 from Las Vegas, it's theCUBE. Covering IBM Think 2018, brought to you by IBM. Hello everyone, welcome back to our day two of coverage here in Las Vegas for IBM Think 2018, it's theCUBE's. Three days of wall-to-wall coverage, day two. Yesterday we had kickoff, kind of partner day. Today is really the kickoff of the event. CEO of IBM up on stage for the keynote. I'm John Furrier with Dave Vellante. Dave we've been doing seven years or so plus all these six shows coming down to one for IBM Think. It's a packed house, you can't even get through the hallways. Looks like they need to go to Sam's convention center. But. Or Mosconi. Or Mosconi, or somewhere bigger, they need a bigger boat. But the keynote kicked off. Ginny Mehdi who's up there. Interesting, putting smart to work, quantum blockchain AI, data, and she kind of laid out the cloud strategy. Using data in public cloud and private, it's clear where they're going with the cloud. Your analysis of the keynote, what's your thoughts? Well first of all John, as viewers know, I mean I'm a big fan of Ginny Mehdi. You know I think she's been overly criticized but I think she's a great presenter. When I compare Ginny's presentation skills with some of the other CEOs in the industry, I think she's far superior. She connects with the audience, she looks great. She's really cogent, she's well prepared. So I really like her as a presenter and as an executive. And you know, another woman in tech, you know, we love that. Yes, you're right, putting smart to work was her theme. She's talking about 30,000 to 40,000 people at the event. There's too many people to count I guess if we can't really figure that out. And so it's big, it's packed. She also did a theater in the round which was different. I noticed last year's service now did that. I really liked that style. So that was kind of an interesting thing. Ginny talked about three exponential growth areas. So I'll lay them out and then we can talk about it. She said they come every 25 years. The first was Moore's law. We all know what that is. And the second was Metcalfe's law. The value of the network increases exponentially as the nodes and increase, nodes in network increase. And then the third, which is upon us now is data plus AI. Her supposition was that is going to usher in a next era of incremental growth because you're going to out-learn the competition. And she used this term of incumbent disruptors. And I heard that and I went, oh okay, hold on. Because I don't see it that way. I don't see the incumbents as the disruptors. So that was my first reaction. And then she brought up three customers. Verizon, and I'm like, Verizon, Big Delco, is a disruptor? Come on, they're getting a disruptor by over the top. But the CEO came on, Lowell McAdam, talking about 5G. So we'll talk about that. And then Maresk, IBM has a joint venture with Maresk. So Michael White came up, he's the CEO of that. Now Maresk is using blockchain. And Maresk we all know is the container company and they're attacking inefficiencies with blockchain. So I thought that was actually a really good example. And then Royal Bank of Canada, RBC came up. Banking to me is an industry that has not been disrupted yet. And so I again was initially negative toward this idea of incumbent disruptors because I don't think the incumbents are disruptors. And we'll talk about why I think that. But I thought IBM did a pretty good job of showing how incumbents can actually take AI and blockchain and at least defend against the disruptors. I mean, it's clear to me that she's obviously playing to the crowd with the digital debt transformation. I mean, you talk about these traditional companies, they need to transform. And she brings up Moore's Law and Metcalfe's Law, kind of take a view of the past, but to look forward, she's kind of saying, look at Moore's Law, make things smaller, faster, cheaper, doubling every six months. That applies to IoT, quantum, et cetera, and else. Metcalfe's Law I think is very relevant because if you look at blockchain, it's about decentralized internet. You're talking about decentralized applications. That's where blockchain will play the major enablement there. That's about network effects. So you bring network effects in with Metcalfe's Law, Moore's Law on the equipment's on the hardware side. I like that. So that worked for me. The disruptors, I think it's more of overplaying her hand on that because I just haven't seen any evidence of any incumbents truly disrupting themselves. So maybe you can talk of Microsoft, IBM's trying to transform, but at the end of the day, they got to look back and learn from the internet era. If you don't jump on these next waves, you could be driftwood, right? So you got to surf the new waves and I think that's what I heard her say is IBM is putting data at the center of the value proposition, using AI as a front end for that, make it smarter, and then using blockchain as an infrastructure and protocol level opportunity to take the IBM software and data playing and wrap them together. So if you look at it, you got data at the center, blockchain on one side and AI on the other. It's the innovation sandwich. That to me works for me. Now, let's unpack that. How real is it? And that's going to be what we're going to talk about. And I think that's a good strategy and it plays all the elements are in play. Well, I think the other piece of that sandwich, maybe it's the dressing on top is the cloud because you have to have scale and network effects in order to achieve that innovation. I just want to mention, she talked about three other things that you are going to do as a customer. You're going to one, leverage digital platforms. You're going to two, embed learning in virtually every process that you do and three, you're going to empower humans. So she put forth this idea of augmented intelligence. And as I predicted yesterday, unlike Larry Ellison, she doesn't come right out and slam her competition. She does it in a classy way. She said, quote, IBM is not in conflict with your business. In other words, we're not taking your data and then re-monitizing it at the back end. That's a big deal. IBM makes a lot of noise about that. So it's really augmenting humans, not in conflict with your business and bringing advanced security to things like blockchain and cloud and AI. I like a term security to the core. I like that, but that kind of gives you the impression that it's core to all things. But if you look at the mega trends that are impacting the incumbents and the people that are trying to do digital transformation as well as the new startups, Dave, that are trying to get a new position in the landscape is clear. You got blockchain, you got decentralized apps, you got AI, but the data is critical. And she mentioned some cool things I liked with the cloud, which was she's saying, look, we'll make the data a really big thing for you. If you want it in public cloud, you can have it in private cloud. So she's looking at cloud as much more of a hybrid approach on private. It's kind of hinting at the GDPR problem that we know is out there. So if you want to move your data around, that's a critical asset. Also, if you look at what's going on in the news today, these days is Facebook is getting slammed because how they were hacked with the election and other weaponization of data, this is a big deal for companies. And I think if IBM can play that card to leverage the data and have the confidence of the companies that they serve to say, look, data's got to be owned by you, but it has to be managed in a way that's dynamic, whether it's a GDPR or some other regulatory issue. And believe me, blockchain's going to have some. So, you know, they can come out and get in front of this new wave. And I think that's a good play. So it wasn't just a recycled cloud show. It wasn't just AI, Watson. I like how she put it together. So just touching on that, you mentioned Facebook. So she talked about Moore's law, ushered in this era of back office productivity. She didn't mention wind tell. I think it's still probably too painful for IBM to think about that. Metcast law, she said ushered in sort of the Facebook era. I think that's fair, the network effect of Facebook. And then she said, hopefully, you know, they'll call this Watson's law. I don't know if that's going to happen, but that. But that notion of, hey, she got to be, got to be power positive thinking, but that notion of exponential learning. I want to talk about cloud for a minute. You and I had some interesting debates yesterday and are open about cloud Oracle announced its earnings yesterday. Cloud growth, 30%. I see Oracle and IBM is very similar in their cloud strategies. Both companies would vehemently disagree with that, but I think they're very similar in that sense. The street didn't like it because Oracle Cloud only grew at 30%, stocks down, okay, great. But to me, IBM and Oracle are similar in that they're basically cloudifying their business. They're allowing their clients to onboard customers to the cloud, putting their applications portfolios, their SaaS products, their middleware into the cloud. IBM putting mainframe class stuff in the cloud, they're putting power into the cloud, storage into the cloud. Pretty much everything into the cloud if you want it. Now, that's not easy to do if you've got legacy businesses, obviously AWS has a blank sheet of paper that was going to your point yesterday, but I like the differentiation that I see from companies like IBM and Oracle and there really aren't many others like that. I mean, my point yesterday was the definition of cloud has been totally mangled, right? It's different, if you're at Amazon, they have a slew of services, they have more services than anyone else on the planet and they have more people using those services. So by that standard, Amazon is clearly kicking everyone's butt. But that's just their perspective. If you look at IBM, their services are applications, same with Oracle. So if you look at what IBM's doing is they're taking the same approach, services and applications are going to be IBM's view of the cloud. But IBM's taking a multi-cloud approach and I think that's different. And when you put the data as the central component of the architecture, you're basically saying, I'm going to look at the cloud as more of a commodity layer, I'll let the customers decide which cloud to use and that's a better strategy. Now it's hard to do multi-cloud. So maybe they're buying some time but I think that's a good, solid strategy to take if they're not going to be trying to push their own cloud as 100% because not all customers will sole source cloud unless there's functionality that that cloud does. For instance, Amazon is winning the public sector business like it's nobody's business because they have the only cloud that has the ability to do classified and non-classified cloud. Nobody else has it. So from a lock spec standpoint, they're winning everything from the DOD, CIA and government. What IBM has to do is go into customer requirements saying we're the only company that can provide this. That's a unique opportunity for IBM. I think that's a winning approach rather than going on a frontal arms race of services with Amazon. And that's what all the big guys are doing. Microsoft, Oracle, IBM are not taking on Amazon directly because they're going to have to match their future for future and then Amazon wins that game every time. So I want to go back to something Sam Palmosano said when he was CEO of IBM in 2012 on his way out. HP was the hot company he heard was running the company and he was asked, would you worry about HP? He said, I don't worry about HP. They don't invest in R&D. I worry about Oracle because they invest in R&D. And what I get, I like about Oracle and IBM. They both invest in R&D, IBM even core stuff around blockchain, certainly quantum computing and the like. So I think that is a very positive dynamic for both of those companies. I mean, IBM's R&D is a secret weapon, I think, for them. They don't overplay that much. They do talk about it. But we look at what blockchain potentially could be. And I think IBM's certainly doing the messaging on blockchain, so there's a bunch of ads on TV and they're trying to make that a kind of a global brand. But blockchain speaks to a new infrastructure, right? It's not just distributed computing, it's decentralized computing. And we were saying on theCUBE and we've been reporting there is a new wave of software developers coming on the market that are going to be writing decentralized applications for token economics. The notion of tokens isn't about ICOs and those scams, although there's a lot of those going on. The notion of token economics fit with a mobile cloud decentralized architecture, whether it's IoT or end users or applications, token economics is going to change the inefficiencies or impact inefficiencies up and down the stack. So to me, the developer community that's rushing into the market on the decentralized applications will be a major opportunity, but you got to nail the blockchain and that tech is just a moving train from a protocol standpoint to an infrastructure. So to me, I like what IBM's doing in blockchain. I think that's going to be an opportunity to move the ball down the field. So the exponential innovation formula, in my view over the next 10 years is going to, and you nailed it, going to combine data with artificial intelligence or machine intelligence and cloud economics. And there is a set of digital services emerging. Well, cloud and token economics, both. But so, yes, and that's part of it. But there's a set of digital services emerging in this fabric and they're not bespoke services. They're part of this integrated fabric and to the extent to which people leverage those services, those digital services to create new business models, it's going to determine success or failure and data at the core is critical. I think you're right on on that. But what I like is that IBM is trying to solve some hard problems with AI. I mean, look, I was tweeting yesterday all day on some highlights from my Puerto Rico trip on the cryptocurrency events we've been covering. And one thing that we reported was the killer app for blockchain and cryptocurrency and decentralized apps is money. Money is the killer app. And as we see that with the hype cycle with the ICOs, but if you look at what IBM's doing with the supply chain side of their business, perfect storm for supply chain innovation. Blockchain is about money, marketplaces, and nailing inefficient incumbents. So if the incumbents want to be disruptive, they're going to have to disrupt themselves by removing inefficiencies out of the system. Well, and the MERSC example was a good one where there's inefficiencies, you know, 20% of the cost of moving containers is admin stuff. Sometimes the admin costs exceed the shipping costs. So that was a good example. But again, I see blockchain as one component in this fabric, in this puzzle. Day two, Cube here kicking off. Wall to Wall covers three days of live broadcast, talking to the thought leaders, extracting the signal from the noise at Cube, the number one leader in live tech coverage. Go to cube.net to check out all the footage and siliconangle.com to check out all of our articles, we're reporting and the team reporting all week. And that analysis of Ginny's keynote, well done Dave, more coverage after this short break.