 Live from the Mandalay Convention Center in Las Vegas, Nevada, it's The Cube at IBM Insight 2014. Here are your hosts, John Furrier and Dave Vellante. Okay, welcome back everyone. This is Silicon Angles The Cube for Flagship Program. We go out to the events and extract the seeds of the noise. We are here live in Las Vegas for IBM Insight, which is IBM's big premiere, big data show and in February with The Cube we'll be at IBM Interconnect, which is a consolidation of all three shows of Pulse, Impact and Innovate. IBM is going to the mega show model, we're excited to be part of that. We are live inside the social media experience, digital experience lounge put on by the social media team doing social business at IBM. Great jobs called Insight Go. I'm John Furrier, the co-founder of Silicon Angle Media with my co-host Dave Vellante, the co-founder of Silicon Angle Media and chief analyst at Wikibon.org and Jeff Kelly, a big data analyst at Wikibon to break down the news of the day, talk about big data, industry news. This is our segment where we will share with you our thoughts and analysis and of course our opinions on the news. So Dave, top news today in the world is... Twitter, John. Twitter earnings were out. I'm going to see you all over the... Twitter was getting crushed earlier. It was down six points. It's pulled back a little bit or there's been some buying so we've got some support. It's down about four and changed today. But I mean, John, you were listening to the conference call. You were analyzing the results. What's your take on Twitter? Is this an overreaction? What, in terms of the stock drop? Yeah. Yeah, I think so. I mean, first of all, Twitter's misunderstood in Wall Street and in the mainstream as well. I think Twitter is a phenomenal company. I'm really bullish on Twitter. I think what they have is an amazing real-time notification network in the moment. Dick, the CEO, Costello, Costello, whatever he puts it, Costello. He's an amazing guy because he understands Feed Burner, which is a company that no one ever remembers, but they basically manage all the RSS feeds, which sold to Google. He understands this real-time web really, really well. I think he also, Dave, understands the value of the fabric that they've built on a global basis. And I think I like how he's not wavering off his vision. I think that he's holding the line good and he's getting hammered because the metrics that he's being evaluated on are really not the right metrics for Twitter. They're called monthly active users and daily active users, monthly active users, MA users, they say, really more of a Facebook metric. Monthly average users doesn't really encapsulate the value of Twitter. I'll tell you why. Because it's very ephemeral in nature and how people use it as a notification real-time network is not like Facebook. Facebook is a completely different animal than Twitter. Facebook is a place that goes and you're seeing that segmentation be much more of an older demographic. But Twitter is about the people. And that is a really fundamental thing. And so our big vision, as you know, with Silicon Angle and the work we're doing with CrowdChat Venture is we believe that the relationships will matter and that Twitter has that. Second thing is, is that Twitter is now going to new metrics around what they call the cohort analysis. Again, focusing on the people. That's a big data problem and they're focused on it 100%. Third thing about Twitter that's happening that not a lot of people understand is there's a new market that's developing on top of Twitter that's going mainstream with their user base. That is a consumption market. And you hear Dick, Dick the CEO, talk about the production and then the non-logged in users. What he really means by that is there are people consuming Twitter on the backs of the existing core base of Twitter, which means it's ultimately a content play. So you're seeing value coming out of them in the real-time moments, news breaking, the elections, the World Cup, things like that we can all point to. But there's two markets, production and consumption. CrowdChat again proves that immersive in the moment programming is working for users and I think that's what Twitter's all about. And they are years away from breaking out in my opinion in terms of the real value. So I could consider Twitter a buy. Yeah, well I think too that the Twitter itself is trying to figure it out. I mean what happened in July is Twitter had given guidance in the previous quarter and it blew away the guidance and so the stock went through the roof, but the guidance was very conservative. And then what happened this time is they missed the consensus and so now the stock's getting crushed. I think Twitter's trying to figure out, okay, what should we guide because what a company with good visibility will do is they'll say, okay, here's our guidance, they'll beat it by a little bit, they'll just get consistent, predictable earnings and Twitter hasn't figured that out yet. Well, I think they have, Dave. I think you look at the earnings call, a sentiment of the executives. They are hard-lined on staying on the vision and I think you don't see the pandering so they're not reacting to Wall Street too much. They're checking the boxes, they're working with the analysts, they've got investor relations. They are really in it for the long game. I can hear that in the management. The issue with Twitter is, one, they've got to increase the revenue base which they're doing and then the second thing is they still have this baggage on their back around the developer community. So they had their developer event called Fabric, which I thought was a good sign that targeting mobile developers crashlytics. If they can create some stability from a credibility standpoint in the developer community and an embracing and growing ecosystem, then they will be the home run that everyone wants them to be. But I think that's a wild ways down the road but Dave, they're in it for the long game and I'm psyched to see them not waver off the vision. So, we also have Jeff Kelly here with us and Jeff, we were at Big Data NYC last week concurrent with Hadoop World and Strata. We had our big capital markets event. You gave a big presentation. We had this awesome panel with Peter Goldmacher, Amy O'Connor and Abhi Mehta. The sparks were flying. Give us your summary of that event and your research. Sure, so the event was great. We had a great time in New York. So really the summary is we tried to help the Wall Street community, the investment community, understand the Big Data market from the perspective of where to place your bets. There's a lot of talk about obviously all the benefits Big Data can provide to companies and there's a lot of vendors in this space. The vendor market is exploding. There's new startups coming out of the woodwork all the time at different levels of the Big Data stack. So the question from the perspective of an investment thesis is well, where do you place your bets? Do you place it on some of these new companies that are emerging? Do you place it on some of the old stalwarts? IBM here at IBM. Insight, do you place it on, do you place them somewhere else? And our investment thesis essentially is that while there is certainly going to be lots of value created in the vendor community, the overwhelming majority of value related to Big Data is going to be created by practitioners. That is, it's going to be created by companies that are applying Big Data technology services approaches to rejuvenate their businesses, to find new lines of business, to find efficiencies, new ways to improve profitability. Of course there's going to be a lot of new companies, new startups, new companies that create completely new industries. Companies like Uber, companies like Netflix. So our investment thesis is really that it's going to be the practitioners that drive the most value and from an investment perspective, if you can tease out who those companies are, who are the companies that are applying Big Data most effectively, that's where we place our bets now. That's easier said than done because as we talked about, and I talked about on the panel, we talked about as well in the presentation, is that it's, the stuff is difficult, it's hard. Just being here at Insight for the last two days, going to some sessions and listening to some of IBM's early Big Data customers and they kind of lay out these, they've got these slides. Here's what our infrastructure looks like and it's extremely complex. This is hard stuff, so just trying to identify those companies that are using Big Data doesn't mean those are going to be the winners, it's the ones that are using it most effectively. But if you can tease out who those companies are, that's where we suggest you think about placing your bets in terms of investments in this market. So talk a little bit about what you've seen at Insight. You've been here for now for a couple of days, going to a bunch of the sessions, you're probably at the keynotes, do some breakout sessions, talk to some customers, net it out. Well, it's interesting. So in our Big Data Analytics adoption survey, we found that around 30, about a third, 33, 34% of early adopters of Big Data are using Hadoop and or NoSQL. Which we kind of consider the foundational technologies of Big Data and really where most of the innovation's coming from. Now, when you look at the IBM customer base, naturally they're going to be a little bit more conservative. And what I've seen here over the last couple of days is a lot of the sessions focused on Big Data and Analytics, a lot of the customers, the IBM customers, are doing really interesting things, but not, I would say, lower than that 33% threshold are actually using some of these new technologies like Hadoop and NoSQL. We see, I see a lot more of companies using things like DB2 with low acceleration. I see companies doing things with IBM pure data. There are Natesa clients, things with SPSS. A little bit with Watson, not too much. That's still kind of on the cutting edge even for IBM customers. So what I'm seeing is kind of this balance between practical application of Big Data using, trying to leverage the investments you've already made from an IBM perspective because I'm an IBM customer. So, you know, I've invested in DB2, I've invested in pure data. So we're seeing of them doing a lot of those things. Are those scalable, Jeff, though? I mean, talk about that investment, that use case. Take that DB2. Is it scalable? And what are some of the agents of customers at? Well, DB2 is interesting because they've, IBM has kind of doubled down on DB2, taking the approach that, look, we need to help our customers get more value from DB2 so that in line with that they've released what's called blue acceleration. Essentially a in-memory columnar capability that can be applied to existing DB2 installations. The idea there is that you can significantly reduce, you know, your storage footprint, significantly increase performance for both analytics and to some extent transactions. And essentially this plays right into the whole theme of, look, people, business analysts, data scientists, they need more responsive systems. But budgets are tight, obviously. Do we want to invest in a completely new infrastructure? So let's look to what we can do with our investment. You can talk about the survey you did. Our current investments. What's the survey tell you? I mean, when you look at the survey landscape, because you're hitting outside the IBM kind of show concept here, but you're talking a lot of different industries and customers. What is the general theme on analytics and how does that relate to some of the things IBM's doing? Well, I think the general theme is that the idea of looking backwards at data that represents past performance in your business, which is really what traditional business intelligence is all about and traditional data warehousing is all about, that's not going away. But what people want is a more real-time view of what's happening currently in their business and they want predictive and prescriptive analytics. It tells them not just what's likely to happen, but here's what you should do. Here's the action you should take, which traditional business intelligence just doesn't do. Now, IBM, I think, gets this. And I've actually seen quite a few, a handful of sessions, I should say, not quite a few, a handful of sessions where they focus on this, creating an environment where you're getting prescriptive recommendations on next best actions. And that, I think, is a really good way to focus on this market, because it's not about the insights, it's not about the data, it's not about the analytics. What do I do next that's going to drive my business forward? So that's really the general theme we're seeing, and I think IBM is playing into that nicely. So, Dave, I want to ask you about some of the database trends. What are you seeing out there in database from a technology standpoint as it relates to developers? Because developers, as a focus of your hearing, going back to our Twitter news, native apps need data, right? Data changes data. We heard that from Glenn yesterday. Speed is a concern. What's your take on the database and or the software market relative to developers? So here's what I'm seeing, John, is that organizations that were spending like crazy on their traditional data infrastructures, data warehouse, structured databases, SQL stuff, traditional BI, really struggling, frankly, but having to pull more money just to make it get to the next step. Jeff, in your speech, you talked about a snake swallowing a basketball, which is a famous quote from a Wikibon practitioner. Chasing the chips is what they did. What's happening, John, is people are essentially baselining their traditional data warehouse spend, and you can see this in the numbers of certainly Oracle, IBM, you know, it's flat-ish in the software business, and what they're doing is, instead of spending a dollar on that traditional data infrastructure, they're spending maybe 30 cents on the new infrastructure, spinning up some POCs, doing some new R&D projects. So they're not, it's not a one-to-one swap. They're not taking a dollar away from the traditional infrastructure, putting it into the new world. They're experimenting. And that's where the developers come in. The developers come in, they're saying, all right, we need the right skill sets, we need data scientists, we need Rockstar developers to develop this new big data stuff, a dupe, et cetera. Oh, and by the way, we need data integration tools and we need access to our existing data warehouse, and they're trying to figure that all out, right? So the organizations, there's a schism in the organization, there's the old line data guard, they say, well, wait a minute, we have data governance, we have data structures, we have security, compliance, edicts, et cetera, et cetera, and you got the new hoodies saying, look, just give me the stuff and watch. Stand back and watch the magic that I create. Now, the best organizations that we see either don't have that baggage or they've begun to rationalize that schism. But clearly the new developer crowd is moving fast, it's a DevOps skill set, they're designing security in, they're maybe pushing the envelope a little too hard for the comfort of the traditional data warehouse crowd. Now, for every dollar they spend here, they spend 30 cents in the new stuff, the big question is, is there a business model there? And I think there is, we're going to make it up in volume, it reminds me of the joke that Abhi Mettit told last week in theCUBE, but if they can create three to four to five to 10X the amount of volume and activity of data, then that revenue will grow to offset that old world. If they can't, then it's going to be a problem. I think my view, very high likelihood that they will. Well, from the perspective of the industry heavyweights as we refer to them, part of that is the volume, if they're there to succeed in this market, can that volume make up for what they're going to lose in the relational database market, the traditional data warehouse market, but also the other opportunity they have is in services, helping people put all this stuff together. That's where IBM is really well-positioned. Steve Mills talked about that yesterday. He said it's getting more complex and I don't think the need for services is going to attenuate my work. Well, yeah, well, there's an interesting thing happening here where you're seeing, on the one hand, the cloud gain momentum and that's where you take away some of the services components because you're abstracting that away. On the other hand, with big data, big data moving in the cloud is slow going. I think you're shifting the services spend. Yeah, so that exactly. Away from infrastructure. It's shifting towards big data analytics. Absolutely, I think you're right. So I agree that services is going to remain, but you're right, it's going to shift from infrastructure to the analytics. And the other place that I think the industry heavyweights are actually somewhat well-positioned are and as David Floyer has pointed out as well, the companies that own the applications are companies like Oracle, SAP. If you own the application, you own the data, not own the data literally, but you own those applications, you're in a position to certainly continue to capitalize on that. So who's going to be good at that? So the big whales of services, Accenture, Ernie Young, Deloitte, PWC, obviously IBM, I would put IBM at the top of that list, are going to dominate. I would think that you'll also see some specialists emerge. Well, think big analytics just got taken out by Teradata, but guys like think big and there's a handful, small cadre, a really sharp, you know, big data, Hadoop-oriented service guys. And then you got HP, HP's big services company, but it's sort of EDS, outsourcing. Kind of CSC, like that to me, they've got to figure that out. Maybe build services around Vertica, but IBM's very well-positioned there. No, probably number one. I mean, they're number one in your report. But they have skill sets that others don't have. Well, right, and they give IBM a lot of credit because they continue to, they've been investing in the analytics space for years. You know, they've got their research and development labs. I mean, they've got some of the smartest people in data science you're ever going to find. So they've made these investments. You know, this isn't new for IBM. They're not making a decision now. We've got to start investing in and smart people related to data science. They've been doing this for years. People like Jeff Jonas, I think, is coming on later. So yeah, they're very well-positioned. It's going to be a little bit more of a challenge, I think, for those services providers that are more focused on traditional infrastructure. How do you make that transition to focusing on data science and big data analytics? Because they're in the same position that companies are. There's a skill shortage out there. There aren't that many folks out there that really understand this stuff really well. So they've got to attract them, attract those people just like any other company might. So they're going to have a little bit more of a challenge whereas IBM's been making this investment for years. This isn't new for them. So Jeff, I want to pivot back to the news here on Google and Microsoft. Two other players in the big whale space. We're not going to talk about HP for now, but Azure is hot. They've got the cloud. They've got the same kind of analytics we're seeing here with IBM. We're also seeing Google conference coming up next week. We're going to be covering the Google Cloud. So you've got the Compute Engine. And obviously Amazon re-invents coming up. So we'll be live there as well. So cloud is hot. Cloud is a big part of the show. Dave, I want to get your thoughts. Amazon's right around the corner. We have Microsoft Azure. The public cloud of Amazon has certainly changed the game. Integrated stacks, you're hearing Steve Mills here at IBM talk about the software integration. So again, Amazon's pacing that out, but Google's a secret weapon too. They have a massive cloud and Microsoft with Satya Nutella going strong and going all in on hyper-connected enterprise, cross-platform developer tools and certainly big data in their cloud offering. What's your take vis-a-vis those guys? Well, I think that, I think Derek said it right. He said, I love Andy Jassy. They've done the industry a great service by starting this whole trend. Amazon's cost structure is, to me, it's big advantage. And I would say Google and Microsoft as well. They are essentially taking what used to be infrastructure outsourcing, which was a very expensive proposition. And they're sticking it behind an API and automating it. And so the marginal economics of infrastructure outsourcing are going to start to look like software. So all those services that you used to acquire from CFC and IBM and EDS and everybody else, Amazon essentially created that capability within an API. Now, can others replicate that? Yes. Is IBM doing things that replicate that? Absolutely. That's what the software acquisition was about. The cloud acquisition is very much like a DynamoDB capability. The big question is, can they do that at scale? And to the extent that they can, they can compete on a cost basis. To the extent that they can't, and by the way, they're nowhere close to Amazon's scale yet. To the extent that they can't, then they have to add value other places. Take Oracle, for example. Oracle is going to get you in the red stack. They're never going to have close to the scale of an Amazon, but they're going to get premium pricing for the application and the database, and they're going to make it up in margin. IBM is sort of a halfway house there. They're not going to... Halfway house. Oh, sorry. A way station. Deference to Pat Gelsinger. That's an inside joke for everyone who's watching theCUBE. That was the Pat Gelsinger famous line where I called Hybrid Cloud the halfway house. That I've filmed correctly. A little offensive. And then you got the fish eye from Pat on that one. We'll call it a way station. Intermediar point between the final destination. What I say when I have say halfway, what I mean by that is, IBM is open, but it doesn't have, and it certainly has the database with DB2. It doesn't have the volumes that Oracle has. It doesn't have as much application juice. Having said that, it's got a lot of SaaS products. So I think IBM can also make it up in margin. They've got the whole business outcome language. Companies that talk business outcome and can deliver business outcomes tend to get higher margins. And that's the bottom line. So I think IBM's strategy is a good one. I think they can, by the way, they have no other choice. We heard from Phillips earlier this year in August, the edict that they're putting forth, and I think this is a must watch video for every CIO, how everything they're doing is going to be subscription based in the cloud. I think IBM's recognized that. They're moving in that direction. Oracle, by the way, has recognized that. I don't know, John, has HP recognized that? HP's really recognized the fact that they have to build their own cloud and build their enterprise solution around it. I think HP's behind a little bit compared to IBM. IBM's way ahead in terms of integrating in other software components. I think the foundation is solidly set at HP. So I think HP's in good shape, Dave. I got to say, from the HP cloud event I was in San Francisco last week, they are getting it. So the leadership there is strong. I would give them an A on that one. Good leadership on their innovation engine. Not so much. They're banking on cloud foundry. They still got some work to do to wrap some innovation around it. They go to market really strong. So I think HP's go to market their leadership as strong, and I think they understand the value proposition. Their only weak link is their innovation engine with cloud. This is still a little bit disjointed, but I hope to clear that up at HP Discover in Barcelona. But Dave, I mean, they're in good position. They're like IBM. They got a huge client base, so they just got to tool up pretty quickly. All right, excellent. Jeff, any last thoughts on Insight? Well, again, I do enjoy this show because there are quite a few practitioners here that are sharing their stories. So that's always fun to come and hear those stories. I like the name change. Insight, a little bit catchier than IOD. But yeah, it's been a lot of fun. Looking forward to catching a few more sessions before the day's over. But really, IBM, as you mentioned, I think they're well positioned in this market. What I'm not hearing from practitioners, and I've talked to some attendees about the IBM's issues with Wall Street and the buybacks, et cetera, et cetera. And most practitioners aren't interested in that. They're not too worried about that. IBM's making this transition. They know they've got to do it from kind of the old model to this new model that embraces cloud and big data analytics. It's going to take a little bit of a while. They may take a little bit of hit on Wall Street, but practitioners seem to be pretty excited about it. They're really looking to IBM for some thought leadership. And to what I can see at this show, IBM is for the most part providing that. All right, Jeff, thanks a lot for your analysis, Dave. It's a midday break here inside theCUBE. This is theCUBE live in Las Vegas for IBM Insight. Inside the special digital experience lounge, the social lounge, Insight Go, they're calling it. IBM's social media team really bringing a new digital experience together around influencers, around openness, around content, really building that organic community. Great job for IBM. And of course theCUBE's proud to be a part of it. And then we're going to be going wall to wall all day today, extracting the seedling noise. We have a crowd chat up and running crowdchat.net slash IBM Insight. We've embedded theCUBE live stream in there, so you can look at that and comment, and we're going to open that up for the whole world to watch and make comments. So please join us. We'll be right back. We'll be here all day. Got any questions? Put it in on the crowd chat. We'll answer them. I'm John Furrier with Dave Vellante and Jeff Kelly will be right back after this short break.