 Live from New York City, it's theCUBE. Covering Lenovo Transform 2.0, brought to you by Lenovo. Come back to theCUBE's live coverage of Lenovo Transform here in New York City. I'm your host, Rebecca Knight, along with my co-host Stu Miniman. We have two guests here on this segment. We have Kurt Scalgan. He is the President of Lenovo Data Center Group and Brad Anderson, the Corporate Vice President of Enterprise Mobility, for NetApp. Thanks so much for coming on the program. Thank you for having us. So the big news of the day, the NetApp-Lenovo partnership, explain to our viewers exactly what this means. These are two global powerhouses joining forces. Yeah, sure. So I think Lenovo has had an amazing year. Last year in our Transform 1.0, we announced the largest server portfolio in our history. And this year, we announced the largest data center, data management and storage portfolio in our history with the partnership with NetApp. So we're creating a multi-billion dollar global alliance, a multi-year alliance, and it has a place in a joint venture in China, as well as we'll be distributing now products in over 160 countries in the world. So tell us about the background to this partnership. How did it come about? Well, for NetApp, we were looking for expanding our reach. And there's two markets that we're kind of underserved in. One being kind of the commercial SMB, SME channel. And Lenovo has a high velocity channel there and a strong position. So Lenovo made complete sense in that space, as well as in China, where we have a strong brand, but we're underserved there as well. And so who's better in China than Lenovo? So for us, this is all about go-to-market. And then the fact that there are server vendors just icing on the cake because there are other two server vendor in the marketplace are also our competitors. And then Lenovo is so much more compatible and complimentary to our entire business. Yeah, Kirk, maybe you could spend a little more because when you look at storage today, storage really is built on servers. NetApp is at a start, it's a software company. Even back in the day, NetApp was never, some of the other storage companies spent a lot of time and money on the hardware pieces. NetApp, of course, that reliable, good, trustable hardware, but maybe explain how much kind of IP goes into this partnership. Yeah, sure. So I think today we have about 15% coverage of the overall storage market within Lenovo. And we've grown our flash array business over 100%. It's over the last four quarters. IDC had us at 30% quarter-quarter growth. So we've done well, but we only cover 15% of the market. After this announcement and shipping now today, we'll cover over 90% of the market in more than 160 countries. So we're using our global supply chain, which was ranked number five in the world by Garner, manufacturing in Europe, in China, in Mexico, et cetera, to really expand this out through our channel partnership program. And in China, we're taking a very unique approach to this joint venture. This isn't about taking global products and just trying to force fit them into China. China has unique software solutions, unique hyperscale requirements. So we're pooling our R&D there. Lenovo will be a 51% owner. NetApp a 49% owner. Brand's going to be on the board. And there we're going to be delivering products in China for China. Yeah, you've got a lot of experience with that. You talked about coming in the future, there's an NFV software and hardware solution in China. So Lenovo has some experience doing this kind of engagement. Yeah, we have a more than 50% growth now year on year in China. We retooled a lot of the operations that we had there. We have a really nice broad portfolio now since we launched Think System and Think Agile. So it's a nice place to grow on. So today we talked about the joint venture with NetApp but also the fact over the next year we'll be building out in a telecom NFV company after having China Mobile and China Telecom with us at Mobile World Congress as well as new Edge Gateway and Edge server solutions. Yep, Brad, I know Cloud's in your title for what you're doing when I hear NetApp talking. I see NetApp at all the Cloud shows that we go to. And it's a very different world than when I think about NetApp 10 years or 20 years ago is like the NAS Filer company. So bring us up to speed of the kind of the NetApp today, the momentum and what this brings. Yeah, I mean we are going through our own transformation where we were principally a storage company and now we want to be a data company and increasingly to be a data company you got to be a cloud company. And so we continue to develop what we think are the best storage products in the world but they're all cloud connected because we want data to be able to flow from prim to cloud and be able, customers be able to, I mean that's what really kind of fuels this digital enterprises is data's the new oil. And so in doing that we have kind of expanded NetApp's charter significantly to being the data authority in hybrid cloud and hybrid being both the private and the public. And so my business is really focused on providing products and solutions so customers can have the same experience in building their own private clouds that they enjoy in the public. And then on the public side we have partnerships with all the hyperscalers to put NetApp's in there so they can deliver native cloud data services. And so this is a very different company where we're getting more and more cloudy every day and that's part of our transformation intentionally. So the transformation it's the theme of this conference and you were up on the main stage talking about Lenovo's turning this corner and really accelerating its growth and also talking about the transformation from within the company, changing the look of the leadership team in particular. Can you tell our viewers a little bit more about that strategy? Sure, so we acquired the IBM System X business in late 2014 and we did some things really well and we did some things that we've learned from. So we spent basically the last 18 months transforming the whole company. New channel programs, new system integrator partnerships, new training certifying over 11,000 people in the world now, tripling the number of our solution recipes and we have transformed the management team as well. We replaced about 19 executives because we wanted the right balance of external and internal perspectives from our competitors as well as from the Lenovo and the next IBM employees. So we feel like we have a very customer-centric organization now and again, Gardner now is saying that we're growing 49% year on year in units. IDC said we're growing 87% year on year in revenue so I think customers are responding to the new product line. Over the last year, the ThinkSystem brand has really meant the highest customer performance, highest reliability, highest customer satisfaction and as a result, it does take a while to transform and I think over the last 12 months you've seen that and we're exponentially growing now as a company. And you see it in your results, they're outstanding. So, Brad, bring us inside the products a little bit. So we've got the ThinkSystem DE and DM. Of course, the storage industry, very much, they need to trust it, they need to understand it. Give us a little understand, I believe DE maybe has something to do with the E-Series there and tells the DM series what's underneath there and how do people understand what's different, what's to say. So we're taking platforms across our E-Series, our FAS and our all-flash arrays. So the DE corresponds to the E-Series, the DM will have our FAS products as well as our all-flash array products in there and so that's kind of the mapping. We're putting initially, I think, 10 products in there. We have the capacity to expand. I'm sure we're going to learn a lot because these are serving markets that NetApp doesn't typically serve. So I think not only is this going to give Lenovo the tools to compete, it's going to give us a lot of information to go even build better products, better solutions for both NetApp and our Lenovo customers. So we're super excited about that. The second thing is, it's on tap. It's the same core software and all the value and the performance testing and validation that you get with NetApp, that all goes into the Lenovo brand and products as well. And we have made it, one of our hallmarks is our data fabric. All the data services that are on top of this that you can move data and manage data between platforms, that's really important for the NetApp customer. All those values extend to the Lenovo customers. So if they also have NetApp in their environment or vice versa, they can share and move data between both those platforms. So that's nowhere else in the industries as possible across vendors, let alone within. So how does it work when you are in the product development process? Two companies both relentlessly focused on customers. This is part of your culture, part of your DNA. So how do you work together in terms of innovating and collaborating? Well I think the first thing is, if you just look at the core business, our server business and NetApp branded storage or Lenovo branded storage based on NetApp's portfolio, we're going to have a better together solution. So the first thing we're looking at is a set of solution recipes so that when you use NetApp and Lenovo together, you're going to get a better experience as a customer base. And so that's why I'm excited today. We've launched three times as many engineered solutions as we did a year ago and trained these 11,000 people because we have a very solution oriented sales force and a very complimentary channel. From a development perspective, we're going to be building X-Clarity management into our portfolio. So the same systems management software that is mission critical for Lenovo server products will now manage the ThinkSystem DE and DM products. So it's a very familiar management interface for customers. There's an engineering effort gone with that. And then on service and support, we're going to use over 10,000 people around the world that Lenovo has to go service support these products so we can deliver a premium customer experience whether you're buying the server or the storage. And back to the customer base, we're going to especially in China have deep engineering collaborations where we're walking into those customer bases and asking what's the unique about the China market? And it really helps that the two companies are very complimentary. So NetApp has deep storage expertise. Lenovo has tremendous compute expertise. So they're very complimentary and as customers want more and more complete solutions, we're learning, our engineers are learning from each other. And it doesn't hurt the fact that we have a large engineering, we NetApp have a large engineering population in the research triangle where Kurtz people are at. That's right. We're probably one kilometer away from each other in research triangle part. Geography matters. Location, location, location. No, and our two support organizations are next door as well. And so I think that proximity will only contribute to the collaboration. Yeah, exactly. All right, so the storage industry actually has a relatively good track record of some deep, long partnerships. NetApp has had a number of them over the years. Tell us what success look like if we look back three years from now, what's this partnership? Well, what we've said publicly is we plan to have a multi-billion dollar, multi-year alliance. So that's going to be fantastic as we grow in over 160 countries. We're going to use Lenovo's extensive supply chain network. So it's one of the largest kind of procurers of componentry and things around the world. We get to leverage this global factory network to build even more value into that situation. And in China specifically, we've set a goal of being a top three storage player. So today we both have probably single digit share in China, but together with this collaboration, we are setting sites quite high to be in the top three over the next several years. No, I think that's exactly right. And I think those are all achievable goals. But right now we want to get out the gate fast. I mean, this is a partnership with two companies with a lot of momentum. And I see this as a huge opportunity for both our companies to kind of amplify that momentum near term. And so while there's a lot of excitement on the future, I think success is going to look like some very exciting results that Kurt can share at Transform 3.0 next year. That's right. And for our customer base, we have already gone into production, taking orders as of today and tons of engineering, tons of manufacturing and development. So we'll have a whole host of seed units and early access units. Our customers can get their hands on this stuff right away and start testing it in their environment. As you said, it's an audacious vision. You announced an audacious vision last year. You did another one again this year. So when you think about what you want to be talking about next year, I mean, you said what success looks like. What are some other things that you're working on? You said, this is a process. Illinois has turned the corner and it's got a lot of momentum. But what else do you have on tap that you're... Well, if we told all you that you wouldn't have us here next year. But I think today is about entry and mid-range, about expanding Lenovo's breadth from 15 to 90% of the market and being very aggressive against our top competitors. They have a combined server storage portfolio. And I think as I've gone around the world, I've been in Latin America, in India. Our channel partners are incredibly excited about this. So I think while other customers might be taking business more and more direct, we've traditionally been very channel-centric. So I've seen a lot of pull for choice in the market. And I think that's what we're going to deliver to our channel partners. But we will have a lot more in store. That I can promise you. This is phase one of a multi-phase, multi-year plan. Yeah, and I think there's a lot of things on the... There's a lot of possibilities on the product development side and how we can do better products. But I think a lot of success is going to look... It's going to come in or go to market. I mean, already, Kurt, since I've been here, I've had a channel partner come up and said, hey, this makes me rethink my channel partners all over again because now that channel partner who's a Lenovo has the full breadth of the storage portfolio. So I think this is going to be really good for both of us, particularly when Lenovo and NetApp are both very channel-friendly partners and companies. And I think this is going to be a catalyst to have more people on our side than ever before. Kurt, last thing, we've spent a lot of time on the Neve. Just give you the opportunity to talk about some of the other breadth and choice and other things that Lenovo has going on. We're going to talk to some of your team about hyper-converge and hyper-scale and other hyper-things, but yeah. Sure. Well, I think the good news about our growth now is that we're doing it across multiple segments in the industry. There isn't just one part of the market that's growing. So last year, we set an audacious goal of being the largest supercomputer company in the world by 2020. We've now crossed that actually this year. So we are the largest supercomputer company in the world, about one of every four supercomputers now are there, and we're expanding that into a lot of AI offerings as well with our four artificial intelligence centers from China, Germany, Taipei, Beijing, all having customers bring their AI workloads into a controlled environment with our partners, whether it's Intel, Nvidia, or the FPGA vendors. So supercomputing's alive and well, and we continue to innovate with our warm water cooling technology that's going to be here in display. We think we're building one of the largest supercomputers in Europe right now using that technology. So not just helping solve global warming, but being more energy efficient while we're computing on that as well. In hyperscale, we've grown to now delivering six of the top 10 hyperscalers products, and we're doing that through basically starting with a white sheet of paper with our customers and building more than 30 customized products in the motherboard and the system and putting it through our entire supply chain versus just in the past maybe two years ago just leveraging maybe ODM product. So significant growth in hyperscale where we're bringing on new billion dollar customers on a regular basis now. And then in flash arrays, our traditional business we were over a 100% growth year on year. So we're building off a momentum. We had great products but only covering 15% of the market now a much larger. Last but not least, we did announce since transform new divisions in embedded and IOT as well as in telecommunications, NFV and software. And we think each of those can be billion dollar groups within Lenovo. So that's probably a lot of what we'll be talking about next year is the announcements and innovations we've had on what'll be transformed 3.0 probably..(laughs loudly.) Well we're already looking forward to the next transformation. 3.0 will be cubed, so we look forward to talking about it. Very nice, very nice, excellent. Well thank you so much, Brad and Kirk for being on the show. I really appreciate it. Thank you very much. I'm Rebecca Knight for Stu Miniman. We will have more from Lenovo Transform and theCUBE's live coverage just after this.