 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, this is Homestretch, Stu, IBM Edge Day Two, our fifth year at IBM Edge. This is theCUBE, the worldwide leader in live tech coverage. I'm trying to sort of digest, Stu, where we're at here and try to cut through what is obviously a great event in terms of the speakers that come in, the senior people at IBM, the face that they put forth to this community, how they've evolved this from a storage show into a broader system show, but cutting down into it. We are seeing now the transformation of the enterprise tech business and within that backdrop, transformation of IBM. IBM shedding low margin businesses, going hard after cognitive analytics. We all know that story, so what's left in the systems division, really three pieces. The Z, the power, which is, there's a one and the one A, power, which is unix, declining business, okay, but still good business, I'm sure it throws off a lot of cash, and then the open power. Growth, exciting, new, probably not very profitable today, but has long-term potential, and it supports some of the other businesses that IBM is putting forth like analytics and cognitive, and then of course the storage business, which is in transformation into a software-defined business and into a flash business. So some holes, right, since the x86 has been sold to Lenovo, and one of those big holes is hyper-converged. IBM said, look, we're doing converged with Cisco. We heard that potentially they're leapfrogging, skating to where the puck is. We'll say, maybe, I don't know. Hard to do without an x86 business, so they've got a partner for x86. It's still strategic for a lot of their clients, but it's like you got three pillars, and then there's this sort of other one that's a big chunk of the market that IBM said, okay, we're not gonna focus on that, because we're gonna clean up our portfolio, focus on profitability, not volume, but it's a whole. Yep, Dave, absolutely. So it's always interesting to sit back and look kind of longitudinally as to where we've come. Something I think IBM's done a good job for a number of years is storage isn't necessarily about the storing of data. It's about data and all the services and everything that can go with it. So we've talked about it a number of times this week about things like cognitive, IoT, all the analytics are hugely important and will be drivers of the data business, which requires storage, but while there's the hardcore people that want to get into the wonky infrastructure of storage, it's kind of that substrate that IBM builds on, and IBM does a good job of moving up the stack. We've seen really maturation of power which I think is part of IBM's answer as to, well, that whole on the x86 side, well, power, it has performance, it has many use cases we talked about from bare metal, virtualization, and containers, all that power can do, and then there's the cloud piece. This hasn't been a raw, raw cloud show, but the IBM's message from IBM is hybrid cloud, software and blue mix, and you can do power in the cloud. You can do Z in the cloud, and when it comes to converged and hyperconverged, well, some of that is, you know, well, if you want kind of the hyperscale architectures, well, we've got a cloud and we've got partners that are doing things like open power, but, you know, converged versus stack, great partnership with Cisco, they've been working pretty well, they're not yet being transparent on numbers. What I did here is they've sold more versus stack in the first half of this year than they sold in all of 2015, so that's great, but it's not a billion dollar business. VCE by Cam Parisen last year did an order magnitude of $3 billion worth of the V block and the VX block, which a lot of Cisco gear there, so Cisco, strong leader in the converge. The thesis I've had is that Dell is really positioned itself to ride that next wave of hyperconverge. Not only do they have the Dell server-based solutions, which now with EMC means they've got the VX rail, but, you know, they own VMware, which has VSAN, and it's going to drive a lot of those solutions, and they have Nutanix as an OEM, so if you line up all of the players today, which is now, you know, a billion and a half, $2 billion worth in 2015, according to Wikibon's number, including all the software and the hardware, Dell's well positioned there, and IBM isn't on the map when it comes to hyperconverge today. Versus stack, sure, they can push that down, they can do a lot of the same things, and software, but it is, as you said, a gap in the portfolio today, but IBM's got lots of things. As you said, many times here, IBM is chasing the value, not the volume, and I heard a lot of good things, but I was a little disappointed on hyperconverge that there isn't really an answer or really, really a strong acknowledgement as to why they're not pushing in that way, despite the fact they've got some really interesting solutions here, the one that got closest to talking about hyperconverge, so when we talked to Bernie Spang about some of the HPC solutions that are building scalable architectures, not just on software-defined storage, but on software-defined compute, which is kind of a new one to me. Well, there's no story there on hyperconverge, and one wonders, okay, is it because IBM believes there's not a big market there, and it could be, maybe they're right, maybe the server-sand guys are going to leapfrog them. What you didn't hear, you try to decode the statements, what you didn't hear is, hey, stay tuned, or we got our best people working on that, I mean, those are sort of pat lines that executives typically give. They almost just sort of, I don't want to say dismissed it, but they said, look, we got converged, that's what we're betting on, and we're doing that with partnerships. And so, who knows, Stu, maybe we're overstating hyperconverged, right, so. Well, if you go, you know, not talk to the Cisco people in the booth here at the IBM show, but you go talk to Cisco about hyperconverge, and they'll be like, hyperflex, hyperflex, we've got that, everybody's going. Everybody's pivoting that way, so a lot of people are wrong, including us, if that's what's going on, and I'm not sure it is. Again, I'm just trying to decode IBM's lack of a story there. On the positive side, I mean, IBM's generally really good at strategy, and it's because they got a good combination of financial wizards, and they've got deep technical expertise, like core, core research. So, Jimmy Rometti set a strategy in place four or five years ago. Well, actually, to me, it started with SoftLayer. That was the admission that, boy, we got to do something in cloud. They went all in on cloud. They're still making tons of acquisitions there. They got a super senior guy in LeBlanc. A lot of people question LeBlanc's appointment to cloud, but what they've done, interestingly, they've brought in, bought in a lot of companies and put a number of people in charge of various positions within the cloud division. And also, big bets on analytics, big bets on Watson. So that strategy, I think, is starting to shape up very nicely, cleaned up the portfolio. I say cleaned it up. They've rationalized it in systems. And what they're doing a better job of, particularly in storage, is getting products from R&D into the marketplace. That was a big criticism that I used to have of IBM. They'd be doing stuff in R&D, never hit the marketplace. Took them way too long, for example, to integrate store-wise. So some of the stuff they were doing in M&A, it just wasn't getting prioritized. IBM was moving too slowly. I think they're moving quicker, and that's good. They've definitely, with the rationalized portfolio, can go harder. Software defined, I think, helps that. Ed Walsh, he moves fast. He's a startup guy, so good choice there as the leader. Z-Cycles, I mean, Z13 last January was a big announcement. That's kicked in. It was a good Q4 for IBM Z, no doubt. It's a very cyclical business. They're modernizing that platform. I mean, they're doing everything you have to do. And there's all kinds of rumors about, oh, IBM's going to sell its mainframe business. We heard rumors about IBM's going to sell its storage business. I don't see either of those things happening. Ed Walsh on theCUBE said, no, I was not brought in to sell the storage business. And to me, it wouldn't make sense. You need a place to store all this data, and it's a good business. It continues to be. And the power strategy we heard from Doug Balog, again, coming into focus. At the time, there were a lot of skeptics. What are they really trying to do? Is this a Hail Mary? Will it work? It seems like there's a viable market for X86 alternatives. Yeah, and Dave, the thing that really impressed me at the show this year is the transition of just talking about the infrastructure. And really, it's not just software saying, oh, yeah, software is great, but I can buy that software standalone. I can use it on a lot of different platforms. Really agnostic and focused on software. And to focus on the transformation that people need to make. The keynote this morning, Stephanie, who we interviewed yesterday, talked about really the power of the individual. They had those MIT Innovator award winners on there. And one of our last interviews, even talking about people that have been coding COBOL for 30 or 40 years, how they need to make change. So it's a nice admission of IBM that change is hard. They've got a lot of ways that they're trying to help not only put products and solutions together, but help bring the IT practitioners and the whole industry along to take advantage of those change. And as you said, Dave, on its core, IBM's one of the last companies that really does hardcore R&D. It's great when we get access to talking about the IBM Fellows. I mean, IBM Fellow is not something that you get a little certificate. It's somebody that's done real research and a lot of work and the brain power here. I loved, I think the, was it Donna Dillenberger that said it's when you get to take some of the brains and rub them up against lots of other brains and IBM believes not only just having good people inside the company, but working with the ecosystem, working majorly with open source that there's lots of opportunity for that open innovation. So it's impressive to see even the futurists of IT infrastructure is on our set. So, not just giving lip service to future and change, but we've seen it over the last few years, Dave, feels like they're making good progress. Well, open source is a big deal for IBM and they've got credibility here. It's not just like Johnny come lately into open source. I mean, if it weren't for IBM, I don't think Linux would have gotten to where it did as fast as it did. And IBM's doing, they've taken so many play, replicating that playbook in so many places. Spark is a really good example. Now blockchain, I mean, we heard so much about blockchain this week. IBM going after it with the Hyperledger open source project. And so that's a big deal. Taking the Bitcoin blockchain concept and applying it in new places, improving on it, that's huge in my view. I'm not quite sure the fit with the system's business. That was a little bit unclear to me. I mean, it's in the cloud and it'll drive infrastructure requirements. But still, it's IBM. His IBM, when Gershner under, when IBM under Gershner made the decision to go services, it obviously was very successful. It made a hugely successful acquisition of PWC. And despite the fact that IBM continued to spend on R&D, it's very hard to lead both in services and in product. And what happened was it became a services-led company. And it's shifting now. And it's shifting into a company that's leading, well, at least with business outcomes, okay, that's good. That's good sales and that's good marketing. But it's also creating new markets in the enterprise around cognitive. It's bringing together its analytics portfolio. It's driving a cloud strategy. So it's taking a lot of those services disciplines by industry and leveraging that expertise to drive software and services through the cloud. And that's really the play. And so the challenge that this division has is, the financial folks at IBM want to recognize the revenue growth in cloud and cognitive and analytics and all those strategic areas that Ginny's been talking about for years. They're not trying to prop up the mainframe business. It's like, okay, Tom, Rose, Amelia, here it is, Ross, Maury, go. You've got the legacy of IBM behind you, sink or swim, and they're swimming, right? It's just, it's not the growth business that is Watson, that is analytics. And IBM's got to show growth to the street on those areas. Yeah, you know, it's funny, Dave, when you think about, you know, all the great things IBM's done with open source, well, you know, we've said maybe that, you know, the billion dollar investment in like Linux back in the day, that drove a lot of services business. And open source did drive a lot of services business. But as we've seen with the pressure of Amazon, margin economics of what's happening in cloud, I need to be a software business more than a services business. So, you know, will IBM be able to, you know, grow, keep margins, and, you know, do they need to shrink as a business overall from a headcount standpoint? Because IBM is a giant, you know, out there. Well, you know, this is the, we talked about this earlier, I mean, I've been saying for years, HP and now HPE had to shrink to grow. That clearly is happening. Dell went in the opposite direction. I mean, I don't think so with IBM. I mean, it's been struggling to grow the top line. And it's divested, it's x86 business. It's divested, it's a micro electronics business. Okay, but it's not saying, okay, we have to dramatically shrink in order to grow. I don't think that's IBM's strategy. I think IBM's saying we have to solve some of the world's biggest problems in order to grow, and that's good. I think it's going to work. And a much, much more partner-friendly, innovative, innovating in partnerships is, I think, a big deal, leveraging that ecosystem. So, I think we're a wrap, Stu. It was great, again, working with you. We got a lot going on this fall. So, we have three shows this week. So, we're live here. We're live out at Oracle Open World with John Furrier and Peter Burris and Jeff Frick and Greg Stewart and that team out there. We've got a show, IBM's chief data officer conference in Boston on Friday. We're going to be broadcasting live from the Copley Plaza Hotel in Boston. Bob Picciano is going to be the keynote speaker. It's a conference that's going on Thursday afternoon and Friday. We're going to be there all Friday through two o'clock start at, I think 10 a.m., going through 2 p.m. Bob Picciano will be coming on. He's our first guest. Always a highlight of theCUBE and Bob comes on. Talking about chief data officers, talking about compliance and governance in big data, why that's important, how that's finally coming to the enterprise, big discussion within healthcare, financial services and obviously public sector and perhaps bleeding into other areas. You guys talked about that at MIT. Seth Patrick, Alex, good stuff. Thank you, Bert Latimore, watching on the stream. Kristen Nicole and your team always really appreciate it. All right, Stu, oh, next week, oh yeah, so ibmgo.com is going to have all the videos, all the, so we go into post-show mode after edge ends. Jason Johnson, by the way, props to him who's been sort of manning the IBM Go action along with a number of folks on the IBM team. All the videos from the main tent, from theCUBE, the technical sessions are going to be up and available on ibmgo.com so obviously check that out. Next week, we are, is big data week, big data NYC. We go concurrent with Strata. We are at 37 Signals in New York City. Pillars. Sorry, 37 Signals. 37 Signals is a great company, makes base camp, but we're a customer. We will be at 37 Pillars on 37th Street. It's a, for John Furrier, it's a seven iron from Javits. So we'll be there in force. We have All Day Cube on Monday, Tuesday and Wednesday. We got a party that we're doing with NVIDIA on Monday night at 37 Pillars. We have a party on Tuesday night that we're doing with IBM at the Mercantile Exchange just around the corner. So big data week, stop by and see us at 37 Pillars. That's a wrap. Thanks for watching everybody. This is theCUBE, we're out.