 From 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. Okay, welcome back everyone. We are here back from the keynote. This is SiliconANGLES theCUBE, our flagship program. We go out to the events and extract the signal and noise. I'm John Furrier, the founder of SiliconANGLES, I'm a coach Dave Vellante, founder of Wikibon.com, research our next guest, Kerry Bailey, Senior Vice President worldwide, indirect sales at Hewlett Packard Enterprise, HPE, and George Machado, CEO ITEN. Welcome to theCUBE. Good to see you, Kerry. Welcome to theCUBE. Thank you. It's good to see you again. So obviously, indirect business is good margin. You know, cost per order dollars, and nice but partners is part of the ecosystem. You got it. Big opportunity for HPE. Great legacy business, great channel, going decades back. Cloud is an opportunity. It is. I mean, and also with the big announcement around synergy. Search providers want simple stuff to sell, softwares key, but gross profit margin. Can they sell services? Talk about some of the things you guys doing in cloud. Look, I think the thing that you have to look at is you look at 90,000 resellers we have, they are trying to say, where do they play? How do they go after this market that's changing so much? And yes, cloud is one of those areas, right? George is a great example of that as a partner that has said, look, I'm on the journey with HPE. I'm also on the journey where the business buying patterns are, and he's dramatically moved into services. Yes, on top of infrastructure. Yes, on top where software defined innovations that were bringing like synergy, right? But he's just a great example of a partner that is the next generation partner where we continue to encourage our partners to build those competencies up around cloud and move to where they're buying patterns are. And this is a poster child for us. George, I got to ask you one of the things that's key right now in this business. It's very fast, dynamic. We're hearing things like start with a clean sheet of paper, agile, get in the front lines, drive revenue for the business, for developers, the DevOps, but yet IT still has a lot of installed opportunities. And so as on the front lines, you're in front of the customer. You've got to deliver the solution, make money, and have them repeat and do it again, right? So how does it stack up for you? I mean, simplicity is key, training, and also making money, a lot of gross profit. You don't want to have lower margins. So talk about the dynamics of what you're building. So you're right. It's very challenging times, but very exciting times also and full of opportunities. We've been partnering for HPE for three years now, and we've been mainly a reseller and infrastructure partner for most of our life. But since the beginning of the cloud, cloud is actually something we cannot avoid. So we've been an early adopter in all the very aspects of the cloud. And even I think cloud is clearly an accelerator for this digital first practice our customers want. And as you said, clean sheets and the discussion is all around business, and there's a huge transformation also in all the businesses to go through to there. Clearly, the way is going through the hybrid model of IT that's retaining what the customers already have and giving this cloud-designed environment that enable them to go to these new native cloud apps and solutions they design. Talk about the dynamic of teamwork because in the channel business, you have to enable them to be successful. So the product's got to be good, got to be incentive to do as they're trained up. But you're out there in the front lines. Again, you need support. What does HPE bring into the table for support for the cloud? Because again, it's a lot of reference architecture opportunities, but it's still kind of evolving the hybrid cloud and engineering opportunity. So the ball's in your court. What is HPE giving you? What does it kind of support? Again, HPE is kind of our DNA. So it's seamless for us to give that answer. We're also a supercharged cloud partner, Helium, and the cloud builder. And it's, everything is about the cloud but not totally about the cloud. HPE, I can kind of discuss, has a top to down based in class, often in the enterprise markets. Not only in services, but also in software, a full stack of software and solutions, and also in the infrastructure side. They have also the knowledge of the customers, the customer's needs, and it's all about business nowadays, the discussion all about business. I believe they have the right partners also to do so. And it's the best way to go to this digital first journey with this hybrid IT model. And they have all these competencies and all these practices that enable their customers to do this in a seamless and very easy way. And I'll tell you one other comment on it is that we've been very, very clear in our cloud strategy with partners. We're really one of the only companies right now that says we're not going to compete with his cloud business. We're going to enable his cloud business. We've announced recently, as you know, we are not in the public cloud space because our public cloud is ITEN, right? Those are the type of partners that when they are moving in a committed to HP around the innovations that we're bringing in cloud, we're going to focus our routes to market to ITEN and make sure they're enabled. That's a good point. I mean, this is, this comes down to trust. Yes, the trust relationship is always there because I'm almost putting myself in your shoes. Hey, I'm in the front lines. I'm taking the orders. I'm getting the PO's. I'm getting the product from HP. I don't want you to backdoor the customer, take the order. I mean, talk about that channel conflict. You guys just don't have any channel conflict, you're saying. I've never seen channel conflict. No, but I'll tell you that. But you go there and say, I'm not going to take orders for your business with our direct sales force. That's right. So we've made a couple of really interesting announcements as we became HPE. One of them is, we've said partner first. Okay, a lot of companies say that. 70% of our revenue flows through partners, period. Then you say, well, what else have we done? You go on the cloud space. We said we're not going to be in the public cloud space because we're going to use our trusted partners to do that, right? And as you continue to take these steps, what it says is the partners, we're in a different world of partnering right now, right? We've got to look for partners that have been on this transformational journey that are aligned to our strategy. And when they're aligned to that, it is just as we've been in business together in our traditional resale model, we are going to evolve together as it moves more into the cloud space. So our enablement has got to be significant, not just from innovation, but how do we make sure he is successful in moving to cloud space, et cetera. What's different now? You mentioned the world's different in partnering. What's different now than it was, just say a few years ago, maybe five, 10 years ago now. I think the biggest thing for me, and look, I just came into the new job replacing Sue Barsami in 30 days ago, okay? And when I looked at this whole market, I go, the channel evolved from being a manufacturer to getting distribution and resellers out. Now, flip it where the buying patterns are, it's customers out to solution business outcomes and how you enable them, right? That's a whole different partner ecosystem that develops and a whole new partner ready enablement we have to do. So, George. I couldn't emphasize more the question of confidence and partnership. And clearly, one of the key issues with HP Enterprise, or HPE, sorry, is the channel model DNA it has. And it assures not only having all the best solutions that they offer, but having the competitive deals on a daily, daily basis, having the correct and adequate marketing funds to develop our strategy, having professional services that can team up with us and give the best solutions to our customers. And the engagement and the alignment in this business-wise kind of conversations we're doing with our customers. And that's clearly a differentiator. So, when Kerry says, you guys, I-10 are sort of his public cloud provider. Now, you're not providing public cloud, right? You're providing cloud solutions to your customers, right? That's right. Okay, and then, Kerry, I have to ask you. Yep. 90,000 channel partners. Not all 90,000 have made that transition. That's right. So, what makes, describe the type of channel partner that you really value as HP is? So, here's what's interesting. And again, in my early coming into the role, the one observation I just talked to 250 CEOs of our partners a second ago on this is, the evolution of the partners, they're taking different paths. And by the way, different paths are okay. We've got partners that say, I'm not going to move into services. I'm going to move into SMB and I'm going to focus heavy on transaction business. Well, our partner model has got to be flexible enough to service them because that's great margin pools. It's the fastest growing segment, et cetera. On the other side, we have to have partners that say, look, we're moving into services, consulting, professional services, et cetera. That's great. We'll enable them around our solutions. And then finally, you've got to cut the partners and say, I'm going to move into consumption-based models. I tend as an example of that, right? They will deploy private cloud. They will deploy Azure. They are working with customers for the right mix of their workload to what delivery model and cloud should work. So the reality is, we have, I would say 10%, 15% of those partners have made a move into services. There'll be more. But we, it's over the next two or three years that they've got to decide where to play and that's going to be the answer. George, for your company, when did you decide to make that move? For have you always been in that space? To cloud since the beginning. Okay. I cannot understand how there are, I can understand why some partners do not sell cloud. I cannot understand why cloud isn't part of their IT strategy. Because it's part of any strategy of a business case of a customer. So you have to, even though you are a seller and sell infrastructure, you have to know how to implement cloud or how to deploy cloud in the same infrastructure. In your services and consulting, it's around cloud. But you've got other services as well. Do you provide solutions specific to say, for example SAP or data or talk about that a little bit? We do solutions to RP. These kind of solutions, more in the cloud is the kind of solutions we do where we can change into as a service model. We do management service, cloud automation, cloud services in terms of provision and deployments. We do some like field services. We do a lot of solutions. We combine this collaboration mobility that goes through cloud platforms in order to have a global reach and a mobile reach to our customers. And you will resell public cloud services. Let's say tick, for example, Azure, which was announced yesterday. You'll resell that service. Yes, I will sell Azure as a public cloud strategy, but also as an hybrid and private cloud strategy. I've been leveraging HPE offerings, infrastructure services, and cloud offerings, such as HPE alien, together with Azure practices. And we can perfectly do this and get the best solution to the customer. Okay, and it doesn't collide in any way. And you'll differentiate by providing other services on top of that, which what? Getting people up and running on the public cloud. Provisioning the services they have on cloud, managing the services they have on cloud, and doing the setup and implementations they need for the hybrid environment that they also have. And obviously you charge for those services, but relative to, of course, but so relative to somebody who's just purely moving boxes, you can turn that knob a little bit. Say, hey, not only can we sell you the infrastructure, but we can also provide these other services on top. I'll answer you, that's only in the reseller side then. Selling cloud solutions, the cross-seller doing infrastructure is huge, because whenever they want to go to cloud, to prepare the infrastructure to cloud, they want to modernize their infrastructure, being service, storage, networking, security, they have to modernize this to, in order to accept all these cloud solutions they want to implement. So it's a huge opportunity, not only on services, but on selling additional infrastructure, and I think it'll keep going for a while. That's the value of a partner right there. How do you guys look at sort of the DevOps crowd? Some kids that are in some brownstone, and hoodies in London banging away on code, no infrastructure, they don't move infrastructure for you, but increasingly your customers are doing business with those guys, do you partner with them? Where do they fit into this whole ecosystem? So we do a little bit of ourselves, but that's not the issue. What we're trying to do is kind of create ecosystems with these kind of companies, these partners, these startups, to give them the, to be the cloud partner. So they give them the cloud patterns and what they need, they don't want to manage the cloud, they don't want the services relating to that, they want just to develop their applications that put it on the customer side. We're trying to give them the other system, they need not only to publish what they do, but also we are in Europe, we have a lot of customer base, give them access to our partners and to our customers and others so they can deploy more easily to other places. So partnership, yes, for sure. Are you guys developing any software for proprietary software? Are you guys composing the solutions? Yes, we do. As an ISV, it's mainly mobility, collaboration, kind of portals and integration, more of that kind of stuff. And so you're selling the implementation as well, the professional services as well to the customer? Yes. How do you guys reconcile that with HP? Because I know you said professional services, they're not competing services most of the case on time, is there? That's right. And in fact, I think it was at GPC this year, we opened up our professional services teams to our partners to mostly enable them, to begin to say, look, when you are taking a customer on a journey, say from traditional IT, and you're getting their first set of workloads over to our cloud system, there's professional services that have got to go with that to enable that customer, right? So our partners are going to deliver the majority of our professional services to enable our joint customers. We'll use our professional services to fill gaps around our products, but also enable our partners. So it used to be nice buckets for partners. Oh my goodness. Resellers, ISVs, Vabs, and Vars, and all that stuff, where did this cloud fit in? Because you're an ISV, you're also a reseller, you're also a value-added business. I mean, you're every family, this is like an integrated stack of naming. What, how does you guys, how do we talk about this new normal? Yeah. Look, I'll give you my perspective on this because when I went out and I talked to 57 of our partners when I came into the role, some were distribution, some were resellers, some were Vars that have made the transition, and when you talk to all of them, the lines have blurred. But frankly, the lines have blurred with the partners like they blurred with the vendors. It used to be hardware, software, services, and that's all that companies did. Those were days that was easy, right? Now, everybody does a combination of all, and the reality is the partner ecosystems are evolving very rapidly right now, and that's why we've got to make sure our partner programs are flexible enough to drive towards where they're going in their business. What's your vision then to supporting the partners? Because that's going to be the key. Trust on the channel conflict, check the box there, have good products, good, the support, the soft dollars, the programs. Because now you have that blurring, it's kind of like integrated stack and the cloud, integrated services you've got to provide to the partners. What's the vision? That's right. I would tell you that if you look at one, our whole compensation rebates MDF have been pretty consistent. We did make a change this year going into it that said it's not your traditional MDF, it's not your traditional rebates of sell this much volume and here's the compensation that goes with it. It's much more around the joint business plan we have together and the initiatives that you have to drive towards the higher value services. Here's where we're going to incent and compensate. I think we got the best compensation program out on the market, but it has to continue to evolve with partners, especially as they go into more cloud and consume in those areas, right? So it's evolving and it's- It's an opportunity. It's a great opportunity. It's an opportunity, but we've got to evolve fast. George, what's your take on what you need going forward? What's some of the things that you want looking for as you climb that mountain and look down on the valley of opportunity? You're going to need, what's your vision and what are you looking for? In terms of cloud or- Support, compensation, because again, some funding's going to come in. You might have to hire the hoodie developers. The quick answer is more, more and more. No, no, actually I'm very comfortable with the compensation models and the partner practice that we're having with Haley Parker right now in the press and just going back to your case, we have it all, but we don't need to have it all. We have it all because we think, first, we do have competencies in all of those areas and having this all give us more profitable because we can get more grasp of PFRs and market development funds. But any partner can choose their peak or where they want to be and they can partner with everyone else to do that. What I would expect, I would expect some more, less complex European market, less complex. We're going international, every part is going international and the global reaches is there, but still there's a very complex marketplace in Europe. Kerry Bailey, Worldwide, Indirect Sales at HP. Thanks for coming on theCUBE. George, CEO of Partner Profit Margins are very key and having the trust, no channel conflict, good products, good luck, congratulations. Thanks for joining us and sharing your insight on theCUBE and enjoy the rest of the show. This is theCUBE here live in London for HPE Discover. We'll be right back with more after this short break.