 Live from Las Vegas, it's theCUBE, covering HPE Discover 2017, brought to you by Hewlett Packard Enterprise. Welcome back everyone, we're here live in Las Vegas for SiliconANGLE's CUBE's exclusive coverage of HPE Discover 2017. I'm John Furrier, my co-host, Dave Vellante. Our next guest is Justin Hotard, Vice President General Manager of the Service Provider and OEM Solutions for HPE, if I can enterprise, and Kurt Belisar, Senior Director of Service Provider Engineering. We got the trends, we got the market leader, go to market leader as well as the engineering. Guys, welcome to theCUBE. Thanks, great to be here. So obviously the service providers is an interesting marketplace. We've been covering it for a long time and we know how hot NFV is and all the great stuff going on at the network, moving up the stack, applications over the top, you name it, it's all crazy world. But you look at the trends around smart cities, autonomous vehicles, and media, media entertainment, smart home, Apple announcing another home pod. It's just internet of things. This is a right market for service providers. My first question is, with 5G over the top, these kinds of trends to power these transformative use cases is really putting even more pressure on the service providers. So what's the deal? I mean, where are they at? What are you guys doing with the business? Give us a quick taste of the landscape and some of the forcing functions that are helping your business. Yeah, absolutely. And I think you hit on a lot of the trends driving the growth in service providers. What we see is a very dynamic market where everybody's trying to figure out their business model and build their services and respond to all these changes. And so what we see is a lot of customers, our customers, the service providers, need a lot of flexibility. They need to be able to respond to these changes. They also need to be able to scale. Globalization is a huge trend because I launched something in the US and Uber or Lyft is a good example. I launched it in the US. Everybody expects to have that service everywhere else in the world. And guess what? They say, whoa, hold on. Exactly, exactly. And then you've got issues with data sovereignty and security and privacy and you have to factor all those things in. But these businesses, our service provider customers, don't have time to wait. So they really see us as a core partner to them to enable speed and delivery. And Kurt, you probably can add a few points because you've seen this market evolve over the last, almost decade. Yeah, I think what we're seeing is we're seeing a transition to where there's more data out at the edge and so you're growing both edge data centers and you're growing central data centers at the same time. The percentage of operating expense that these customers are spending on their IT gear is just very large percent. And so they're all trying to optimize their spend in that space. And that means that they're looking at ways to optimize the gear. They're looking at ways to optimize how they deliver the gear out to the data centers. They're looking at reducing serviceability costs and trying to attack it across the board. So let's talk consolidation for a bit because early on everybody said, oh, it's just going to consolidate to a few providers and the exact opposite has happened. It's logical. Services have always been sort of decentralized and local and that's sort of exactly what you're describing. So how do you look at the market? How do you segment it? And what's your thinking in terms of the explosion or contraction of this market, in terms of number of players? Yeah, Dave, so I think a lot of our, a lot of what we see in the press or what's discussed is we talk a lot about the infrastructure as service providers, right? And the largest service providers. The reality is, is the market is fragmenting because more and more businesses are moving to an as a service model. There's businesses as a service, software as a service. And so each of these customers has a unique business model, how they make money, where they extract value, how they respond to their customers. And we really see that trend and I don't think it's going to change. That's not to say that the largest players in the market won't continue to grow and scale. And as we've seen, they've been doing that pretty consistently, but we're still going to see those different services and different values because it is local, it's customized. And you think about autonomous driving. I mean, there's going to be, you brought that up earlier, right? Like there's going to be, there's the people that are going to provide autonomous vehicles for consumers. There's many people that provide it as a service. There's people that provide services into those vehicles. Data services. Data services, content services, right? And so we think all of those models will continue. And the economics of one size fits all, just don't work. And I think when you look at our product strategy, our solution strategy, including Point Next and how we go to market, it's recognizing that. I mean, we have customers in Europe, for example, that buy what we might consider more traditional data infrastructure gear. A lot of the core products we have in market today, we have customers that want customized, we talk about white box a lot, but customized solutions, the latest technology integrated, optimized for their workload, for their scale. And we run the gamut. And a lot of that is because not one, one size just doesn't fit all in this environment, let alone what Kurt was talking about with where they're deploying their technology. Yeah, no, I see the same trends. I think that both the large public cloud providers are going to continue to grow and then you're going to see that the next tier down is also going to continue to grow. You know, it's everything as a service is starting to explode. And how are their requirements? Are they dramatically different? I mean, the large guys, they got massive scale and sort of give me the stuff and get out of my way sort of attitude, but the second and third tier, there's a lot of customization required. Where do you see HPE being able to add value in that space? We're going to see customization at both ends. It's just going to be more customization with the top tier customers. But it's interesting, what you've seen is a lot of the IT skill sets and people have migrated from some of the top tier providers down to the second tier. And so you see them wanting to employ a lot of the same techniques to go save cost and optimize their environment. And when we say customize, there's a very good reason why they customize. They will customize to the extent that it allows them to go lower their total cost of ownership. And so they'll go grab... Well, that's a great point. Dave's mentioned in an earlier segment that all companies are becoming technology companies. Jim Jackson was talking about the digital technology issue. So you have a power law going on. You're going to have that the head and the long tail of kind of service providers. So some enterprises, you take the enterprise market, you can almost say, okay, there's a line, you guys are now service providers and the rest are traditional enterprises. So in a way, they're SMBs from that old classical definition. So the point is the definition is changing. Yeah. What's that impact to your business and your product offering? It's really interesting. I mean, I think your point is every company is a service provider. And so we also see this even within our enterprise customers, they have workloads that are running on enterprise rate. They run mission critical workloads and then they run service provider platforms, right? And they're looking for that flexibility. They don't want to be bucketized. But because in order to compete, in order to have a service that might deliver content into their products or provide connectivity into their products for intelligence or AI, they need to be able to, they need to have the same cost advantages, the same technology advantages, the same forward planning, because a big thing we see in the service provider spaces, they buy ahead on technology because they're trying to run the life cycle of what they might need and get that return on investment. So we see those same behaviors across our enterprise customers that are buying as service providers so there is a bit of a blending of the business. Is there a pattern that you can talk to in the marketplace? This is interesting because if you believe that, which I do, I think you guys would agree that everyone's becoming a service provider. But service providers have had a legacy business that had completely different dimensions than say a classic enterprise. A lot of online, a lot of hyperscalers up front. Now you have data tsunami coming. So are there patterns that this is a little service provider like that now the enterprises have to deal with? Can you share insight into some of the things that, and what you guys are doing to solve that? I mean, I know the flexibility thing is a key message. Composability, I get that. But what are the core customer problems that now look like service provider problems? Well, there are a lot of enterprise customers that are going and starting to stand up environments that look like service provider environments. And there's different reasons why they do that. They could need an internal cloud for some reason. They could actually be standing up a service now that they're offering out to the public. But the answer is they're all looking for some of the same things in their cloud-like environment. They want consistency in the way that they want to go and deploy and talk to the servers. They want to have lowest cost, total cost of ownership. And that's both on a capital expense side in terms of what they pay to go buy the actual equipment, but also on the operating expense side. The more that they can make their cloud or their grid look uniform, it becomes easier to service. It becomes easier to maintain. And so you're starting to see them on a smaller scale perhaps, but employ a lot of the same techniques that are used in the large clouds. The business model question too comes up. In the old days, the ones who were online, highly big procures of gear, servers and storage, financial services, healthcare. I mean, these are highly online transactional businesses. And service providers also fell in that bucket. But now as everyone sassifies, hello, your revenue model is tied to those services. Yeah, and it's interesting too, because we put a lot of emphasis, I mean, by virtue of being a technology company, we put a lot of emphasis on the tech and making sure we've got the right systems and configurations we're delivering to the customer. But the other thing is, it turns out that there's some laws around physics. So power matters, real estate matters, right? Footprint matters, distance, right? All those things for latency and proximity. And we talked about some of the other elements, but those are actually huge operating costs, huge value points for our customers. So helping them make sure that they're balancing all those choice points, because if we get the operating expense right on the tech, but then they can't handle the power, they can't handle the footprint, they've got a different issue, they can't scale, exactly. And so that actually puts a limit on their growth, right? And so there's all these different things that we balance and where we bring value. And it's not just the technology, but that total solution. So the service provider space has always been a harbinger for what's going to happen in the enterprise. So if you looked 10 years back, it was virtualization and then dev ops and containers and then now all that stuff that's hitting the enterprise now was being done years ago. So what are the sort of tech trends that are driving the service provider space now? What are you seeing there that might show us a glimpse as to what's coming in the future? Where are they focused? I think that we're seeing a continuation and furthering of some of the technologies that we've seen the public clouds rolling out starting to happen with the enterprise. When I think from a technology trends standpoint, things that folks are looking at today, right? We're seeing alternate processors become available this year. ARM64, we're getting into the second generation of that. We're seeing trends coming like NVME drives, the ability to pull data off of drive much quicker. If you're a financial services industry company that wants to transact data real quick, that's helping out there. We're seeing NVDim technology that's coming into play and that's shifting everything, right? Storage and memory is starting to come together. And so the way that they move around and cache data is something that's going to change. Applications are going to have to change. The network... The architectures are changing, big too. Absolutely. One of the drivers behind that, because you brought up the in-memory and then also we just had talking to the server options lead and this is a big deal. I mean, memory used to be a constraint that you get the program around swapping out back in the old days, but now it's almost limitless with persistent SSDs, speed, and also that gives app developers huge flexibility. So this is going to... I mean, this should change the game on the server. It's all about the data. I mean, there's just more and more and more data being stored for different reasons and the data sets that people want to operate on are just getting larger and larger. And to the extent that we can pull those in and operate on them in a faster way and memory, it helps. But you guys got a very dynamic market, so I got to ask the question, what is the biggest wave that you guys are riding on the go-to-market and from a technology standpoint, because if you believe this conversation we're having, which is happening, is a service provider, a service provider, a service provider is going on because someone may be a specialist in, say, big data analytics service provider for cars, or I am a healthcare service provider that's at scale, so scale becomes now the new differentiation. I mean, that's the lock-in spec, but it's not really lock-in, it's just that you have scale. So you can almost envision this channel of service providers. How would that play out? I mean, that would be certainly game-changing. How do you guys rationalize that trend? And what is the wave that you're riding? Yeah, I think it all goes back to our customers, and we're doing a few different things. So one is deep direct engagement with these customers that are especially the ones on the cutting edge to have an early dialogue with them, make sure we're delivering the right solutions. The other thing is actually bringing value. So we do some things through it. We have a program called partner ready service provider. We bring in actually some of our service provider customers, and this is a global program, and we actually then deliver those services, because we have certain customers that might, again, back to that mix in a CIO's environment, they might look like an enterprise, they might look like a hyperscale service provider customer. They may also look like they're a consumer of service providers. Oh, great. Exactly, and so actually being able to do all of that is really important, and we think, again, we think when we wrap all of that with our service delivery, our global footprint, our supply chain ability to deliver products anywhere in the world, those are all things that give us a solution advantage for our customers. Kurt, how about open? The cloud line server portfolio, fast growing, the cloud age is here, open infrastructure. I was just talking to some of the guys in the labs, you're seeing some of the stuff at the network layer becoming open source projects. You almost take the network stack and say, oh wow, there's like six open source projects that make up HP, Arista, Juniper, and Cisco, core technologies yet, you have to build your own proprietary stuff around that to differentiate how does open fit into all of this? Because at the end of the day, it's going to be an open source driven software world with the cloud. Yeah, I think there's open source software pieces and open source, I think we will get to the point where we have more open standards around hardware too. And you've seen OCP, you've seen open 19 launch a couple of weeks ago and you're starting to see standards around the hardware as well. I think that opens critical. I think that it is the way of the future in this space. I think that we, again, back to the comment about what the large grids or large service provider customers need, they need uniformity in their data center to a certain extent. It makes it easier to manage and easier to operate. And if you just start with that principle, that implies we're going to have open standards. They're going to want open standards around the rack, they're going to want open standards around the gear, open standards around some of the options that go in the gear. There's going to be open standards from a software standpoint. And it's going to be the companies that go and sell that gear responsibility to make those bulletproof, to make them to the point where they're secure, to make them on the hardware side to the point where you can distribute it worldwide and service it. And open is here to stay. We've been predicting on the Q and O, Jay's got a question, but I wanted to get this point. I believe that we've been predicting hasn't yet come true and most of our predictions come true. So we're kind of waiting for the signals. Since open compute, we've seen a maker culture going on where we believe there's going to be a hardware renaissance. And when I say open hardware, it's really a driver on that thoughts on that because this certainly would change the game. You see people trying to do their own servers, but yet they can't get a fab plan open up. They can't do this. An interesting trend. If software is eating the world and data is going to eat software, which we believe, then you might see a really big shift. So software, I mean hardware, we had Microsoft's bombers say at the conference last week, we should have gotten the hardware business earlier. I mean, what is that all about? So again, this points to a renaissance. Do you agree? Totally. I think you hit a dead on. So we see the same thing. And it's a business model shift, right? It's a different business model than where we've been, but the opportunity to deliver value and open around platforms, around making sure there's interoperability, quality, security, exposing performance, right? Those are all things that are enabled through hardware and they make a difference. And Kurt talked earlier about some of these technology trends, they're very hardware centric because that's actually what delivers the difference in software and data. So if we get, you know, getting that right. The systems too, having systems experience is now the new IP, not necessarily having the fastest board. Yeah, that's right. Having that ability to integrate it and deliver an experience and performance. Those are things that make the difference. Kurt, your thoughts. No, I, like I said, I think that we are going to see more and more open standards around it. And I think it's going to help people scale. I mean, you know, you go back to the, it's about putting the systems together in a, you know, open scalable way. It's also about getting more work done out of the systems. You know, it's kind of a, if you think about through CapEx and OpEx, you know, there's going to be a work per watt per dollar done. How can I get that best done in the most standard way? And standards are going to have to be there to enable all these pieces to go together and come together in a, with a uniform look in the data center, which is what anybody is deploying a cloud needs. So Justin, put a bow on this segment. Summarize sort of from your perspective, Hewlett Packard Enterprises is cloud service provider strategy. Where can you add the most value? Where's the sweet spot? And where are you going to make the money? Yeah, so look, I think, I think what we add the most value in is being able to be a comprehensive provider for all of our customer solutions. And that, that's not just the product. It's being able to deliver the specific product to the specific workload or application. Being able to provide that global footprint and supply chain, the services on top of it so that a customer, when a customer makes a decision that they need help, they've got one partner to go to. And I think ultimately that's where we'll make the value. Justin Hochard, who's the VP GM service provider, OEM Solutions and Kurt Bellisard, Senior Director of Certified Engineering. Guys, thanks for this insight, great conversation. We love it, we love hardware. We all love software too. All that machine learning out there is giving me more and more power available. It's theCUBE bringing you all the action here at HP Discover, doing our job delivering a bunch of great services around data and video. Of course, bringing you a live stream here. I'm John Furrier with Dave Vellante. We'll be right back after this short break.