 Live from San Francisco. It's theCUBE, covering Oracle Open World 2016. Brought to you by Oracle. Now, here's your host, John Furrier and Peter Burris. Welcome to theCUBE's coverage of Oracle Open World 2016. It's the SiliconANGLE Media's theCUBE. It's our flagship program. Go out to the events and extract the signal from noise. Day one of coverage, I'm John Furrier, my co-host Peter Burris this week. Next three days, live coverage, 35 interviews, and we're kicking off the event with an analysis of the keynotes from Larry Ellison last night, Mark Hurt, and overall Oracle strategy. And our guest today, guest analyst, I like the football coaches that come on on ESPN, break down the plays. Matt Eastwood, Senior Vice President of IDC, Matt, great to see you again. Thanks, John, good to be here. Thanks, Peter. So, Peter, you guys are analysts. You get paid to basically understand the landscape and kind of have the 20-mile stare, especially in this industry, but we've seen this move for it. Old guard trying to transform into the new guard, except you have a Maverick and Larry Ellison still at the helm. You got a good manager here with Stafford Katz and Mark Hurt. They're not going to lie down. They're going to the cloud. They're going to the cloud and force. Some will debate where they are. Matt, what's your take? Because you see this, and some people aren't transforming to the cloud. What's your take? We will, I mean, Mark said it this morning. You have an industry that's effectively not growing, maybe growing at, you know, pretty anemic, one, two percent. So the only way to grow if your Oracle's to take share, and obviously if you look at where the growth in the industry has been the last decade or so, it's really been in cloud. And I think what you've seen from Oracle most recently is an orientation towards, you know, cloud and thinking of cloud first the last few years, but very much on the SaaS side initially, and now they're really doubling down on infrastructure as a surface of the past. That was the big message last night and again today. So one of the things that Larry Ellison came out on this keynote last night when the folks haven't seen it, very aggressively up-front saying Amazon, and he didn't use Amazon web, he uses Amazon in general, but you can see his direction he's going. He obviously sees him as a major competitor, obviously they're going after them, part their database to Amazon web services, but he's pointing at a real low cost, high performance, his whole stick is, we can deliver significantly lower cost and higher performance. He's going to the price performance well. So this kind of teases out the infrastructure as a service play, which some analysts like Holger at Constellation was saying is a reboot. Your take on this one, do they have a play there? I'll say that the Sun, they got to integrate engineered systems. Can they deliver that kind of low cost outside of the Oracle environment? I think you just kind of hit on it. They're really extending the story, extending the message for the last five, five and a half years since they acquired Sun, which was really hardware, software, the whole stack, silicon all the way up the software stack and now they're extending that further up the cloud stack. I do think in effect it is a bit of a reboot. It's a different way of thinking about how infrastructure is consumed and making sure that you can cover those bases, whether it's a kind of an on-prem, private hybrid solution or an off-prem cloud solution. And they're really playing the fact that that stack all the way from the silicon and enabling software on the compute layer all the way through the adjacency around storage and up that software stack is a place where innovation can and needs to exist. And I would say that it does need to exist there. I think that if you look at what's happened in our industry the last 10 years or so, the cloud has really made and built its position around optimization of data centers around density, optimization of data center around a generic workload. And now there's an opportunity to kind of extend that message and really optimize around workloads and Oracle's obviously a company that understands certain types of workloads. Yeah, I think that's actually going to be in many respects what we're going to hear a lot about over the next couple of days is bare metal, bare metal, bare metal. That's the one that's most obviously pointed at Amazon. But you're absolutely right. At the end of the day the industry is growing at a certain rate and Oracle's not going to grow much faster than the industry. But you've got to play to your advantage and Oracle's advantage is millions of users of their applications. And so in many respects the real play here is how Oracle is going to talk to the industry about how they can move their applications from off-premise into the cloud or not. That's where the rubber's really going to meet the road here. If Oracle's going after Amazon with bare metal just on a price performance just on a dollars per unit kind of basis it's going to be interesting to watch. But that's not going to be their main strength. They can do it, but that's not going to be their real strength. The real strength is going to go after their application portfolio and making that work. One other thing I'd say that's I think is really important, John, is that we've seen over the years companies successfully transform, big companies successfully transform in a tech space. IBM did it, Microsoft has done it a couple of times now. Nobody has ever done it when their company is a product of multiple acquisitions. And I think one of the big challenges of Oracle, especially as the charismatic leader starts to think about what he's going to do next. This is going to be interesting if Oracle can transform, transform this amazing collection of acquisitions over the past 10 years and move it all forward together. That's going to be a feat of significant management. Well, that's a great point. I want to get your thoughts on this too, from IBM's perspective, because yes, they have software, a lot of acquisitions, but software's run on databases, right? So I said on our Cube Friday podcast, soundcloud.com slash cubecasts, check it out, I went on a little riff on this, not a diatribe, just more of a point of clarity, at least from my perspective, my opinion based on sources that I have close to the company that Oracle has about 70% of their revenue in the database business and yet hasn't moved it. Microsoft with Azure has quietly been moving their install base and tying it in, and Larry Ellison pointed that out on the earnings call last week. So now you have, essentially, Oracle, all the smoke and all the sunshine they're blowing around really hasn't moved their install base to your point. So the question is this, can Oracle and concurring increase or take away the swim lane of the database team? Can they say, hey, database team? Because now people are using other databases, not just Oracle. In a world of big data, data capital, what's your take on this? I think, you know, even to the point that Peter made, you have two, there's a big intersection happening in our industry today. In the infrastructure space, it's largely been a horizontal play, you know, across all industries, same infrastructure layer largely. Oracle's really bet the last few years, was really doubling down on applications that increasingly were verticalized. So now you have this kind of verticalized orientation on top of that database layer that they've been so strong in, and now you're trying to drive a conversation in the industry that is increasingly about industry cloud, cloud that's really optimized for healthcare or for financial services or for transportation and logistics, you name it. And I think that is one area where Oracle maybe does have an opportunity, is to help redefine how we think of cloud, not just as a pure kind of horizontal play, but as something that's really optimized when I used this from Workload earlier, not just for Workload, but for specific type of industry workloads. And I think that's where you're going to start to see a lot of the intersections happening in our industry. It won't just be Amazon and Microsoft and Google and IBM, but obviously you've got the GD for the next people. The workloads is the new sticky. Yeah, yeah, exactly. So Peter in the old days, database had web logic, that became a nice stickiness for Oracle. Can they do that? What's your take on that? And you know, customers got choice out this, not just Oracle Cloud, and Mark Herd did point out in the earnings calls, they have a lot of net new customers coming on that aren't usually Oracle. So then again, the cloud isn't ramping as fast as they say it is, and certainly you see a decline on the licensing on prem. Again, that's the current facts. So what was Larry Ellison's play originally? Larry Ellison's play when he started Oracle many years ago was to mark the hell out of the company and to get partners. He was above all of the database providers. He went after a channel and successfully got it. That was the group that originally built the first set of Oracle applications. We're talking 20, 30 years ago. Very, very powerful and they were responsible for installing an enormous amount of Oracle database. What's this play now? If you look at the announcements, buried inside there is an enormous amount of attention being paid to the channel. If I were to predict, I might as well, I would predict that we're going to see a lot of Oracle inside, a lot of channel plays. Going back to your point, Oracle's not going to build all those industry clouds. The channel is going to build all those industry clouds. Oracle has first given a pathway to channel partners that have been loyal to them for 30, 35 years. And once they give them a pathway- Or a four Oracle, though. Four Oracle, no question. One Oracle. Once they give that channel a pathway, the channel is going to start pulling a lot of momentum, a lot of customers with them. And so that's going to have an amazing bearing. That's why I think that the real target of all these announcements is more Microsoft than Amazon. I think Amazon's a faint. I think Amazon's a ploy. The bare metal thing, going to get a lot of press. But the real angle here is, who's going to bring the industry to the cloud? That's Microsoft's objective. And I think it just became Oracle's objective. Well, look at this line there. Let's just put a little bookmark on that. Or AWS a ploy for Oracle standpoint. Jassy would argue that they're going to move in the enterprise pretty quickly with a kind of a new strategy, move the goalposts off the traditional existing enterprise market. Okay, but I would agree totally that Microsoft clearly is what's on the table right now. In front of them, they got the install base potential. The apps, the apps. They got the apps and they got the customers. So the question is the battle for that enterprise. Matt, your take on this because now Oracle and Oracle, yeah, they're optimized, they work great. So buying Oracle Cloud, you're basically buying an Oracle data center. As Larry Ellison said on the Churchill Club, a data center is the cloud is just a data center where no one knows where it is. So I can buy that argument of Oracle and Oracle being some sort of integrated on-prem, off-prem somewhere in another Oracle facility working great. Non-Oracle environments really bring us back to what the Dell Technologies play, what VMware's trying to do, the cloud brokering business. So Peter's essentially saying, if you play the channel play, which is an EMC's wheelhouse, HP's got great, great play with the channel. So the question is, hmm, is it really a channel war, not a cloud war? It's your thoughts. It's a great thought. I mean, I think if one of the things we would say at IDC is using kind of that second, third platform structure, the world, the second platform had a very well, well-defined set of partnerships, both on the go-to-market side and on the technology side. And the same thing is really emerging around third platform, cloud, mobile, that whole analytics world, that's really kind of what differentiation happens here. So I do think that that is what's happening. It really is about how you can establish what that new world order looks like in that third platform. And yeah, I think that's an interesting observation around Oracle versus Amazon versus Microsoft. Clearly it's a battle for developers and influence of developers. And Mark uses the term extend rather than customize. A lot of that work that happened in the second platform world was building very custom applications on top of the standard infrastructure. This new world that we're heading into is really about how you can extend and use APIs to do things that previously would have taken an awful lot of engineering work to do. But his 80-20 comment today, Mark Erds, I thought was interesting, because analysts have been saying that for years that 80% of the energy in a data center or an IT organization is on keeping the lights on and only 20% for innovation. And obviously we need to change that equation, particularly as we're going to become more digitally based in our businesses. But to get to 80% innovation by 2025, I just don't see that happening. Yeah, last night I saw a tweet from Bob Evans from Oracle who said, our SaaS business has been held by our platform in the service business and infrastructure services. And I'm telling myself, that doesn't really, doesn't make sense. Are they going down market or up market? It seems to me they have a SaaS business. It's called applications. Right, right. So obviously platform service looks pretty good. So I'm kind of looking for progress updates there. So I'd love to get your take on platform service. But really the action for here in all the announcements is infrastructures of service. Your thoughts on that? Are they doing it right? What are the elements, any critical analysis or any kind of things that you're seeing? It's like, hmm, not sure yet or that looks good off the tee. I mean, that's a tough space. The infrastructure is the service space. The pricing environment is really kind of ridiculous. So you have to make a bold statement. Larry's great at making those bold statements around things like twice the compute, four times the storage for 20% less, those types of numbers. But that's a moving target. It's constantly changing. And I think the conversation I have with Oracle, if you're an Oracle customer is, how do you see those levers kind of shifting over time and what's your strategy to continue to make the bet you need to make to survive there? Because you're talking billions. They have the billions to do. But the billions and billions that you just have to put into optimizing that infrastructure layer. Not even thinking about what's going on kind of in that middleware and SaaS space. I like to get both your perspectives and analysts. I know you guys are out there doing all the work but I want to take it from the customer perspective. What's the impact to customers? Okay, also the world's changing. You can argue that Oracle's in this transition where they are stuck in the middle, to the beginning and towards the end. I would argue they're in the beginning but at the end of the day, you still got buyers making technology decisions. Impact to buyer. Well, I think that the most important thing of all, John, is that they still matter. One of the things that gets lost when we just talk about technology is the fact that human beings are still going to make decisions, are still going to face action about risk, are still going to have to convince themselves and everybody around them what is the right thing and the wrong thing to do. And people are always going to be part of the equation. So when you think about it, Oracle has, Oracle's big advantage, is that it has all of these customers. Now, it has interesting relations with a whole bunch of them because as you said earlier, the way the database business has been run. But there's no question about it that the way that customers make decisions is going to change over the next few years. For example, everybody likes to talk about hyper-converged infrastructure but we forget that hyper-converged not only is about bringing network storage and server together in the same unit, but it's also storage administrator, server administrator, and network administrator. How are they going to come together? It's partners for storage, partners for network, partners for storage. How are they going to come together? Who's going to win? Even contracting has an enormous impact on how fast this stuff happens. It's disruptive. It's extremely disruptive. The customers have to organize differently around this trend. They're going, they, big changes are going to come on the horizon. We like to talk about the iron triangle associated with this of automation, administration, and vendor relationships. Big change is on the horizon but very simply, at the end of the day, the change is going to be a function of how fast customers change and not limited to how fast Oracle, Microsoft, and Amazon can change. That's a good point, Matt. Buyers are in charge now. You have the iron triangle as you said. I love that. But now they have more choices and the margin pressure for the traditional box movers, kind of insulting term, but the industry standard servers, storage, and networking players are better and more polite than they said. The best of breed players. The best of breed players is different now. They're marginally, so they have to move to what the value is. So Peter brings up the point that that means customers need to change. The channels are going to be at risk. Everything's on the table. What's your thoughts? I mean, yeah. I mean, I think if you think about it from the perspective of the customer, I mean, first you have to, one of the things that I wasn't talked about today, which I think is worth putting out there, is this has largely been a conversation so far about the core and the cloud. I do think increasingly, when you start to think about digital business models, you have to start to think about the edge as well and how that edge is going to get redefined and what's Oracle's role there as well. So every one of these customers we're talking about or vendors we're talking about, whether it's Amazon or Microsoft or IBM, they're all increasingly building a story that's about how you can operationalize in the core, in the cloud, and at the edge. And when you get to the edge, you're talking about in a space that's had a lot of very proprietary embedded technologies. So what's your play there? And that's increasingly to be influenced by kind of standard IT blocks, converged infrastructure, I think is a pretty good play there as well. But this people in process notion is absolutely where things start. And I will say that most customers move in an evolutionary fashion. And the one thing you do have to lay over the top of this is a maturity model. I mean, customers that are very mature and how they think of IT and where they are with IT and where they are in the convergence of IT are in a much better position to think about how they can compete with and really kind of build on top of the cloud than somebody that's lagging further behind. So who's your industry leader really, right? Well, no, it's up for grabs. I want to say that everything's up for grabs in the channel equation. So it puts the vendors on their toes and certainly the customers will win. Obviously a lot of choices. Matt, thank you for taking the time out of your busy schedule. I know you got briefings to run. Do you really appreciate it? Thanks for coming on theCUBE and sharing your insight. My pleasure. Thanks for having me guys. This is theCUBE. Of course, we'll be at Reinvent to break down the Amazon web services. Of course, this is theCUBE. Number one live broadcast at events in the world in tech events. I'm John Furrier with Peter Burris with Matt Eastwood kicking off Oracle Open World 2016. Here for three days, go to Twitter. The hashtag is theCUBE. Go to the tweet at us at theCUBE. We back with more live coverage after this short break.