 Okay, we're back, this is Dave Vellante wikibon.org, I'm here with Stu Miniman at Stu. You can tweet us, he's at Stu, I'm at Dave Vellante. This is theCUBE, Silicon Angles flagship production. We come to these shows, we're at IBM Edge. We go out, we scour the event, we find the best guests. We bring them to theCUBE, we unpack their knowledge and serve it up to you or our audience. Andy Monshaw is here, he's the general manager of Pure Systems Group at IBM. Andy, welcome to theCUBE. Thank you. So, as I was saying, we last saw each other in November. I think you were in the job for all of two and a half days. You know, you are in a challenging position, right? You got to herd cats, you got different divisions that you got to organize, you got different technologies, you got the channel tugging at you, you got sales people that you got to train, and so, I knew you a little bit when you were running the storage business and obviously an experienced IBM executive, so I think you're the right person for the job. But give us an update on what you've learned, you're in now for several months. What did you learn and how have you applied it? Okay, so yeah, I was in the job for about, I guess about three weeks when we met last time and we've been really, let me update you. So, first of all, I think the actual offerings that we have brought to market really hit the inflection point, the requirements in the market at the right time. I would say we could have been a little bit earlier, but frankly, the market itself is starting to evolve now around these other inflection points, mobile and social and cloud and big data and all the things that we're talking about here at the conference, which is driving a level of requirements for infrastructure and applications that we really haven't seen in a long time. But that also drives a whole set of complexity points and the clients themselves are now starting to see that they're locked, meaning they can't move fast enough to the new because the old is really like a boat anchor and that's the market that we've entered into. So now, the offerings themselves are much broader really than what the market understands today and I think that's been a learning for me, a challenge that we have where our competitors are fairly narrow, our offering is quite broad and so it shows like this that give us an opportunity to really have the clients understand the art of the possible and the art of what's actually happening. I mean, the people that we have up on stage are a lot of who's who of large clients that are using these systems. We've been in market only 10 months, we've been shipping. We are first shipments, we're June of last year. We've shipped over 4,000 systems in 90 countries. We've got 180 managed service providers using these systems and a lot of them are repeat buyers already. So we're seeing that we're hitting a very specific need in the market with a very broad offering and so far things are going really well. And a lot of proof of concepts out there too. I think you've almost 4,000 as well in terms of your POC backlog. I'm calling it POC. I think you guys had a different name for it. But so that was a number that somebody shared at the event yesterday. So that's good uptake. Now, when we last talked, a lot of the traction, and this is not uncommon in this space, a lot of the traction was coming from the cloud service providers. It sounds like, based on the examples that we're seeing at this event, it started to seep through to the commercial enterprise. Oh, absolutely. So I would say, so far we've been selling the bulk of these offerings in really three basic markets. Managed service providers, because they get the time to value. And we've also packaged these systems with a lot of offerings content, marketing dollars on the front end to help them generate business and pay as you grow offerings on the back end so they can buy it consistent with their business model expectations. General business is the second segment that we're having a lot of success in. And the reason we're having success in general business is it's all these other attributes of mass consolidation and simplification and all of the kind of basic attributes that we have with the system. And then the third place is new application spaces and large enterprise. So virtual desktop, because you don't catch, you don't need to manage the refresh cycle across multiple silos of networking, large networking organizations and large storage organizations and large server organizations. And even those are split. It's kind of, it's been, and I think all of us are having the same basic challenge in that where the ability to bring in a new application there is a much more straightforward implementation than trying to coordinate refresh cycles. Yeah, absolutely, Andy. What we called it is that project-based engagement especially when you can change the operational model. So of course VDI was, who manages it? Is it the desktop team, the server team, the storage team? Well, let's try a new model and therefore converge infrastructure is a first piece. I talked to some of your guys on the floor showing off the different systems and they were showing me the Pure Systems Center website. And what's really fascinating about that is you see there's 281 different Pure Flex system models that you're driving through your partners, 52 on the Pure application and a dozen on the Pure data. So when we were at the launch, blown away by how many ISVs were there and the question is how many of them are just there for support and how many will really build off of this platform? And I think the numbers show that you've got a lot of different solutions out there. So the question I have is convergence a lot of times is about simplifying the environment and it's much easier if it's the same kind of building block. So with so many different configurations, how does IBM manage that and do you get the economies of scale and simplicity across so many different solution sets? Yeah, sure. So that's a really good question. And the design point of this system is the Flex system is the building block and the Flex system is exactly what it says. It's very flexible, flexible compute, flexible networking, flexible operating systems and that Flex system building block builds into the Pure Flex system, so fully rack stacked, cabled and then that becomes the building block for Pure app. So we get the economies because the building blocks across this are very consistent. Okay, the other question I had for you is if we look at virtualization intended to take off a lot in North America, I've heard that you're growing real strong in Asia, especially in China. Can you speak to that? Yeah, sure. A very good percent. I don't think we actually talk about it externally, but a really good percent of our business is actualizing in what we call the growth market units. And I think if I just spent two weeks in Africa launching Pure Africa, we were in Nairobi and Lagos and in Johannesburg and it's the same types of attributes in the marketplace where the access to lots of IT skills can be scarce and the simplicity of this system, the integrated benefits of these systems, the deployment of application benefits of these systems is really resonating in these territories. So we like to talk a lot about the hyperscale markets and what we can learn from them and it's been quite a bifurcated business. You got the Amazons and the Googles of the world and they're automating and they're doing their own sort of reference architectures or converged infrastructure where we want to call it and then we're starting to see that seep in to the enterprise a little bit. So like you said before, you've really hit the market at a good time. But so what's your angle on what's happening in that part of the world? The hyperscale, you know, web scale out and to what degree will that seep in? Will you grab learnings from that? Is that an opportunity for you or is it just too sort of far afield? So that is a great question and downstairs right now we have a couple hundred managed service providers spending time not only on the peer systems but on the portfolio and here's what we've learned. And in fact, prior to this job I ran a small and medium business for IBM called Midmarket and inside of that what I came to learn is the movement to cloud is happening at a rate and pace that even the market and analysts are not picking up yet. A lot of clients are actually using cloud services and wouldn't even recognize that in a conversation but in fact their departments are all accessing that. It's true, oh no, we're not doing anything in cloud. That's right. Over here, of course they're. And actually, and they don't think of it that way too, you know, some of them wouldn't even say that, you know, using Salesforce.com for example is a cloud service, they don't think that way. But in fact it is happening and frankly if I can sort of go out on an edge here I believe what we're going to see in the marketplace is the second wave of the VMware effect. So we had the first wave when large enterprises started putting VMware in and virtualizing the servers and we saw server volumes start to kind of dip. I think now what we're seeing is lots and lots, hundreds of thousands of small and medium businesses are now moving their infrastructure to a cloud service which is highly virtualized. So it's going from on-site individual servers to highly virtualized servers in the back. So we're seeing the second virtualization effect. Now, we've profiled over 40,000 managed service providers. So you don't need to only look at the Googles and the Amazons. IBM has a massive cloud set of offerings but there's thousands and thousands and thousands of mid-sized managed service providers that use hundreds or hundreds of thousands or millions of servers. We're working with a customer over in France right now, a managed service provider. They have about 15 employees and a million servers. So there's the opportunity extends well, well, well beyond just a couple of large players. Yeah, I think you're right. And cloud is really the real deal. We're entering sort of the next phase. It was almost like the first phase was really started when the economy turned down. People said, oh, I got to go to variable expense. And then you had the shadow IT effect. And now I think IT has realized, wow, we better hop on board and you're starting to see deeper integration, business integration and business models emerge. So we were getting for anything, the big data, people are sort of, that's all the talk is but the money's being made now in cloud. So my question is, where do you see that going in terms of the traditional IT flat to down budgets? There's not a ton of investment going on, certainly not within the heavy lifting of the infrastructure. Meanwhile, cloud service providers growing like this. That's right. So does eventually the whole thing go to cloud? Does it come to the point where the IT department essentially becomes these, you know, people talk about cloud brokers but completely changes their role. Are you seeing that already and where do you see it going? Yeah, sure. So going back in general business in particular, and I agree with your point 100%, the first time it was to get utility types of, you know, moving from CapEx to OpEx and getting the OpEx to be variable, that was wave one. Wave two is I need to go to mobile, I need to get more security, I'm concerned about security. That's a huge issue now across almost every enterprise. And these capabilities are driving people to service providers that can do it at a very economical effect because of the aggregation. Will it all move to this? Probably not. I mean, the IT world is filled with everybody is gonna go here and it never actually happens. And there's legitimate reasons for it not to happen. But I do think we're gonna, this is a trend that's just beginning. I think personally, I think we're just at the beginning of this. I think the buyers of this will be different. A lot of the budget for this is gonna show up in non-traditional places and marketing budgets or in finance budgets that won't show up as IT, but it'll show up as spend. So even the world of people who measure this aren't gonna capture the spend. That's why I say, I think it's happening a lot, just so much faster than we're really talking about, you know, on a point to point. Yeah, or that you can even count, like you said. Exactly. So Bernie Meyerson was on yesterday and he talked about this mobile first initiative and he specifically was talking about the security implications of mobile first and I asked him, is security a complete do-over as a result and he said, yes. And so that strikes me, because everybody's so concerned about cloud security, but it strikes me that cloud security ultimately is potentially anyways gonna be better than the vast majority of enterprises. You know, maybe the top companies out there that have the skills and have the knowledge and the resources can do security better, but it seems to me that the cloud service guys are ultimately gonna win that battle for the benefit of particularly mid-sized customers. What are your thoughts on it? The cost of doing security at the level is required now. It's not a cost that can be borne by small and medium business. It just, you know, when you think about, and I had a client in a round table over in France about a year ago and he turned to me and said, look, it has to go to cloud because the cloud provider can spend enough money to get the right availability characteristics the right backup and recovery capabilities, the right security capabilities, and they can deliver me services where they can amortize the upfront investment across a lot of clients. I can't afford to do it. And he said, they will, or IBM, you will. We happen to be talking about an IBM smart cloud, but you know, you can do that. You have the expertise and you've got the aggregation benefit. I do think that this capabilities shift and requirements is what's really going to drive this. I personally believe virtual desktop is going to take off so much faster than what people are talking about now. We've been talking about it for years. The experience is now there and the requirements now. It's because of mobile. Yeah, generally, yeah. Absolutely. That's the real drive. And Andy, I wonder if I can poke on that because, you know, I've looked at VDI for many years and while there's use cases that are really valuable, we really find it, it's the mobile and it's the availability of information where it needs to be at the time, rather than kind of, you know, VDI is kind of a, just a tool in the chest. So why do you really think VDI, which has been so many years, we've been saying really now, really now, really now is going to take off? Well, because the experience itself is finally there, number one. It hasn't been there. VDI has been around, the concept's been around for 10 years. At least, yeah. The experience has really, I mean, I've seen clients running CADM applications on VDI now. I mean, that was something you couldn't do before. Now it's, you know, real time and the experience that clients are looking for. But I think we're now hitting a point where people have to do it because the amount of information that's pushed out on so many devices is at a point where there's just phenomenal security risks. And clients are now looking at that and addressing it. And if I'm a small and medium business or a general business even, I could never invest in an IT department that could have the domain expertise to be able to deliver all of this capability. And so I see it happening. And oh, by the way, when you move to VDI, you also get the added benefit of being able to take a lot of the kind of endpoint structure that's there to support the endpoints. And you can consolidate that to the back and yield benefits to deploy people onto the things that you're looking to add value. I guess, right? I've looked at it more of there's various internal systems and getting it to the proper endpoint. It's not just about, you know, virtualizing that desktop and that, as I said, just kind of seems a point solution. It really needs to be orchestration across your information pieces and absolutely security is a key piece. Agreed. VDI, I tend to consolidate terms sometimes just for ease of communication. We talk about MSPs all the time. In the traditional, that's a 1980s term, we talk about MSPs as anybody who delivers stuff as a service, whether it's infrastructure, communications, or marketing, or whatever, but, so in this case, VDI for me is really all about all of the endpoints. Much beyond kind of the Zen desktop. Correct. You get a VMware view. Correct. Okay, I like that, actually, that sort of new definition of VDI, just the virtual desktops in and of itself is a misnomer. Let's talk about the channel a little bit, beyond the cloud service provider, because that's obviously a channel, but so what are you seeing in the channel with regard to the pure business? What's the uptake like? What's the message like? They want increased flexibility. They want these reference architectures, yet at the same time, you guys are oftentimes pushing integrated systems. What's the discussion like there? Sure. So first, let's just sort of refine the definition of the channel. What we have seen in the channel now for the last two or three years is there's sort of three camps. There's a next generation camp. These are folks that have moved their business model from a value added reseller of hardware to a broader business model, including service delivery. Including what we call next generation partners, these managed service providers. Yeah, guys who are embracing the cloud, really. They either started there or have shifted there and yes, are embracing it. Oh, by the way, I mean, in less than 18 months we brought 4,000 new MSPs to the IBM partner world, 4,000. So I would say that's an indication to me that we've got the right set of offerings and the right set of capabilities for those types of partners, and they're embracing it. They like what we have to say. You wouldn't get that kind of take. We just launched the program less than 18 months ago. You couldn't force that if you wanted to. No, but the second camp are the value added resellers who are holding on to the value added resell business but also moving their business model. And interestingly, they'll tell me it's a small portion of my revenue right now but it's a large portion of my profit. And if you think about, when I was in the PC business a long time ago, we used to say you rent market share. You don't actually get market share, you rent it because it was very highly transferable at any point in time. That's starting to happen now in the kind of more commoditizing pieces of the infrastructure. You're renting market share. And frankly, when they move to the service model, service provider models, you not only have market share, you're growing it because you have a now a newly formed relationship with a client that lasts seven to 10 years and not two to three years for the refresh cycle. And so, and then the third camp is the ones that are just gonna ride this thing out. And my personal view is over the next two, three, four years we'll see less and less and less and less and less straight bars. And so what we've done here is we've created a whole set of programs to embrace all three segments. And we're seeing a lot of success. The Pureflex brand is running at about 70% channel participation. Should be more, I'd like it to be more. We just last week announced a whole new set of prepackaged bundles. We have guaranteed minimum margins for the channel that are quite rich. And the game changer for us is we've created partner delivered services. Because as the partners want to move their business model they want to be able to deliver high value virtualization services, cloud services, et cetera. And so we train the partners on this and they deliver it and they can get 30, 40, 50 points margin. IBM branded services or partner delivered? Partner branded, IBM supported. And I wonder if I could just dig in. If I look at like Cisco what they did with their converge solutions, they really took mostly network channel and found companies that wanted to grow a data center channel. So I'm curious what kind of, what's the profile of your successful channel partners for the Pure system solution? Sure. So a lot of, so rough numbers, rough numbers about 50% of our business is net new. Roughly. So we're getting, you know, one camp of partners are the ones that are moving people from traditional blade centers or traditional x86 into this and getting the consolidation benefits. The other ones are the partners who actually see the world's moving to this converged infrastructure kind of buying and have embraced this as new practices. Okay. And last question I have for you is what's the competitive angle here? Are you seeing kind of stacks versus stack? Is it, you know, V blocks and Oracle, Exo, whatever's and going up against yours? Or are you still mostly competing against kind of build your own or all your own environments? And give us, you know, your take as to how you're doing out there. Sure. The competitive environment and where we are very successful in the competitive environment is where the clients understand what we're talking about relative to the breadth of this offering. So if you look at our competitors, everybody's pretty single threaded. You know, two core Intel with a Cisco switch or with an EMC system or, and by the way V block if you take a look at it is extremely, extremely poorly designed. That's why they had to come out with VSpec. But from a, from a, you know, from an ability to amortize the power mechanicals and the rest of the efficiencies. You look at our system, it's extremely dense and that's why you can get consolidation benefits of, you know, 500 HP servers into one chassis. I mean, that's the kind of benefits the clients are getting. So when the clients understand that you can do power, i-series and Intel consolidation when they understand that you can consolidate all of this wildly underutilized open system storage behind the virtualization controllers which nobody else has in their offerings. When the clients understand that you can do breadth of management across the entire system and not individual management components. And like yesterday we announced the SAP HANA edition of Pureflex. And when clients understand that you can put the database on the HANA, you can put the business suite on the power systems which runs business suite better than anything else on the planet Earth and then run some of the low value modules on Intel. You can't do that with anyone else. And so this competitive angle is really about educating the clients around the added value you can capture with a system like this. I think our competitors have basically said to clients, I just really want you to move what you're doing here over to here. And that's, you know, it's little value to that from my point of view. Excellent. All right Andy, we're getting a hook. I really appreciate you coming by. I could go on forever with you. We could talk about storage, we could talk about XIV and all the changes that are happening here. But unfortunately we're out of time. So thanks very much for coming by. It was great to see you again. All right everybody, keep it right there. We're right back with our next guest after this break. All right, thank you.