systems and now are changing it. For instance, people want their own identity. We do it on CrowdChat, you can do it with OAuth, but IBM also has interesting opportunities with their own identity systems. So you can't, it's not a winner take all on identity. I think a new paradigm is coming out. You're seeing things like fingerprints, you're seeing biometrics, you're seeing selfies. There is a new way of identity and I think no one's cracked the code on that and cloud exposes the opportunity but also exposes the weakness. So in an era of social, in an era of push notifications a lot of stuff's certainly changing. Identity is a huge issue. This is absolutely directly related to security. This is the subtext of this event Dave. So at the Uber level, John, I think this is profound and here's why I say that is our industry has really only been through previous to this current one two major shifts that move from vertical integration to sort of horizontal competition. Essentially that's been in place now since the mid 90s, early 90s even. When IBM decided way back when to go forward in services that was a winning strategy. Frankly it's trivial compared to the transformation that's happening now. It's radical Dave, I mean it's so obvious but I'll give you some examples today, just today. None have to look any farther than this morning. Top news in technology industry globally today are a few stories I'll highlight if you to make my point. One, the government is putting pressure on Apple to backdoor 12 iPhones. That is a huge thing. Apple's putting that heat shield down. No, no, we're not gonna create a backdoor. Huge implications on policy security. Two, master cards accepting selfies and fingerprints from people for access to content and identity. And three, Uber driver killed five to 15 people in Michigan. All three are related to around one core issue. Who the hell is that person that killed the people of the Uber driver? That should have been using big data analytics to predict that. You have the master card identity issue. That's going to be a new form of identity. And obviously the Apple backdoor is a security issue. All revolves around cloud security identity. It's all software. And all this stuff about Watson analytics, emotions, how people feel is trivial compared to what is actually happening in the industry. So the opportunity is going to be for the big guys to do well. And startups to fill the gaps. The point I wanted to make was in terms of the industry structure. And so what's happening is, as we talked about, these horizontal platforms, these horizontal layers, if you will, whether it's cloud security, identity, the data transport are supporting what used to be vertical industry structures where the value chain of that industry was hardened in cement. That's blowing away. Why is it being blown away is because people are digitizing everything. They're digitizing the assets which allows them to sort of jump those industry, you know, swim lanes. Yeah, I mean this is the guy from the predictive analyst. Alchemy is now part of the formula, but we've been saying on theCUBE and we continue to bang on this term, you've got to be horizontally scalable with data and now technology, whether that's open source, industry standard hardware. Okay, horizontally scalable works. But also you can develop a pre-packaged, vertically integrated apps on top of it. It's not the stovepipe of the past where here's my silo, here's my app, that's my retail app. You know, by the way, I had a different app for back end. No, the data modeling is causing a horizontal integration plus vertical integration. This creates a huge challenge, huge opportunity at the same time. And so, I mean, again, this is a trivial example, but if you look at the mini-computer business in the 80s, it died because those guys failed to respond to the trend toward disintegration. And what's going to happen now is I think you're going to see similarly some of these industries are not going to respond to the digital transformation imperative and they're going to get blown away. You know, IDC put out a number out here this morning and the keynote said one-third of the leaders are going to get disrupted. I think it's much higher than that. And so, that industry structure, the way you structure and organize an organization is table stakes, but it's vitally important. And I think that's what Ginny has been spending a lot of time on. Now, to me, John, the big challenge is the inertia of IBM's huge fragmented software business. It is a great point. The fragmented software business is something that I think is a challenge for IBM that they've got to address. Well, there's two things. You hit a nail on the head. IBM's got structural challenges in how they've organized. They've got zillion CTOs. They're working on that, right? And they're working on that. But this is not the issue. The issue is the person has to implement the solutions. The doer, the practitioner who's sitting there going, wow, I have an opportunity. I got risk in my business. I got to actually build out these horizontally scalable applications. There's no playbook. And so what has to happen right now is to mitigate the risk and take advantage of the financial opportunity. A person in the company says, hey, I got a meeting next week at off-site. I got to present the not the five-year plan, the one-year plan, how I'm going to move from point A to point B for our business, not the vendors or not the company. So all that kind of ties together because how do I implement the solution? How do I learn? Where are my peer groups? Where's the best practices? I got to buy research from Gartner. I mean, this doesn't work. I mean, this is the whole thing. The content is going to be free. The community has to come together. And the issue is on the customer side. IBM's customers are the ones that I feel in the pain. So IBM's got to move their organization in a position to be more agile, okay? And to make the demands of those folks building the next generation architecture. Well, and I think you're going to see huge demand for how do I do that? Like you said, there is no playbook, so. All right, we are day two kickoff. This is theCUBE. I'm John Furrier with Dave Vellante. We go out to the events and extract the signal from the noise. 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