 in the heart of Silicon Valley, extracting the signal from the noise. It's theCUBE, covering OpenStack Silicon Valley 2015. Brought to you by Morantis. Now your hosts, John Furrier and Jeff Frick. Okay, welcome back everyone. We are here live for day two coverage of theCUBE, Silicon Angles flagship program. We go out for the event, instructed to see the from the noise. I'm John Furrier, the founder of Silicon Angles, here with my co-host Jeff Frick, general manager of our CUBE operation. We are here in Mountain View, the Computer History Museum for the OpenStack Silicon Valley conference event, industry, participations here, some customers, mostly industry leaders. Our next guest is Jesse Proudman with Blue Box, CEO founder. Now part of IBM, recently acquired by IBM, winner of last year's CUBE madness event. Welcome back to theCUBE. Yes, it's a weekly event now. Next year we're going to actually make it a security hackathon. Perfect. I think it will be a harder level of security. I'll judge it. And as you, we're going to turn it into what it is. Welcome back. My pleasure to be here. All right, so give us the update. Part of IBM, IBM, big investment in cloud. We've covered them across the board. Blue Mix is hot. They're kind of really moving very fast to build out the cloud. And we heard from Monty Taylor, recently moved from HP to IBM. Big things are in the works. Yeah. Big ideas. And you are a very successful entrepreneur. You didn't need to sell your company to IBM. You were already rich. You're at a great success. OpenStack is on the dawn of great things. Why sell to IBM? Yeah, it's a great question. So, multiple ways to answer this. So we'll start off by who we all talk. We talked with everybody in the OpenStack space. And that was one of the coolest parts about going through an M&A transaction is you literally get to meet with so many of the leaders. And we learned about everybody's strategy. IBM was the only company that, to me, felt like they had a coherent story. And so we go through the M&A process. We get acquired. And I'm in New York about a week after the deal closed and we're presenting a new strategy to the analyst community. It's basically this three by three grid, public, dedicated, local. So it doesn't matter where the location is. Blue Mix services, IaaS. Doesn't matter what the mix of what you're buying is. But you're delivering that entire story as a service. IBM is the only company that gets that. What is Cloud today? Cloud is an SLA and an experience. It's not software. It's not open source. It's not technology that I put on premises. It's about getting an experience that I don't have to worry about. And I think the challenge with private clouds historically has been, they've been putting the onus of that problem on the buyer. IBM Cloud doesn't want to do that. And so, look, IBM realizes they're late to the game. They've made that recognition, but they are a unique organization that has enterprise experience. They have a global footprint. They've got relationships. They've got an incredibly smart engineering organization. And now they've got the best strategy in cloud. They would bring all of those things together and it's a no brainer. So being part of that at this point in time, being able to influence and direct that could be more exciting. So I got to ask you a question. I've been asking every guest has come on here this past two days. Does hybrid cloud actually exist? Does it exist? So, yes, hybrid cloud exists. It depends on what your definition is. So I like the 451 definition, which is essentially a single workload, one application that spans two infrastructures. So a great example is a customer of ours named Big Fish Games. They have a data center. It runs existing equipment. They have a private cloud with us. It runs application compute. Those two things are interconnected with a fiber cross connect and they run a single workload, a single application across both of those. That's hybrid cloud. The notion of hybrid cloud where things kind of magically move to wherever is the least expensive or the most performant, that doesn't exist. But being able to target workloads and connect different environments, that exists and is alive today. But hybrid cloud, is it a product or is it an outcome of an engineering exercise? It's the outcome of an engineering exercise. There's no, you don't go and you buy, I would like one hybrid cloud please. You combine multiple technologies, a public, a private, two private clouds, and legacy infrastructure. You combine those with a single workload and you get a hybrid cloud. So it's the outcome of some effort, not a product. Okay, so the next question is for you is, what's next for Blue Box? You're going to get an IBM email address. Is there integration? You got on software now in 90 days, which is a big press release. I got to ask you, 90 days, that's not a big deal. Why not 30? Right, right. Come on. We didn't work very hard. Pretty lazy. You guys are slow. She had a little on the, slow on the uptake. That's right. Summer, right? Talk about the 90 days. I'm joking, I'm joking. But I mean, why not, if you're agile, why 30 days? Why not 90? I mean, why is 90 an important number? Yeah, so 90 is an important number for us for a number of reasons. One, just getting through the diligence process, the amount of effort that takes, particularly for a company like IBM, they really scrutinize the companies they're acquiring for good reason. They want to make sure that that's the right fit and the portfolio is great. So that process took a lot of emphasis. We closed the deal. And then the first 30 days, we really spent on HR integration. So how do we get the teams, the people, everybody's situated, feeling really good. I think acquisitions are a tough time, particularly for a start of going to something like IBM. So we put all of our emphasis into making sure everybody at BlueBox is excited. They could see the career potential. They could see the opportunity and the products. And in the midst of that 30 days, we then began planning for what we're going to be the initial sort of releases that we were going to go do. And getting BlueBox dedicated on the software was decided to be that first big step. Makes sense. We have global footprint. It gets us reached to customers that we didn't have access before as independent BlueBox. And arguably it was the easiest engineering challenge. And it was the most fun engineering challenge, being able to take what we've built and see how extensible that platform was, was a great exercise. We also did a bunch of work in diligence to do this. So we already had experience of what it was going to take. So it was a big sprint. In reality, it was actually done much faster than 90 days. We waited to this event to announce it, to have something fun to talk about. But it was a great accomplishment. And we're already seeing immediate customer demand yesterday from the blast that went out, which we've never seen in the history of our announcements. Normally it's follow on interest sort of days or weeks later. But literally we had active lead saying, this is a really cool product and we're just buying coming yesterday. So that's trailing. Going forward, the next big emphasis is on BlueBox local. So how do we take all the technology that we've built to deliver a host in private cloud and put that in a customer's data center? And again, trying to do that in a way that we're delivering not software, but an experience and SLA to the customer. And nobody else in the space, we don't think is approaching that problem in the right way. We've got some people around the fringes that are doing the as a service methodology right. You see the platform nine funding. Canonical's doing some of that effort and MetaCloud continues to have some capability there. But they're all focused into a large extent on software versus that delivery as a unified entity. Okay, so we've talked privately so I won't share some of the intimate details. But I with IBM, we also have talked to those guys from Bapachiana, all across the senior management team. We also talked to other folks out there. And I recently sat down with Dave Donatelli, who's a new leader at Oracle, and I wrote a post on Forbes and quoted it down. I'll read you the quote that I want to get your comments. According to Donatelli, the move to the cloud is one of the most profound underlying infrastructure changes causing mass restructuring and change for existing hardware players. To amplify this point, he says, any large-scale hardware vendor without a successful public cloud will be severely challenged business model. Your comments, IBM obviously, public cloud, Amazon. I mean, IBM has to be in the public cloud business. Is that what you guys are doing? Is that part of the effort? Yeah, absolutely. So I agree with that quote. You see that in the history of IBM. You see it in the history of other competitors in the space. So I mean, I'm obviously divestified their X86 business to the logo last year. And then with the IBM cloud business unit that was formed this year, is making a giant emphasis in all consumption models. So that public, dedicated, local, Bluemix services IaaS, that matrix, the nine grid there story, that's what we're working on as part of IBM cloud today. And so public is a critical component of that story. It's a component that IBM has not historically delivered particularly well on. And it's a story that together now, we're pulling together an incredible team, the right set of talent, and we're bringing it offering to market in the foreseeable future. So IBM is basically saying we will have public cloud. We will have public cloud. Jesse, why do you think it's funny? You keep talking about delivering experience. And I think that's the right way to look at the problem and clearly Amazon upset the Apple cart because that's what they did. They delivered an experience to your screen with a credit card and you had your cloud spun up. Why do you think it takes so long for the old dogs to learn the new trick? Is it just because they're old dogs in the new trick and they just haven't used that filter? It's a great question. It's revenue recognition, I think, to a large extent. So think about the legacy business model. You sold a bunch of hardware with a bunch of software. You got a bunch of money up front. You recognize that revenue, the next month you went and you sold the same thing to somebody else. The experience model, you have that small transaction that start and it's a land and expand model. And it's a fundamentally way of conducting business. It comes with a fundamentally different set of technologies that power it. So it's not just a business model transformation, but it's a technology transformation at the same time. But when you've got this stable operating platform and it's generating you material revenue, it's hard to adapt. It's the classic innovators dilemma. Right, innovators dilemma. But it just keeps on, my one and only favorite business book and it just keeps showing that smart people making logical decisions based on business parameters will miss discontinuous change, right? Just because IBM is late doesn't mean it can't win. And I think that's the key, right? We are so early in this transformation. You think about the global spend in IT, how much money has historically been spent on that hardware and software and that's now transferring over to as a service capabilities. The timeline for that, we are at the very, very beginning. And so IBM is the only provider that has that complete story of open by design and public dedicated local as a service, as an experience and the enterprise relationships. And you combine all those pieces together. If we can execute on what we're talking about here, we think we've got a really material, materially interesting story. Okay, so I got to ask you kind of the competitive strategy question, which is, you know, classic, you know, business school 101, you know, economies of scale, AWS Amazon Web Services has a trajectory over a decade, building blocks and a bunch of services built into that, elastic bean stock, registered, et cetera, et cetera. The danger of going too fast and trying to meet the trajectory of, say, Amazon is diseconomies of scale. Are you guys aware of that at IBM? And what are you guys doing to think about that? Just move the goalposts or change the game, add more things to it, share as much as you can. Yeah, great question. So I think the biggest challenge I've seen in this industry is so many providers trying to imitate and follow Amazon you're not going to win at that game, right? It's for exactly the reasons you just listed. It's the scale, the experience, the footprint, the service catalog. Those are all things that far exceed the ability many companies today to mimic. And so the question is, how do you build something that Amazon doesn't have? And how do you make that compelling to the enterprise buyer? But what does Amazon not have? They don't have anything on premises. They don't have anything dedicated. They're missing that open by design story. So Amazon to a large extent is a proprietary platform. It's a wonderful proprietary platform but you're locked in when you start using those APIs and as soon as your data sits on Amazon it's going to be hard for you to get it out. The open by design methodology that IBM cloud is moving forward with gives customers a lot more freedom, a lot more flexibility and it gives them choice of locale. So the only way to get a private cloud with Amazon is to spend $600 million like the CIA and that hasn't been proven to work yet. You get a lot more flexibility with the IBM cloud story. So we're not going to mimic. We will certainly have capabilities and technologies that support and do many of some more things. Well we've heard from customers that said, hey, I'm running a little bit of Amazon here and I want to bolt on some Watson analytics. Yep. And move everything out of Amazon so it makes a lot of sense for you guys to have that alternative. Absolutely. And nobody's going to buy from one vendor. This will be a multi-vendor world and it should be a multi-vendor world. So the question is how do we get technologies that will be part of that multi-vendor story and how do we get deliverables that the customers actually want? So I got to ask you what's next? How is the politics going at IBM? Who's your friend? Which groups do you like the best? Share the inside, open up the kimono and share what's going on inside the curtain at IBM. Yeah, that's a question I get all the time. The first question is how long are you stuck there? And then the second question is how bad are the politics? The answer is I'm not stuck there at all and they're because I'm having a blast. It's so much fun. And the answer to the second question is that the IBM cloud BU, that's one of the most exciting, innovative, agile groups I've ever worked with. And that was my biggest fear. I've never worked for a large company. So coming into arguably the largest technology company in the world now was expecting all kinds of challenges and new experiences. And there certainly are challenges and new experiences, but the group is dedicated to building a product. And they got a young team booming with the experience. They got Cloudin who's in there. And they have had a few other acquisitions, Softlayer, Bluebox, you guys got the new blood in IBM. Yeah, and we're building that IBM cloud BU around these new teams. And what's great is that there aren't turf fights around folks that have been there for 20 years. They're all supportive. They all want to help. They all want to figure out how to integrate. They're all open source DNAs in the company. So that's real positive. And the research team by itself has done some phenomenal stuff. So look, IBM's reinvented itself umpteen times over the last 100 years. This is just this next generation. And they've got a system to do this. We're really excited to be part of that. I mean, we've been covering IBM for a few years now and we heard the new strategy years ago and watching it play out. We would check in with Bob Pacino all the time in Heechusa and works for Bob. Love the strategy. Love what's going on with the cloud, with all their events. Now let's take it back to OpenStack. What is OpenStack's identity right now? And they're at an inflection point. What's your view of OpenStack? They could, sometimes you don't take the fork or sometimes you stay in the path. This API application, Craig Mclucky was talking yesterday like if you force it too hard, you could really kind of be out on a limb. There's all kinds of nuances here in OpenStack. What's your opinion? Yeah, you know, I think there's a couple ways to slice that cat. So you look at the beginning. OpenStack was founded by NASA and Rackspace to be a public cloud platform. To be a public cloud platform that many providers could stand these implementations up and have this worldwide network of technology. We missed that boat early on, right? But it became a wonderful private cloud platform and through that private cloud productization effort, you started to get enterprises interested. So we've crossed the gamut now. Enterprises are actively not only asking about OpenStack but implementing OpenStack. So that's no longer a question. And that was the most apparent thing walking into IBM. It's like they have so many relationships with banks, insurance companies, governments, et cetera. And they're all not saying, oh tell me about OpenStack, what is it, how does it work? They're saying, how do we bring OpenStack and everything that the value it creates into our organization? So now we're in this private cloud world and we've got to sort of swing back towards that public cloud world again, being able to bridge those two, the two chasms. So public cloud requires much faster delivery of features. It requires a different set of scale than you traditionally have in a private cloud where private cloud requires sort of more stability and consistency. We've got to figure out a way as a community to bridge both gaps. And so I think a lot of the emphasis that IBM upstream will be working on is that duality. So what's the standard issues? What do you see trending well that's standardizing with OpenStack that's hardened that people are going to be doing? We had Derek Collison say earlier on theCUBE, developers should be assembling more, building less. Do you agree with that? What's the state of the DevOps? Yeah, so that's the whole microservices argument. And I think that's true. I think if you look at this API economy it's been created over the last couple of years. It's a wonderful way to develop new applications. And that's what draws a lot of people into Bluemix, which is the cloud founder blaze platform as a service that IBM has. So you look at the Bluemix service catalog and you can pull together all different sets of APIs to compose an application that does things that historically you would have had to build all on your own. So I absolutely agree with Derek. The question is, in what environment do you do that? How are the tools laid out? Who provides them and are they delivered as a service? And so that's the key to me is that as a service mechanism. It's always great to have you in theCUBE. It's like you're a guest analyst in and of yourself. It's kind of like ESPN when they have the coaches that come on, they're not retired yet to give some commentary. So I got to ask you the last final, final question. Greg's going to kill me for going a little bit extra again long here. What should we be looking for in theCUBE? As we go to VMworld next week we get Oracle open world coming up, Amazon re-invent. We've got the big cloud shows coming up. Microsoft's the only one that hasn't had theCUBE yet. We'll get into Microsoft's Azure event. Microsoft, if you're watching, you got to get us in there. But those three events, what should we look for? What questions should we be asking? Yeah, so I think the Oracle quote that you read is quite fascinating. So think about how do you stay relevant in a world where public cloud will dominate? And so thinking about the services that Oracle is bringing that VMware is bringing and the relevancy they have in the marketplace and then how they're differentiating. So if you've got a proprietary cloud, public cloud, that's based on your own set of technologies and capabilities, how's that any different from what Amazon or Azure is doing? Versus if you have an open cloud, how does that relate? So this notion of open source kind of taking over the world as it relates to the cloud implementations from these big vendors, that'll be a pretty fascinating thing. How about AWS and the enterprise? What questions should we be peppering them for? Cost. And I think it's this nickel and dime notion. And it's not that it's expensive. I don't care about that argument. What I care about is it's really hard to predict what your bill will be. You mean like TCO or total cost of ownership? No, just being able to understand what your spend will be. Because they have now built a billing mechanism and a relationship with a customer where every little transaction has its own associated cost, it becomes a very opaque experience from a customer and one that is ultimately very frustrating. All right, Jesse Probman, CEO, founder of Blue Box, now part of IBM. What's your official title like a GM? They give you- CTO. CTO of Blue Box, cloud division, CTO. Just Blue Box and IBM company. Okay, all right, here we are. We have all the data here in theCUBE. We'll be back more live coverage with Silicon Valley after this short break.