 Hey, welcome back. We are live in Las Vegas for IBM Pulse. This is Silicon Angle and Wikibon's theCUBE. It's our flagship program. We go out to the events to extract the signal from the noise. I'm John Furrier, the founder of Silicon Angle. John with Dave Vellante, co-founder of Wikibon.org and our next guest is John Mason, general manager of the mid-market, small, medium-sized business for IBM. Welcome to theCUBE. Thank you, John. So, obviously, the cloud is the story here. You know, promises, promises over the years, you know, has always been kind of the sound bite. People say, oh, yeah, we're going to hear the cloud. Cloud washing has been going on for years, but now you're seeing a lot of real value coming out of the cloud. You guys, major shift here, right on the trajectory of you guys, where you guys have been, kind of bringing everyone under one vector into the cloud. For the large enterprise, a little bit harder complicated equation. You got a data center on premise, but for small businesses, they don't have a lot of room for IT budgets. It's not a billion-dollar operating expense, but tell us why the cloud and what will the mid-market get out of the cloud in this new equation? Because you got all these great things. You got IT as a service. You got basically IBM as a service. How does that translate for someone who's just trying to run their business and grow their business? Well, John, I think we're at a tipping point. This is one of those once every 20 to 25 year shifts in this technology industry that you get to experience once, maybe twice in a career. Right now, we have the coming together of cloud, mobile, social, and big data and analytics, which is really changing everything, and particularly for small and medium businesses, who, as you say, don't have the in-house expertise, they don't have a lot of the infrastructure, nor do they have the legacy, and in some cases, bureaucracy of larger companies. So what cloud in particular lets them do is go really fast, and it's all about speed and agility, and really keeps it simple for smaller companies to find markets to go after growth and to do that very quickly and very nimbly, and that's what it's all about. Now, IBM's a huge company, a lot of portfolio. You guys have a lot of different sets of services, software prior to the acquisition, hosting company. It would go host stuff there, and channel partners would use hosting for small businesses, medium-sized businesses. Now, with more capabilities and more demand for whether it's some sort of transactional front end or consumerization experience, what does IBM bring to the table around software, and how do you talk to customers about that, about, okay, is it just turnkey? Is there a roadmap? Can you just go into a little bit more detail about that? Yeah, and I think software truly changes everything. We've really seen an explosion in the number of companies that are moving to software. Just in the last seven, eight months since we closed the acquisition, 2,400 new clients on software. So that's more than 10% of the entire base that software had prior to the acquisition. So you can see a real acceleration. We expect that to continue even further accelerating as we roll out new data centers to have 40 data centers around the world by the end of this year. So what we're really trying to do is certainly be very careful not to break what software has been very successful in building as you try to integrate one very large company and one much smaller company. So we're actually trying to almost do a reverse integration of integrating IBM into software in many ways. They have great things like very easy web-based discovery and purchasing with a credit card. In 10 minutes, you can be up and running with a software instance and deployed within a couple of hours. That's speed and agility that typically larger IT vendors haven't been able to deliver. So software really brings that to IBM and to a much broader customer base. So it changes the game entirely. So I wonder if we could talk a little bit more about mid-market, how you guys define mid-market. And then I want to talk about some of the organizational implications and changes that are going on as a result of cloud. But let's start with, what is mid-market? How far down market do you go? So we at IBM define mid-market by every company that has fewer than 1,000 employees. So everything from the very small startup in a garage somewhere all the way up to some fairly sizable mid-sized companies with several hundred employees and multiple locations, et cetera. But there's something unique about sort of the smaller companies in terms of their infrastructure. They typically don't have as many layers of legacy technology the larger companies have nor do they have the expertise. So that actually calls into question, how do you engage with those companies to really help them? A lot of that comes down to local partnerships. So we have 140,000 partners around the world. Tens of thousands are active at any one time and all working in their local markets to help smaller businesses, mid-sized businesses really take advantage of the full range of products and solutions that IBM has. So that's really key to this as well. So obviously the large customers have a lot of infrastructure built up as you're pointing out John, a lot of legacy. They've got a lot of developers. They've got a lot of, whether it's infrastructure admins or virtualization admins, they've got one of everything, maybe 10 of everything. The small guys at the other end of the spectrum, they might have an IT guy maybe. Now the mid-sized markets we see are somewhat different. They're sort of tweeners. They've got some expertise, enough to be dangerous but they don't have the bench strength. So how do you or do you try to differentiate between those sort of mid-market players and the real small guys that might be startups or mom and pop organizations? Yeah, we do differentiate and our partner is also differentiated. So this isn't only IBM, there's a whole ecosystem of partners that work together to help these companies really take advantage of the technologies. In the mids and sort of the higher end of what we call mid-market, the challenge that many of these companies face is they're spending all of their IT time just keeping the shop going, keeping their existing operations running. And a lot of the line of business owners within the organization are saying, I need to try this new thing. I need to go start a pilot. And I can't wait 12 months or 18 months for my IT guys to be freed up from their SAP project or whatever ongoing back end systems of record that they need to do just to keep the business running. So what we really are able to do now with some of these cloud technologies is to help accelerate some of the new growth opportunities that mid-sized companies are looking to engage with, particularly around systems of engagement, talking to their customers, finding their customers, engaging across social networks, across mobile devices. So it's really not just keeping the back end sort of systems of record going, which is a lot of IT's time, but now also engaging forward out to their customers, to their partners, to other stakeholders with new ways of interacting and finding customers to drive through. So how are the mid, so the small guys can move with the market, they have to or they die, but the mid-sized guys, they have some legacy. So are they organizing around the cloud? And what are they doing with this sort of systems of record organization? Are they morphing that? Or are they sort of fossilizing it and growing new around cloud? So and I think Robert LeBlanc talked to the point around hybrid and, you know, my view is eventually everything is going to be a hybrid cloud solution. And actually every company is going to be a cloud service provider at some point. You know, every company is moving from products to services, and all of those services are moving into cloud services. Many of those initially can be in a development environment or a pilot stage in a public cloud. At some point, you want to maybe take part of that into a private cloud, and eventually as you go into scale, you want to have a mix. You want to have both public, private, in a hybrid environment. Particularly as you start to tie in to your back end systems of record. So it's really going to be a hybrid world. And you see many of these mid-sized companies, their existing on-premise solutions have to keep running. You have line of business owners trying new things, trying to engage differently with customers and drive new growth opportunities with maybe public cloud activities. And then over time, you're seeing the linkage taking place where you've got IT and line of business owner walking together to actually get the best of both. You need it to tie in to your systems of record, because that's where a lot of your valuable customer data is. You need to have those analytics capabilities to really target the customer and be very focused. At the same time, you need to move fast. You need to scale. In many cases, a public cloud instance is going to help you to do that faster. So it's really taking the best of both worlds. We're here at John Mason, who's the general manager of Global Mid-Market for IBM. Huge news. Obviously, you guys have a lot you're bringing to the table for the mid-market. Let's talk global business. I mean, I was saying on my intro, this is not about cloud washing. It's really about a reformation on a vector everyone saw coming. It's being figured out right now. You see people settle into their swim lanes, and you're seeing the consolidation around the foundation of cloud. You guys certainly are putting forth this path. I got to talk about the numbers, right? So IBM quoted $7 billion in cloud revenue that's going to come out of this initiative. Is that new business that's going to come from somewhere else? I mean, obviously, it's bigger parts of IBM, but within your sector, how do you see the dollars hitting the table in terms of is it going to be restructuring the sales force? Is it going to be net new business? Where's the cash going to come from? And what's the customer value behind that? You mentioned $7 billion, that's a couple years ago, but even last year in 2013, we already did $4.4 billion of cloud-based revenue, of which, I think roughly $1.7 billion was pure sort of as-a-service revenue. So it's already a very significant business for IBM. Now you've seen us double down in terms of infrastructure build-out. What capabilities? Bought software for $2 billion, now adding $1.2 billion additional infrastructure build-out, $1 billion investment in Watson, much of which will become as-a-service, so available to companies of all sizes to take advantage of. And then today, another billion-dollar investment in other platform resources. I see the smirk on your face. I think it's a sandbagging situation here for IBM. It sounds like the number might be greater than that, although I'm just speculating. Yeah, I would love to see more than that. It's never as easy as it sounds, though, to be honest. When you see any technology transformation as we're living now. Well, it kind of makes sense. If you're doing about a billion right now, just on services, and it's kind of loosely coupled, and it's just kind of loosely hanging around, you kind of pull together a cohesive strategy with more capabilities that's interesting. So I think the numbers might be a little tick up there. But to your original question on global rollout, I think this is totally a land grab in terms of local capability with cloud, public, private, and hybrid. And we today have 13 data centers with software, 12 at IBM, so 25 in place already today that we're taking to 40 by the end of the year. And then you hear about companies like the loft that we heard about. Pretty small company out of Australia who within a few months is going global with a digital marketing capability. And the only way they're able to do that is to take advantage of the global footprint of a service like software. I mean, its synergies are all over the place. One of the things I said on my Twitter last night was, this is about the developers. I mean, look at it, there's a lot of business value here, but the channel is developers. I'll see 70% of these attendees are first-timers here. It's a new conference in the sense of the vibe, and also the taris, seeing different hip music on stage, IBM's cool, DevOps is a new breed. You're seeing a younger generation, the older guys are going to be programming in an agile way. So developers care about really two things, their own vanity of their product, making sure that they can build something good, and also distribution, make some cash. So if someone can come out of the woodwork and produce something in piggyback IBM, that's the real deal, right? That's kind of, is that what you guys are targeting? And I think John, you hit on two really important things there, so the creativity of the developer and then the go-to-market. But one thing they don't really care about is building out their own infrastructure to have it run safely, securely, quickly, with all the things that the user of their application cares about, because that's not their business. They're not in the business of building and owning and running infrastructure. They want to free up their time to be creative and to get their product to market, and that's really where all of the things that we're announcing today in terms of platformers or service and DevOps capabilities, that really helps them focus on what they're good at. It makes DevOps an oxymoron then, because in that scenario, there is no ops. They're just developing it, pushing it to them. And that's where they add value. That's their... They don't want to know the plumbing, local email, configuring, provisioning, all that stuff's under the hood. You guys abstract that complexity away. Okay, so that's cool. DevOps has become just dev, pushing to ops that you guys will manage. Great go-to-market, which is synergy for them to make some money and to value their customers. I want you to explain to the developers and also to the small businesses that will be watching this, how does Watson fit into this? Because the cognitive computing narrative is new for IBM. It's new for the industry. Essentially, I call it the AI, the reasoning, you know, smarter machine, smarter plan and all that kind of falls under it. But Watson really is a front-end. It's a big data. Data meets cloud, right? So big data truly meets cloud on this equation. So what is the Watson paradigm shift mean to the enterprises out there, the mid-market enterprises and also the developers? So I think what we've got right now, we're seeing these waves of innovation. And in particular, you've got these three key elements coming together, cloud, mobile and social, which is creating this massive amount of data, unthinkable, 10 to the power, 23 increase in the amount of data in the next two to three years, which is truly an unthinkable amount of data. What that data allows us to do, though, is to be much more targeted and focused and insightful if we can process the data fast enough to have almost real-time reaction and anticipation of actually what's gonna happen next. There's no way that we can do that with the legacy technologies that we've had in the past. It's just not fast enough, it's not agile enough. It's not able to take all of these different inputs, process them and turn out an insightful answer to any question. That's where Watson comes in. Is it a marketing thing? Is there a real deliverable there? There's clearly a real deliverable. You've seen the ability to just process game show questions and come up with what looks like a really smart human answer and that's three years ago. Since then, we've taken that same analytical capability and moved it into core areas like healthcare or financial services, getting into really meaty problems like helping solve cancer problems. Now, if you can imagine, taking that forward and opening that platform so it's not just limited by IBM's ability to get creative with the analytics but open that up to the whole ecosystem of developers who as we said earlier, their strength is creativity. So how do we then get creative and allow them to really go build on that to get answers to some of these tough questions? We're big fans of Watson. We think that's the future of big data which is complete abstraction of complexity. It's just inquiring, databases. So it kind of hits the whole backend data warehouse market business intelligence but it makes business intelligence for the normal person. It makes it simple. And particularly for small and mid-sized companies, the one key thing that we all need to get better at is making technology work simply so that they can use it to drive that business. Whether it's Watson and analytics or it's cloud or mobile social. You talked earlier in one of your sections about the consumerization of IT. What does consumerization do? It drives simplicity. It forces simple interaction through the smaller real estate of a mobile device. Forces a change in how you engage with these systems. So it's all about simple speed, agility and all of these different technologies. It's a perfect storm of innovation. I got to say, the consumerization trend has at least forced companies to be good because if it's not good, people won't use it. They just won't use it. And you can't make them use it as an IT. You can't say, you, thou shalt. It doesn't work that way anymore. Those days are over. That guy's had a good run in those days in the main frame. Okay, John Mason, thanks for joining in theCUBE. We'll be back. This is live Las Vegas theCUBE, our flagship program. Go out to the events. We're here at IBM Pulse. The changing of the garden cloud, big investments, big changes. IBM is moving the ball down the field. We're here live with theCUBE for two days. Be right back.