 London, England. Extracting the signal from the noise. It's theCUBE. Cover. Discover 2015. Brought to you by Hewlett Packard Enterprise. Now your hosts, John Furrier and Dave Vellante. Hey, welcome back to where you're watching HP Enterprise Discover 2015 in Europe here in London. This is a special presentation of theCUBE. We're live. I'm John Furrier with Dave Vellante. My co-host, our next guest is Bill Hilf, SVP and General Manager of HP's Enterprise Cloud Group. Welcome back to theCUBE. Great to be here again, guys. You are always in the center of the action because the HP Cloud story has been this evolving growth. And there's been some confusion out in the market. We've unpacked it many times here in theCUBE. Now more awesomeness is coming with more news. Azure relationship with Microsoft. British Telecom, I saw something on that one. You guys are moving really fast. You're doing a lot of things. Where are we? What's the new HPE Cloud message? Seems like you guys get your groove swing right now. It seems to be coming together fully. Yeah, well, we're in a full groove right now. Let me kind of give a little context of what's happening for us. So we deal with customers across the whole IT portfolio. So when we sit down and talk to customers about cloud, they're not just having, wanting us to have a cloud conversation. They want to talk to HP about the in IT portfolio. And so what's happening with cloud computing now, it's hitting a point now where cloud computing is becoming a proxy for the digital transformation that IT is going through. It's not just a destination or a single thing. So unlike, let's say, like the web or- Not buying cloud. I'm going to buy some cloud. I'm going to buy a cloud. Like people don't say that or say, you know, like I talked to one CIO just yesterday and said, you know, I spend, you know, 85% of his, and he has a billion dollar IT budget, very large customer bars. 85% of his spend is all on technologies behind his firewall. It's like some of it will be cloud-like. Some of it will be fully cloud. Some of it will be cloud application platforms. So it'll be cloud storage, but it's all his IT. So we don't come in to just say, here's a public cloud story or here's a private cloud story. We come in to say, how do you do automation orchestration across all of your assets from traditional IT all the way up to cloud native applications, including the public cloud. So the reason why often people have a hard time decoupling what is HP's cloud strategy is our aperture is much wider than a lot of other people when we're talking to customers. We serve customers across our whole IT estate. So what we've done recently is we've made a change in our strategy where we've become a lot more focused on how do we get larger participation in the overall cloud computing growth. So one of the things we did is we shut down our public cloud. People say, oh, why you shut down your own public cloud? Why wouldn't you go fight that fight against Amazon and Azure or anyone building a global public cloud? The more we looked at it, customers are saying public cloud will be a part of my IT future, but it's not the only thing I'm going to use. Literally not a single enterprise customer I talk to says I'm moving everything to one type of cloud, public or private. So we said there's a much greater opportunity here for us. Like if we went and partnered with Azure, we partnered with AWS, partnered with other large public cloud providers, we have a much better opportunity to help customers across that journey than saying no, no, no, only choose our vertical stack. Like that's our cloud story. So the moment we did that, I opened up just literally a dam of water flowing at us of opportunities, customers saying, now you get it. Probably my favorite quote of all is from a customer who said, you finally are building a cloud strategy that maps my reality versus your vendor-driven agenda. We felt like we were on the right track that day, like we're starting to land it and understand. That's part of the announcements we're making this week. So I have to ask you the tough question that everyone's talking about, which is not necessarily my opinion, but I'll ask it. HP's given up on the cloud by giving up on the public cloud, by acknowledging that Amazon, Azure, Google, and maybe Oracle are going to have public clouds. And Oracle's on record saying, if you're not in the public cloud, now former HP or Donate Dave, Donatelli, if you don't have a public cloud and you're selling hardware, that's table-stake. So that's a narrow vendor perspective, I get that. But comment to that question. You're not giving up on cloud, but you're not offering a public cloud as it's defined today. Is that correct? Clarify that. That's correct, I'll be very discreet about it. We had a public cloud, we shut it down. And we are getting out of that public cloud business. We're partnering with public cloud providers, like Microsoft Azure and others. And so we're taking a multi-cloud approach to customers who want a public cloud infrastructure. We're basically then doubling down on private cloud and our managed cloud business. So our private cloud business is a multi-billion dollar business for us. It's a very large business. It is what right now, the majority of enterprises are actually buying and deploying more private cloud than public cloud. There's some research that came out this week from 451 that basically says 75% of enterprises are going to be spending on private cloud, 75% are spent, and a quarter of it will go to public. What's happening though is all these lines of demarcation between public and private are blurring more and more. So you start to ask questions of, is my Siri application, is that using a public cloud or a private cloud? No, it's using like 600 APIs. You don't even care what it's using. You just, you're using it to find a taxi or a sandwich, right? And that's really what most enterprise applications are going to turn into, these hybrid infrastructures that can leverage things no matter where they exist. So when we got out of the public cloud game, not only is it, I know a little bit about public clouds from my experience with Microsoft and Azure and at HP, it's an extremely, extremely expensive game to play in terms of multiple billions of dollars and capital expenditure every year to build it out. And it is for a very specific set of workloads and use games. And it's a strategy, it's a strategy that has costs, has a trajectory, economics, but no one's really buying it, basically, from what you say. Well, the thing that no one's talking about, and this is, I mean, when you talk to customers, you hear it all the time. Enterprise customers are getting a lot smarter. They're figuring out how they can run things like a public cloud. They understand how to do automation orchestration. They understand how to build a consume model for internal businesses. They can say, oh, for these different departments, I can become a service provider just like these public cloud guys. The technologies they can get, not only from the big players, they can get technologies like Chaos Monkey from Netflix to do public cloud-like testing of your app. So what's available in 2015 and the knowledge that customers have today makes cloud computing a lot more accessible to the enterprise, right? So you found your idea? So it's one thing, I mean, obviously doing what customers want, that's good. You've got to check that box or you're going to be out of business. The flip side of it is you've got to be able to make money at it as well. As I've said, that if you want to compete in the public cloud, Amazon, against Amazon and Azure, you better have either massive volume or you better be a SaaS player because they got stuff they can sell and host in the cloud and make money at it. So talk about the economics of working with Azure and how you make money at that. Yeah, so, I mean, Azure is one, Microsoft is one of those partners. And like I said before, it is a multi-cloud strategy that we have. We will partner with many different providers. So you have to. Some of them really big, like Azure. Some of them very regional, like here in the EU, we have a program that we've participated in called Cloud 28 Plus, which is regional and geo-specific service providers that have come together in a member community to provide public cloud services to Germany or to the EU region that are very specific to the security and data sovereignty rules of the EU. So we'll partner with a huge array of service providers that want to go into the economics. So what do they buy? We basically provide them the infrastructure, including Microsoft, to run their public cloud service. So we sell to, into those customers. Remember, the public cloud and any cloud means there's more infrastructure being purchased. The ethernet and disks are still there, right? So people are buying, so we're selling to, and now with Microsoft, we're also selling with. So when we sell to an enterprise customer, we'll sell their software with our servers. So it gives us two ways to make money with them, two primary ways to make money. Let me give you a good example of where margin is at, in particular, related to your question. So here in the UK, we've partnered with Microsoft to do this deal with the Ministry of Defense. We're their big Office 365 users. They wanted a certain SLA and a certain set of security requirements from Office 365 that Microsoft did not provide. We provide that, HP services provides that. So we give them a higher SLA and greater security than what's available from the public service of Office 365. And you can charge for that. And we charge a premium for that. And we have a deep partnership with Microsoft, so we have tier one supported to their engineering team. So when the MOD has an issue, we don't meet an SLA, we have direct access to those teams. So it's just a way that we can come in and say, we can give a higher value added offering on top of a public cloud service, be it SaaS or an infrastructure service, in a way that's very differentiated. And we'll be able to do that with others in the space too and other public cloud providers. And talk about elastic pricing. When that becomes a requirement, it's what? You can do that through financial mechanisms and are you getting demand for that type of business model? Yeah, we do, we get, so there's a demand for consumption-based pricing and we have a program called Flexible Capacity where if someone wants to buy a private cloud but they want to pay for it, literally they want to have the servers on their data center floor, but they want to pay for it in a consume-based model, we can do that through HPE Financial Services. We can come in and say, we can charge you per month on what you use, even though the servers are literally sitting on your floor. So it's sort of like a lease where we can go in at least per month at a certain rate. The other thing that's interesting, it's happening that a year ago when I talked to you guys, this was not happening in the industry. As much as the draw from CAPEX to OPEX was happening where customers are saying, man, I just want to move all this to OPEX and get out of the CAPEX thing, we're seeing the demand come the other way too. We're particularly in the retail industry where they're trying to hit their earnings numbers every quarter, saying, hey, we'd like some things actually to be out of our EBITDA and into capital expenditures. Could you help us move the other way, like a reverse lease and make these things? So we're actually doing financial- So they want to capitalize it. Get it off the income statement and shove it to the balance sheet. Yeah, so it's happening in both directions and that gives us a good role with our financial services and financial instruments to come in and provide some of those dials. So that's very interesting. I like this idea. I've always said, I said on the intro and I said earlier to Dave, HP's always been a great partner with other ecosystem big players. The wind tail going back in the PC days, they weren't the first in PCs, our servers. Number one, they became number one, so very fast follower. So this cloud move was actually pretty brilliant in the sense of, hey, what are we fighting here? Exactly it. So we are number one reseller of VMware, number one reseller of Red Hat, number one reseller of Windows, both in Windows Server Revenue and Univolume and we're the number one reseller of Office 365 licenses. That's just the beginning of it. So the change of strategy was let's lean into the partners here. Why are we fighting our partners here? As the ecosystem really blossoms with cloud, we can make money through all of these partners, through all of these opportunities. So rather than saying no, you have to go down this path, we can say yes a lot more to our customers and that's our sales guys here. Like when we've made some of these changes in the past few months, the guys who ran our regional sales will call me up saying, you're now deeply understanding the DNA of what HPE does great. Where we can lead with partners come in, we can solve a heterogeneous environment. We can bring VMware in, we can bring OpenStack in, we have management tools, we have all sorts of different offerings underneath. We can run it on behalf of a customer, we can remotely manage it, all these ways that we can say yes. And the TAM says, it's big numbers too first of all. It's not like just an idea to make more money. You're going to make a lot of money, right? That's right. But the other issue that I want to get your comment on is we break and then we got to break hard real quick. Will there be a long tail distribution of clouds? Meaning, everyone saw about the big three, is there a long tail on cloud? You want to ask that question right before we go to break. I love it. So that's a fantastic question. Because there's obviously a lot of belief and opinion in that. Yes or no? I absolutely yes, there will be a long tail to clouds. Because I fundamentally believe cloud computing will be like the web. If, imagine if Tim Berners-Lee said, I'm going to charge for this thing called the World Wide Web. Where would we be today, right? Cloud computing is going to follow the same arc. It will be everyone's utility, right? It won't be one vendor is going to rule or two big, two or three big supercomputers. We got to go to the keynote, Bill Hill. Thanks for sharing that insight. I want to get that last question important to note. You guys are number one at what you do best, partnering, putting solutions together, long tail of clouds, strategy shift, opening up a door of opportunities for HBG, congratulations. We'll be looking forward to covering. We'll be right back with more here live with a general session coming up in one minute. We'll be right back.