 Live from the Computer History Museum in the heart of Silicon Valley, it's theCUBE. Covering OpenStack Silicon Valley 2016. Brought to you by Morantis. Now, here are your hosts, John Furrier and Lisa Martin. Hey, welcome back, everyone. We are live in Silicon Valley for OpenStack Silicon Valley, OpenStack SV hashtag. Oh, SSV16 is the official hashtag. This is SiliconANGLE Media's theCUBE, our flagship program. We go out to the events and extract the signal from the noise. I'm John Furrier, my co-host, Lisa Martin. Our next guest is Joe Weinman, who's a VIP influencer in the tech business, luminary, patent holder, author, all around great guys out in the trenches. Joe, welcome to theCUBE, the first time. Thank you, I'd like to be here. Yes, I've been dying to do this for years and finally I broke through your firewall. You're now a CUBE alumni. Welcome to the Exclusive Club. We see each other all the time, certainly a lot of conferences. You're best-selling book, Cloudonomics. Couple years old now, but still really a pace setter, really on what now people are talking about in terms of cloud economics. But at the same time, the digital transformation hype has reached an all-time high and reality for customers. They kind of get it, they see Amazon, they see mobile phones, they see Uber, they see Airbnb, they understand that there's a mandate there. They don't know what there there is yet. So what's your take on this? Because people are rushing fast to build, yet the pressure to grow the businesses, not just cut costs, are really a big focus. What's your take? Well, I think to your point, that's really the biggest transformation is if you go back a few years ago, everyone was talking about how cloud is a cost optimization approach. And like we can save a few shekels basically by doing cloud. Then people start to realize, wait a minute, there's more to it than that, there's an agility angle. But what I've been arguing probably for six or seven years now is don't look at the cost side, don't look at performance metrics, look at the fact that the world is going digital. If you're not competing as a digital business, no matter what business you were in, then you're going to miss out. And ultimately the spoils will go to those with the digital skills and capabilities to incorporate in their products and services. It's funny, digital, if you go back and ask anyone I kind of do this at parties and kind of a social experiment, what does digital mean to you? Most people think, oh, the web, e-commerce. But you kind of go a leg deeper than that. You just look at it from a business perspective. It's end to end process. Yeah, so actually I look at it in several different ways. And in digital disciplines, the new book, this is what I cover, it's the idea that processes and resource optimization certainly has gone digital. Products have gone digital and digital products have been around for a long time. You had like the digital watches 30, 40 years ago, but now they're not just smart and digital, but they're connected to the cloud and ecosystems and developer communities. So the whole nature of not just the products themselves, but services which leverage the internet of things like let's say connected healthcare with connected pacemakers, connected diagnostic machines, connected pills even, and then also customer relationships have gone digital. So a Netflix recommender, Amazon, but also a Mayo Clinic that does personalized medicine or patient specific therapies based on a massive amount of big data and targeted recommendation engine that leverages all of that. And then the last thing that I cover is actually the innovation process where that's gone digital. Whether you look at 3D printers, cloud mediated, contests and challenges, innovation networks, idea markets, like I just don't get honestly, companies that are, we don't need to worry about that. That's something for our tech people. It's like, there's no tech people versus the core business. They're one and the same and you've got to realize that. I got to ask you a question because during the keynote, Martin Casada, former Nassir CEO, then sold it to VMware now at Andreessen Horowitz. Always a great speaker, Cube alumni. There was a lot of haymakers out there, but he showed a slide that you tweeted and I retweeted some of my Twitter feed that had old way, new way. And I want to ask you, because this comes back down that the tech people comment you mentioned, there's a new way happening and there's an old way. At some point it'll be cannibalization, but the fact of the matter is, some people just don't get that. How do you talk to people when they ask you new way versus old way? Is there a way for people to understand what is new and what's old? I mean, is there a side of the street to be on? Sure, well in my book, I actually not only came up with sort of this framework which is based on the classic Michael Tracy and Fred Versama value disciplines framework for the mid-90s, but updated for the digital era, but I also had the opportunity to talk to some of the industry leaders like Bill Rue over at GE and got sort of a lot of insights as to what actually makes things work properly in the new enterprise and it's very complex. For example, one of the common themes across, not just a Netflix, which is a tech company, but also Burberry and Nike and GE which are equally digital tech companies is you've got to have CEO buy-in, right? It's ultimately the CEO that takes the risk and accountability for any initiative and one favorite quote of mine is the CEO of Nike when first presenting with the prototype for the fuel band didn't say, I want a five year business plan and I need to know exactly what the churn is going to be four years at and what's our profit margin? It was, how soon can we have this, okay? And that's the kind of leap and you need that kind of commitment when it comes to budget allocation and so forth. The other thing you need though is sort of a VP middle manager level who acts as the fulcrum between the CEO vision of let's go out there and be innovative and introduce these new products and services and at a base level, the technologists that understand what's even feasible and you need that fulcrum that's close enough to the action to know what's going on but operationalize it and make the execution part actually fit the strategy. Or enter the cats if you will. Along those lines, one of the things that I think is interesting is understanding it's not a tech problem as you said, it's really a direction that businesses need to go in in order to survive and be competitive. Talk to us about your recommendations for the CIO collaborating with the business side about really putting a customer centric umbrella around that to drive this thing like when you mentioned Nike, Netflix, what Disney is doing with Magic Bands for example. What is that dynamic that the C-suite, the CEO and the business and IT need to have to facilitate that customer first focus? Well, I think it's several things and it's a great question but that is really the whole point and the point of the value disciplines model originally and my digital disciplines model, it's all around delivering unparalleled customer value which is a little bit different than competitive strategy but closely related because if you want to compete effectively as a rule, not always but as a rule you've got to deliver differentiated customer values that customers select you. There are other dimensions to competitive strategy like maybe having a cost advantage that allows you to weather price wars better say but that's less interesting to me. The other thing is people focus on quote unquote the customer experience but there's not a lot more to the total customer value package than just the experience. So the one thing I would say is you've got to have this co-creation of strategy effort that says we are trying to figure out something that will really be unique and help us create differentiated advantage and therefore help us create margin and market cap and allow us the flexibility to continue to innovate but all that has to be grounded in the reality of technology so you have technologies that weren't ready for prime time or to put this politely there are people that jump on bandwagons without necessarily fully understanding at least from my perspective the economics and rationale for what they're doing. I'll give you two examples I won't mention company names because I don't want to get in the trouble but there are companies who have said we're all in in the cloud okay and they mean public cloud I love the public cloud public cloud has plenty of use cases that are magnificent that prove just how wonderful it is but generally if you were to look at the economic principles behind it it's variable workload it's a advantaged unit cost and it's any performance differential one way or another which could happen and that's what leads you to the balance the other principle that many people forget is if you can statistically multiplex your own demand to create flattening then you don't have the demand spikes that lead you to the cloud so without naming names there are some companies that are diversified and yet are all in the public cloud but my detailed analysis shows that you can actually self multiplex and get a lot of statistical smoothing and when you have very flat demand it's fine to have your own resources or resources and COLA at the other extreme you have companies that have well publicized outages due to not just spikes that they couldn't anticipate but spikes of their own creation like market promotions and you're like wait this e-tailers site is down and they're doing this in their own infrastructure in other words it's like setting fire to your own house you create this market promotion that creates a spike in demand that takes down your own servers and causes a lot of unhappiness like so the basic answer to your question would be understand what you're trying to do and why just don't hop on a buzzword understand where private, public or hybrid really makes sense based on those criteria performance differences, workload spikiness unit cost differentials and maybe ancillary they call that getting over your skis and hence face plan on the spike okay so let's get back down to the cloud thing because you also your other book cloudonomics and digital discipline converging here at this show OpenStack Silicon Valley which is racing to build this open cloud software model kind of as an alternative to Amazon, Azure and other clouds but at the same time really target at the enterprise challenge we're hearing is total cost of ownership and complexity more on the operational side not so much on the tech side really it's a process issue well I think your thoughts on that one thing to look at is you can't just take a point in time view at least I don't I'd like you know grew up playing chess and so you don't worry about your current position you worry about what's going to be the case five or ten moves down the way right and so you know I'm not the right person to comment on is this particular you know release or component of OpenStack better or worse than the competition but what I would say is I think one of the interesting things is that if you go back to the founding of OpenStack most people predicted that it was basically going to be a dismal failure and some might say I won't say who but some might say that it was like a last ditch effort because if you're a smaller competitor going up against a large depocketed competitor like AWS which you know obviously is a leader obviously you know has done great stuff well if you're Microsoft then you can afford to invest and say well look we've got a lot of our own distinctive competencies and advantages so we'll come up and be a worthy competitor but if you are one of the founders or co-founders of OpenStack whose name I won't mention and you're a smaller competitor then you know that's like the old like coalition of the willing stuff right to try and put up a battle most people were like look you got these people together they've got you know their own diverse interests it's just you know smoking mirrors and I think most people would say now that they're a credible competitor obviously there are people that love OpenStack and don't like you know public cloud you know pure public cloud etc but ultimately what it comes down to to me is you know features can always be fixed or enhanced portfolios can be expanded but what is the ultimate architectural principle and for me like I've always been hybrid cloud is the answer I looked at the economics of it I looked at other industries and like if you take the prognostications of some people in the business they say for example super smart people who I respect that all services go from product to from custom product to standard product to service to utility to commodity okay and it's a very plausible scenario it just has never happened to anything anywhere okay so you know if you take water yes water is utility that you can get out of the tap for free or essentially for free depending on where you are and yet there are people that have managed to decommodatize that and sell water as a product at like $25,000 a bottle if you take the prediction that everything moves to a public service then we'd all be living in hotels we'd only be driving around in cabs nobody would own it or lease a car nobody would own a house or at least have a mortgage on it etc etc and so you know when you look at cross industry analogies and when you look at the underlying economics what it says is what are you trying to do right it's not that an SUV is better than a two-seater roadster or vice versa if you're trying to carry cargo you take the SUV if you're trying to have a fun drive in the countryside with the top down you take the roadster you have spiky demand or you don't have the competency to do it yourself like if you're a smaller business sure go cloud either at SaaS or infrastructure or platform level but if you can do it yourself you have the volume economies the ability to self modulate workloads then it's perfectly fine to do it yourself and ultimately it's the hybrid architecture that wins because you wouldn't want me to say sign here and if you sign this document you are forever barred from using a hotel room or forever barred from owning your own house you want to have flexibility and so anything that helps ease that flexibility whether it's containers or and every cloud is no general purpose either because every hybrid cloud is and the beauty is in the eye of the beholder I might want a red sports stir well exactly so like it's not a tail or it's not a product hybrid cloud is not a product per se right it's more of a philosophy but I guess my point is that I think that the ultimate race will go to the companies that basically say our value is not even though everyone says our value is in the as a service and there's lots of great things that come from as a service right it's somebody else's problem you don't have to worry about a alleged fire allegedly taking down your reservation systems and stranding thousands of passengers as may have just happened yesterday and today it's somebody else at least you can yell at but that said you know even Netflix which is the poster child for public cloud adoption most people don't realize that the core part of their architecture that delivers streaming services is the Netflix open connect appliance which is a physical box that they own deployed in co-location centers they need to control that point well it's control it's a backbone bandwidth utilization and it's proximity to the edge which of course the internet of things is also going to be I think a major architectural transformation everyone's so focused on building these hyper scale data centers and there's a lot of benefit to running distributed queries at the edge or doing data aggregation at the edge or archiving so I think we're going to see some architectural shifts Awesome So I wanted to get your advice for the enterprise we heard this morning from Jonathan Bryce that a recent survey that OpenStack did I think of about 1100 users indicated that 65% of their clouds are in deployment 33% increase over the year before but there's also a recent CIO.com survey that reported that over half of enterprises trying to deploy OpenStack clouds are failing what is your advice for those that have tried that in the open cloud that aren't succeeding what are the things that you think that they need to do? I'm the wrong person to help people with their implementations of particular stacks what I would say is these surveys are always challenging for me because it's like 100% of enterprises believe in alien beings and the reason is because there's at least one person in a 300,000 person enterprise that believes in alien so like how do you count workload distribution for public versus private? Or they talk at 200 enterprises and two of them believe in aliens therefore the percentage is skew Yeah, exactly Right, it's very challenging what I would say is that enterprise adoption is not as important as billboard adoption or whatever just fell there but that you first need to begin with what are you trying to do now and where are you trying to go and what are your constraints? So you have legacy software running in TPF on a mainframe that is your core reservation system you've spent 40 years developing it it's a billion lines of code that only three people in the world even know the language that it's in you're probably not going to rewrite it overnight you're going to wrapper it, right? For a green field stuff obviously you want it to be cloud ready whether or not you choose to run it in a public cloud or private cloud because you want to be able to migrate it over I think containers are helping to resolve some of the migration issues you've got inter-cloud standards that are being worked on more or less by various entities including standards bodies so just a matter of seeing powerless stuff unfolds but the traction certainly seems to be there among the leading public cloud providers we all know who they are both in the US and internationally and open stack certainly from what I've seen seems like a very credible contender and just gets better with every release For those enterprises go back to the drawing board and really figure out what you're trying to solve for probably a bit easier stuff than done but maybe lead there rather than starting with tech Well right, as opposed to just to put a point on this which I'm not going to say what percentage of the time happens but the CEO is on a flight somewhere pulls out the in-flight magazine and reads an article about Enterprise going to the cloud goes and says, you know, I want why aren't we doing this, right? So I mean it makes sense obviously but that's not the rationale for why it makes sense it makes sense based on things like user experience due to geodispersion and latency reduction slash response time reduction it makes sense based on the ability to handle spikes and still continue to perform it makes sense to be able to do load testing it makes sense to do data center migration it makes sense to, you know, if you don't have the competence to run your own data center which let's face it, most enterprises don't, you know, so and the best and the brightest are being snapped up by the biggest providers, so Well Joe, we're excited that you're here on theCUBE first of all, we're a big fan of your work and certainly like Dave and I make a lot of predictions on theCUBE and when they come out right we're all proud of ourselves we pat ourselves in the back you've made some good calls certainly in the book, both books, very solid What are you working on now? What's exciting you today? Obviously the nice trajectory up with what your work has been done you have great analysis going on in the marketplace what's getting you jazzed up right now? I've just been running around like a crazy person giving keynotes like, you know, on multiple continents in any given week and it's just like it's hard to even think about what's next but, since you ask I am probably going to write a book on disruptive innovation because I don't think the Clayton Christensen model quite gets it right as important and brilliant as it was there are just some issues with the model where it's a great model but again, if you actually say what is disruptive that Christensen answer is counter to so well, there was just a PC did that explained why the Apple iPhone is not disruptive and why Uber is not disruptive and if you look at that and why Netflix was not disruptive and so you say really, like, okay well is the problem with your special definition of disruptive or is the problem with some subtlety in their innovation process and I have a belief as to where that is. I think we can see where you're going to come out on that excited to follow that so I got to ask you on your keynote tour what's jumping out what's the, let's take a big data approach what's the pattern recognition what's surfacing out of what people get excited about what's the touch points well, you know, you're here in the US I'm here in the US and so we tend to talk about AWS and Facebook and Google and Microsoft and IBM and a handful of others and all those shifts the biggest thing is China so I've been to China five or six times in the last four or five months and really, first of all got a sense of the energy out there the entrepreneurialism they are with cloud right now in terms of an energy level if I can call it that back where, like a few years ago it was like, wait, this is new it's the future, it's big the government is investing and supporting infrastructure and it's more of a government-private partnership you've got the really big companies that make Google and AWS look like, you know, SMBs because like, if you take Tencent for example so I just keynoted their event in Shenzhen two weeks ago and they are just huge and it's an interesting different constellation of services so QQ, okay, is their sort of email WeChat is, they're like cross between Messenger and Twitter and they're at 600 million users plus for those services and they're just getting started okay, that's the de facto platform so if you look here you've got Facebook, you would argue is probably more of the social media and messaging platform they're not in public infrastructure enterprise cloud services then you've got Tencent which is the number one gaming provider and they've got all this so they're a very serious contender and I don't think we pay enough attention to what they're doing and moreover, these are smart people and you've got a lot of the people that sort of left the PRC let's call it during the diaspora 20 years ago, became tech leaders here they're not going back there and you know, anything that says China is just copying the US they're not innovative, misses the point they're super entrepreneurial, super innovative And certainly the capital's flowing nicely too Absolutely Alright, final question we're getting the hook here but it's just a great interview we're going to continue one more question you mentioned chess you got to know what checkmate looks like to play chess so tell us about the chess board for the suppliers out there if we're living in a buyer led environment that's what seems to be the users are in charge choices are everywhere horizontal, non-linear consumption of content all kinds of services being bundled together complete radical departure from the old way if you're a CEO who wants to buy into something what's checkmate look like for them? Well, you know, I'll tell you the challenge for all companies operating in this period of transformation of the entire industry is just this is tough, okay this is like, you know, I don't know I don't know about history but Carthage when the Romans came in or something, right? And so you have these empires that have existed for a long time and it's really hard for them to change so, you know, without picking on anyone Telcos, for example, right now is an AT&T for a long time and so, you know, we were doing this stuff back in the early 90s, right? You had Easy World Wide Web and you know, now, you know I think probably AWS and Google and Microsoft and IBM are viewed as a little bit more capable on the field and so you say like you've got the natural capabilities, competencies, infrastructure, customer relationships, right? The cloud is a network-centric service, right? You have no cloud without a network and so that's a natural and then you also have the legacy hardware vendors who are giving it a college try but you know you're just undergoing the shift to open compute and open stack and you know, it's tough and especially if you're trying to deal with Wall Street and you know, you need new firm skills and competencies and you've got to understand the shift in buying behavior and you know, it's not just the tech companies, it's do you think Honeywell ever said, okay, you know, when they do their competitor audits of like, you know who they're selling against at Lowe's or wherever you go to buy a Honeywell thermostat. Gee, I wonder if we should also put on our strategic analysis the possible scenario that two guys leave Apple and create a new cloud-connected thermostat, right? So no matter what industry you're in, wine, it was just in Napa Valley for a few days. fruition sciences is doing these irrigation centers, irrigation sensors on grapevines that are transforming thousands of years of best practices in winemaking. And like the net result is you get higher quality grapes that generate higher quality wine with less irrigation. So the world is on its head right now. Everything's being tossed upside down. It is. And I would be, you know, if you were not scared to death of the big US, Chinese and Japanese competitors that are in here and thinking, you know what, we got to figure out what we're going to do here, they're going to eat our lunch, then you should be basically, maybe we'll just resign now because you're either going to resign or be resigned. Innovation, technology, business models, completely upside down, flipped on its head. Almost the opposite of what they are today. Exactly. Great work, thanks for spending some time and sharing great insight on theCUBE, of course. Great to see you in person. And we'll be following your next step and certainly the books are amazing. Joe Weinman here inside theCUBE, breaking it down, laying out the chessboard for us and looking five moves ahead, as always on theCUBE here in Silicon Valley, where innovations always flow and then extracting the signal from the noise. I'm John Furrier with Lisa Martin. You're watching theCUBE, we'll be right back.