 Live from the Oracle Conference Center in Redwood Shores, California, it's The Cube at the Next Generation Engineered Systems launch event. Brought to you by headline-sponsored, Oracle. Hey, welcome back everyone. We are here live in Silicon Valley. This is The Cube, our flagship program. When we go out to the events and extract the signal from noise, I'm John Furrier with my co-host, Dave Vellante. I'm excited for the next guest we have on, John Fallot, EVP here at Oracle Systems. Longtime son engineer, Larry called you talented. Many times on stage when he was doing his keynotes. Welcome to The Cube. Yeah, thank you guys for having me. Really appreciate it. And there's so much sun DNA in Silicon Valley. I mean, if you look at all the major breakthroughs in terms of technology and system software, you go back, this is back to the Unix Berkeley days and that whole generation really is now spawning back in the cloud. So, you're seeing a resurgence of systems. And it's old school and new school. So, you're heading up this now. You moved it over from 2009, doesn't tend to close the sun acquisition. You're now heading it all up. What is the deal? I mean, is there fruit coming off the tree five years later? I mean, R&D, they're touting a lot of R&D. Give us the quick, yeah, that's what's going on. Yeah, it's interesting. You know, when Larry bought Sun, the press at the time was sort of confused because here was a big package software company buying a hardware company. What was the idea there? And Larry always had this vision that he could actually put the engineers together and build better products. That was the beginning of the vision, which is kind of interesting. So, you know, from day one, it was go hire some engineers, John. Go build me more aggressive product roadmap. Go tell me what companies we need to buy. And so it was the opposite of the current realization. But the other idea there was getting to the cloud. And again, Larry's been, you know, highly quoted on the cloud, both positively and negatively. But I know internally from working with him, part of his vision was, as Oracle, he could also build better cloud infrastructure, both from customers as well as for our own abilities. But having all of the engineers that build the application and build the Miller and build the database, we could build a better mousetrap. And I got a bunch of stories about some of the things that we talked about in those early days because you're seeing those stories now. Like you see the products now and it takes years to build this stuff, we're now starting to see that. So what's one of the conversations back then? You had a couple outliers like, hey, let's do this convergent infrastructure thing that was kind of outside the box back then. Integrating middleware and bringing more of an OS kind of integration blue layer. So like, what was some of the debates? What would rise up and down the chain in terms of, what were some of the food fights internally around approaches? Do you go integrated? Do you go siloed? Do you go integrated stack? Well, you know, we didn't have a lot of food fights inside. We knew what we were building was something different that people weren't used to. And as I like to tell customers, I say, let me start off. I'm not conventional wisdom. Conventional wisdom is to buy stuff from a dozen different vendors and put it together yourself. I'm going to build you bigger, more powerful systems that are more cost effective because they're integrated. Now, before Oracle Bot Sun, they had already been working on Exadata. So Exadata is a vision that actually was started years before the acquisition of Sun. But what Larry discovered in building that, as you guys understand is, it's just a lot harder when the engineering activity consists of contracts, non-disclosure agreements, all of that, as opposed to, okay, everybody gets the room. You mean with other partners? With other partners, right? We're, let's get all the engineers in the room. We can change the software as we need. We can change the hardware. So that Genesis was there. And it was kind of interesting because one of my very first meetings with Larry, Larry wanted to talk about the Spark processor. And he says, John, can we put something into the processor to go help accelerate the database and make the database more effective? And of course I said, sure, of course Larry. And then we went back to the teams and we worked on how could we enhance our silicon design to go make a better product. And those products are going to be announced in 2015. So there's a lot behind all of this which was driven actually by engineering. It was, you know, how do you engineer a better product? And that was the drive behind all of this. You know, one of the things that I'm enamored by, you know, being a computer science person myself and kind of being a student of the evolution you've lived and built is Amazon. Dave and I both spoke to Andy Jassy and talk about the evolution of Amazon web services which essentially was a bolt on to solve some of their retail and affiliate business. And you know, they had the same debates but what they did decide was to build a platform. That scaled up. Rather than going for the low hanging fruit, say, oh, let's beat a storage device and compete with EMC. That seemed like a no brain and maybe you do that. But you guys took the same approach with Larry and the team. Okay, I get the engineers in the room. That is almost the same thing. You built a platform. Do you elaborate on where that came from and where it is today? Well, I mean, you know, when you say about Oracle, you think about them as a platform company and Sun was as well. It's kind of interesting because when the engineers came together, there was really no cognitive dissonance at all because Sun had been working on Java and Spark and Solaris and a variety of other platforms and there's a certain mindset around that. And then Oracle had been working on WebLogic and the Oracle database and so on. The idea of a platform was very straightforward. You want to preserve people's applications, right? You want them to inherit new properties when they use the products without changing their software. So they have durability over decades, but you want to keep making it better and better and better. And so, you know, I'm intensely focused in hardware intercepting the database in middleware. When I talk to customers, I am intensely focused on those. But why is that? Because your main cost components are how hard is it to run your database? How much storage do you need? How expensive is that storage? And then the applications inherit the properties of those layers. And so I magically make SAP and SAS and many other applications run better. And so that's really an engineering problem, is go after those layers. And since Sun and Oracle were both intensely platform companies, it was a great thing to go put together. And if you go into an Exadata meeting, if you got to secretly go into an Exadata meeting, you'd have a hard time figuring out which men and women are working for me and which men and women are working on the database. Because there's this single conversation about what can we do to go make that work better. And it's very exciting. So the strategy's been very clear. Well, that comes from Larry, right? I mean, he's crisp and thin as thinking. So in some respects, that's maybe the easy part. It takes a long time. Take us through that. I mean, you had to get talent. You had to put R&D into it. The fruits of that labor take years and years and years. Take us through that. Yeah, I mean, there's multiple levels of that. I think the roadmap and the strategy, as you said, came together fairly quickly. And Larry loves to have the strategic debates. And we meet every week to talk about hardware strategy and products. He's very intensely focused on this business. But the core tenets of it did not change right from day one. And so what we did was we reinvested and hired a large number of engineers. We've acquired multiple companies in the hardware space, as you know, both storage and networking. And then we basically rebuilt both the strong organic team plus some inorganic components and then have introduced generations of products. You know, here today, why are we here? This is the X5 generation of the complete engineer systems family. Every single year we've been introducing a completely new generation of these products. And so it's a breathtaking pace that we've been setting out to do here to introduce next generation products that include both software innovation and hardware innovation and then are delivered as an integrated engineered whole. And so underneath that has been years of individual technology development, organizational maturity, product maturity. And the systems and storage business has transformed quite dramatically. I mean, when Oracle acquired Sun, Larry used to talk about the cause, we don't want to be in the low end X86. Exactly. We're chasing profits, not revenue. He's very clear about that. Storage is another really hard piece. And Sun, frankly, Sun always in my mind struggle a little bit with storage. What's different now? Is it the intense focus? Is it more R&D? Is it talent? Is it vision? Take us through what's different. Yeah, so I think it's all of the above. And in the storage area, especially with Larry, what's great about Larry is, as Sapphire likes to say, he's the master of the long game. If you want to play in storage, you better be prepared to stay long and invest. And so we've invested heavily in core technologies like ZFS and now FS1 as well as our tape technologies and then consistently executed on incrementing the tape bill of those products for a long period of time. And that, of course, has then resulted in what you have with solid products. And if you look at what Sun, if you want to take an element of history there, it's that consistency of investment and execution that comes in. And you see that in storage. Is Larry patient or impatient? I like to say, yeah. I think Larry is the most impatient, patient person I know. It's kind of interesting because he obviously likes to get things done. But he knows, if you do platforms like database and storage and silicon and so on, you better be prepared to invest for the long term. And he always has been doing that as Oracle. So for me, it's been very exciting, which is this ability to long-term investment technology. I think another comment on storage also is we have the ability to invest to make things like the database run better. And that has a dramatic impact on people's infrastructure. And so we can pick these focus points and then stay with them for years. And you now see that coming out today. In today's announcement, we're going to have this huge message around cost. It's kind of interesting because people don't associate Oracle with being an inexpensive company and we're not, right? But what we've done is we've done a bunch of engineering here to make it much easier to use and much lower cost if you look at what am I trying to do in my data set with these products. And so that was always part of the vision was to take costs dramatically out of the data center. And you don't think about Oracle doing that, but we're going to engineer in a bunch of stuff so you don't have to do it, right? So it's interesting that strategy because essentially you, in some regards, take a hybrid-column compression, OISP, you're essentially locking out your competitors from actually exploiting those types of capabilities. They're unique to Oracle. At the same time, Oracle used to have this rich heritage of partnerships with other hardware companies. Those are sort of fading as you guys go and compete with those guys. At what point do you say, okay, the database in its competitiveness relative to something like SQL Server is needs that ecosystem? Or do you feel like the long-term strategy is to clearly drive that value and differentiation relative to the competition? Yeah, so let me be clear about that. There's this perception that we don't work with the other hardware vendors. Obviously, from a sales standpoint, we compete in a lot of cases, but we work intensively with the other vendors because I don't go into any environment that's an Oracle monoculture. It does not exist, right? I have to go and inter-operate with these and work on a lot of technologies. We've done technology, for example, upcoming for the database in our silicon products which are open to others to use, right? And so we've been briefing customers and allies on there. So we may choose to go after something more intensely like a database compression algorithm because we see a bunch of value on it where other people are building a more generic platform, but we do spend a lot of energy working with other software developers and with other hardware manufacturers even though in a sales standpoint, they make a... Is it unfair to say that you're locking out competitors on some of those capabilities? Is that a misconception on my part? Yeah, that is a misconception. So if you look at the Oracle database, let's look at Exadata. Kind of a classic example, right? What we've done there is we make sure that the database is the database. Your application remains unchanged, right? You can move to P-Series, you can move to X86, you can run the database wherever you would like. So if you choose to use Exadata to run your database and you decide you don't like me, you can go and move it somewhere else. Now, underneath the database, I'm doing a lot of engineering. In the latest X5, I've done a lot of engineering around NVMe storage and others to go accelerate those by being very careful to keep the tools the same. Enterprise manager's the same, data guard's the same, golden gate's the same, rack is the same, so that you're not locked in. And so there's a subtlety in that strategy. If I was locking you in on APIs and programming and making sure you can't move your app, that's a lockout strategy. But very careful not to do that. You're saying choice, that's what you're saying. You're saying choice. So I'm not debating to lock in. I'm talking about the competitive, I call it lockout, right? Maybe it's the old saying, if you want to know what's happening in the company, talk to engineering and sales. Maybe I've been talking to too many sales guys. So they'll position it and say, this is unique to Oracle. I'm sure we'll hear some of that today. Okay, so that's- And we're working hard on investing to have a unique value proposition and we're investing heavily to have value at. That's the idea of pouring all this money into engineering. So EMC can't do hybrid columnar compression, the way you can correct it. But EMC has a wide range of depth around what they have in their data services, how they do other things. They invest in their own technology. That's an open- You're saying there's always a way to get that cat. As long as they work within that Oracle framework, you're saying, and can work with things like ASM, for example. Absolutely, ASM is a very example, right? You can work with that. So back to Amazon, I want to ask you what you think of those guys. Obviously, they're moving into the enterprise. You see them putting a toe in the water. The last conference they had in Las Vegas, the Cube was there, and you heard more enterprise. They had one big government contract with the CIA. I mean, that's a little bit of a telegraph. You know, there's a collision course between Oracle and Amazon. I mean, they're far away right now, but everyone's seeing Amazon as a potential threat. What they're proving is flexibility agile for enterprise. How do you guys view it? Yeah, so first of all, we have agreement with Amazon around a variety of our software too. So there's lots of ways we can play that game, which is we have opportunities to expose our software through Azure as well to customers and do that. So I think the competitive landscape comes down to you're moving from decades ago where you only had packaged software running on siloed, unvirtualized computers, right? The good old days, right? To a situation where we believe pretty much all enterprises are gonna have a hybrid approach. They're gonna have some level of custom written software, other software that they wanna choose to use on premise, whether it's for privacy or legal reasons or that's how they believe they wanna go do it. And they're gonna use some level of infrastructure, services, software and service. Our goal as a company and our investments, as you can see, is to span that spectrum. We have our own software as a service offerings and platform service offerings which are growing rapidly. We can come to you and do it on your prem. We can do traditional siloed computing if you would like to do as a packaged software company. We can merchant hardware and software to other companies that are building cloud services, right? So we have a multi-dimensional strategy there and we're embracing it. So Larry had some negative discussions about cloud many years ago. I can tell you that. But he was actually saying the cloud is, not really, if you parse those discussions, he was just saying, we're not screwed. He was just saying, he was pointing out the hype, which you see off the internet of things right now, but basically it's distributed computing. I mean, it's the same game, just moving around. So I bring that up. So you brought up performance, but workloads are a big thing. You're essentially saying that you can tune your stuff for certain workloads. Is there stuff that you're saying, hey, you know, the customers can choose cloud here and certain workloads and Oracle will get better for others. Is there trends that you see patterns around your technology for certain workloads? Well, I mean, we know we run the database better than anyone else and people think about it as just the high mission scale ERP database and obviously we're strong at that. But we're also used for lots of people building strong cloud databases. And that is important because that is an often an underlying element of the application. You might have a pretty light middleware layer, but how's the data access work? And that's where your capability comes from. But I think a lot of cloud today, where it's less interesting to me, a lot of cloud today to me feels like consolidation. I got a certain amount of stuff. I want to go run it cheaper and simpler, right? What I want to build is more exciting than that, right? Is we're going all in memory. We're going 100% DRAM on the storage side, backed by Flash. We're going super high speed interfaces. We've built in in memory database acceleration. We're silicon. You'll see a bunch of exciting announcements. And so the idea here is actually not, okay, I got a pile of stuff. I want to run it cheaper. That's one element. I got a pile of stuff, but also, I'd like to make my business processes more effective. I'd like to have a real time view of my customers. I'd like to always be up to date on my product skews. I'd like to always know what's happening in social media. And those are the problems we're going to have. This database is everywhere now. So if you look at the database model, it's not a monolithic database. What you're basically saying is you're moving it in memory or in core to do all kinds of other database like middleware stuff. Right, or even just to make the existing OLTP and warehouse run wildly more effective. Well, and ISVs have always had to take advantage of hardware. Oracle's historically done that. Microsoft has done that. And now you're able to do that, as you said, at the top much more easily and effectively. The Oracle's cloud strategy is really interesting. John and I have written about this and talked about it a lot, is you got Amazon going for volume. You guys have said we'll compete on price with Amazon and Azure, which would be death to most companies, but it's not to Oracle because you've got the full stack. Exactly. You get margins out of that. So you're happy to play that commodity. For us as software as a service, platform as a service and infrastructure as a service are a blended element of our business, right? So we have the opportunity to deliver all the higher order software as a service models in addition to infrastructure as a service instead of just only being an infrastructure as a service provider. And it's an important part of it because a lot of people want to go run an app somewhere, right? Now we're using a lot of technologies you're seeing here today, right? So our trick is that not only, and it's interesting because as a cloud company we build our own hardware, which means we only play margin at the component level. There's a lot of talk about people building their own computers. Well, we do that too. But the more interesting part is in every one of my products we co-evolve the product with the cloud guys. We've put in management features and put in network security features and we put in a lot of capability to go make it run better. Because again, we want to cost effectively deliver the entire range of capability. Platform as a service, software as a service, no pressure as a service. And there's a lot of software work and hardware work we can do to do that more effectively. And we think that's our natural advantage. What are the technologies and products you're dog-fooding in your internal cloud? Well, it's virtually all of our products, right? So we have many hundreds of engineered systems, Exadata's and others. We have hundreds of petabytes of the ZFS storage appliance. We have thousands of conventional servers. All of the storage and compute resources are 100% Oracle, right? The networking resources are becoming Oracle, right? So we have other vendors that are providing networking hardware to us and we are gradually engineering those out at a fairly rapid pace. So if you go into our cloud data centers you're going to see essentially an all Oracle infrastructure, both servers and storage and engineered systems, it's all of our software stack and we're all in production. And Larry's very clear on that. So we're getting down to the wire, I got a few more questions. One is more of kind of a philosophical question than you've been around the industry and you talk about the good old days. Big rack of stack computing. Old school's now the new rage. I mean, we talk about systems programming is hot. The way you're engineering, quite frankly, it's pretty exciting and people who are in engineering are pretty jazzed about this current engineering cycle. So talk about the gap and how you guys are attracting the young guns. And what are those guys coming out of Berkeley and the computer science programs? Is it, you know, obviously applied physics? Is it the computer science? Talk about that, the younger generation. What kind of people are you attracting? Who are you looking for? And what is that old school? It's like grasshopper meets, you know, like, you know, kung fu, how is that? What's that, what's that model? This is kind of interesting because a few years ago when we started this and Larry's passionate about college hiring and I'm passionate about college hiring. So we had a complete meeting in the mines there. When we first showed up college campuses, hey, Oracle wants to design, is designing silicon, which I come work for us. They're all very puzzled, who's that, right? So then we said, no, no, what's son? We're inside Oracle now. So they say, yeah, I want to join that. But you know, we have a very aggressive program. So I've hired, you know, an order over the past few years, you know, in the United States alone, 900 plus masters and PhDs from MIT stand for Berkeley, only the top schools. And it's been tremendous. And now we just have a flood of people coming in because it's kind of interesting. You want to tackle a hard problem? I'm tackling some hard problems. I'm really saying, what can we change in the operating system? What can we do in the database layer? How can we build the silicon as opposed to, I want to build something generic for everybody. And so we are definitely attracting some really great talent. And that's been one of the most exciting things in our Oracle. And it just took a little while to get started because you didn't associate the name. Well, Larry's an engineering focus. He comes from that mind. So he understands talent, right? I see, you know, his entire background. But now you have to put a roadmap in front of people and get them excited. I mean, you got to have some eye candies. Hey, we're working on some tough problems. And that's your challenge. Absolutely, absolutely. But you know, inside the teams, I tell them that it was a pretty simple idea inside Oracle. For our hardware, our plan is not to build the second best hardware in the world and then do a lot of marketing. We have no slides that say that. The plan is to build the best hardware, right? Because, you know, Larry, and you could argue whether we're doing it or not, but there's no arguing about what the plan is. So when I go talk to a top engineer, I say, you want to come here, so here's the plan. We're not going to build the second best hardware. I need you to come here and help me build it. Because the way Larry works is what you see him every day, which is, how do you build the best? And that gets engineers excited. By the way, that's what gets me excited with people on my team excited, which is, you're not trying to, you know, fill in with a marketing program. You're saying, oh, let's build the best. This is not the best. There's no head faking, there's no head faking. Okay? So we're in the cup. Guess what? Right. The trophy's on the table, go get it. You go to market like we are doing today with the next generation. We're going to get some smiles and some frowns and we go back and we change the frowns to smiles. That's, it's a very simple architecture. Yeah. So you guys are five years in. We've got to wrap this up, but I want you to give a summary of what the announcements are here. So that's Larry's master of the long game. He's got a great team. He's, you know, you're awesome. You've been, you know, well-known in the industry. We're going to have some great problems. Engineering lies. That's awesome. So what is this announcement all about today? If this is one leg of the journey in the march to excellence, what is this announcement about? So the biggest part of this announcement is the fifth generation is engineered systems that we want to get across. As we've been very successful at customers understanding, we can tackle a big performance problem. We're really good at the mission critical, you know, computing and so on. The big thing we want to get across in this particular announcement in these products is that we're also the most cost-effective vendor in the industry. And I know that's not how people think about us. That we've done enough engineering here around how do you reduce the cost of the products and how you improve the efficiency of the products. But if you want to run an enterprise application, we are the cheapest guys in the business, right? And we're going to actually use the word cheap. And that's not a word you associate with Oracle, but that's intentional because I know as an engineer, if I do a better job giving you a complete solution and I build in acceleration and management tools and stuff that ultimately you're going to be able to take advantage of these products more cost-effective than you have today. And that's our big message today around the fifth generation product is it's not just for your big ERP, not just for your mission critical, but you can use it for all the stuff that you've got. And you can start thinking about Oracle as a low-cost provider. Well, John, we appreciate it. We went over a little bit and we're getting the hook here. Thanks for coming. We're always great to talk to you. Great to see you. And we remember that we did that podcast many, many moons ago, 2006, back in the glory days. But this is theCUBE. We are here live in Silicon Valley with John Fowler. Really the top dog here at Oracle, engineering in the trenches, Larry Ellison completely on board, meeting weekly. We're looking forward to seeing more continued success. This is theCUBE. We'll be right back after the short break live in Silicon Valley. We'll be right back.