 Live from the FIA Barcelona Grand Villar Compensator in Barcelona, Spain, it's The Cube at HP Discover Barcelona 2014. Brought to you by headline sponsor HP. Here are your hosts, John Furrier and Dave Vellante. Okay, welcome back everyone. We are live in Barcelona, Spain for HP Discover 2014. The European edition, this is The Cube, our flagship program. We go out to the events and extract the synth from the noise. I'm John Furrier, the founder of SiliconANGLE. I'm joined by co-host Dave Vellante, co-founder of Wikibon.org. Our next guest is Martin Mikos, who's now the Senior Vice President and General Manager of HP Cloud, formerly the CEO of Eucalyptus. And as we know, we covered at HP OpenStack in Silicon Valley recently. It was acquired by HP and has come on in to run the HP Cloud organization, which we've been chronicalizing from the day they were rubbing nickels together to, you know, the Sargalai era and Martin Fink era now is the Martin Mikos era. Martin, welcome back to The Cube. Great to have you. We're big fans. Love your work over the years. And great to see you at HP leading the Cloud effort. Welcome back. Thank you. Thanks, John. Thanks, Dave. So we're excited because the Cloud certainly is something that we love. We love open source. We love DevOps. We've been covering. We love big data. So these are, you know, we're like in our element here with the Cloud. But what I want to talk to you about is the leadership of Meg Whitman and seeing her up on the stage, getting all her marks, innovations alive at HP, customer first, and they have partners. But the key of all that is the underlying message that the Cloud is the tip of the spear. It's the enabler of change. It's what is going to accelerate HP to go to the next level as a company. So what's your take on that? I mean, do you feel a lot of pressure? Do you feel like you're into the gun? Do you feel good? Are you ready to go? John, I love pressure. And I think it's very true. We launched the Helio and Prax family just six months ago, and it's already becoming one of the leading product families in the Cloud world today. So we're making tremendous progress, and it goes back to what you said, that HP decided to transform itself and renew itself as a company. It decided to become an innovator again, and it picked Cloud and a few other areas. But Cloud is one of them as a key area for innovation and new creation. And that's why HP has brought on board experts from many other companies who have built Clouds before. So you're an investor in Cloud Air. I know that because we started Silk and Angle in the Cloud Air offices. We've seen each other there. The team was kind of born in Cloud Air. Michael, Zomar, Alva, Dahl, and the team over there. You've been close to the open source movement from the beginning. You have a good taste of the future. You've been in the trenches. You kind of know what's going on. You're a taste maker as well now as a senior executive. What is it about Helio and Cloud that youth believe will make it successful? As you see the Cloud Air, as you see these new innovators, the startups out there, and I know you're also doing angel investing. HP is the big battleship. It's shifting into the Cloud. What is it about HP that makes you go, this is an absolute winner. It's going to be a winner. And what in the Cloud Helium do you think is the key asset for that? Well, I would say sort of as a metaphor that the big data companies, Cloud Air as you mentioned, Hortonworks absolutely, MapR and others, maybe they are fighter jets and HPs and aircraft carrier. And we're building the very robust platform that those fast moving startups can operate from. And there are very few companies who can be an aircraft carrier of the most modern kind. There's just a handful of companies in the whole world who can do it. And I'm seeing more broadly that either you are a provider of robust infrastructure or you're one of the modern Cloud companies. But the old class and category of ISVs doesn't really exist anymore. It's disappearing. And the Cloud vision, obviously open source driven, a lot of innovation. What's the business plan look like for you guys? I know you're investing heavily in OpenStack. It's all in bed. You've got a lot. The metrics are getting higher and higher. The number one contributor and then how you're going to calculate the metric. But it's significant. You guys are all in an OpenStack. What are customers doing? Because customers want to be fighter jets. They also authority aircraft carriers. How do customers do that faster? Because at the end of the day, customers want to deploy on a mobile infrastructure. They want value. It doesn't work. They won't pay for it. They don't want to pay for something that doesn't work. So you've got to deliver the jets and the aircraft carrier. That is true. And we know that it's faster to upgrade software than to upgrade human beings. And when you have to take the journey from classical IT to the new style of IT to Cloud, you have to retrain your people. They have to learn new paradigms, new design patterns. That's a big, big thing. So we provide the technology, the aircraft carrier, and then we do the training for them to take them on the journey from old to new. And it's hard, but it can be done. Has been done before. HP did it 30 years ago when we shifted from Minis and Mainframes over to client server. So we're just doing it again when we go from client server to Cloud. And don't forget the laser printer. That laser printer drove a lot of cash. Oh yes, that's a fantastic innovation. I was just talking about that. That's why I brought it up. We were very proud of that too. So Martin, we saw you last year at Amazon re-invent. We had you in the queue. We had the backpack. And I've always loved that you've clipped this strategy. A big fan of what Amazon is doing. Having said that, two years ago when Amazon first came out at re-invent, and I said this to Andy and Jesse, I said the messaging was very, very good, except the whole notion of on-premises being a bad idea and private Cloud being a bad idea, which was Amazon's messaging at the time, was off base. And he actually pointed to Eucalyptus as an example of partners in the ecosystem. Well, you got to love Amazon, right? And so, good for them. So that was, to me, a key part of the strategy is to get ecosystem players to demonstrate that connection. And you've seen Amazon sort of change its messaging over time because they're talking to customers. Now, the chessboard has changed a little bit. So where does Eucalyptus fit into the whole Cloud space now that it's part of HP? So first of all, we went through an amazing recovery of Eucalyptus. The product is fantastic now. It scales more than ever before and more than many other Cloud platforms. A very high level of fidelity with Amazon web services. So it's a very powerful platform, and we've closed some big, big deals in the past few months on Eucalyptus, exactly on hybrid deployments, vis-a-vis AWS. And that's not changing. And even today, when AWS needs an on-prem partner, there is nothing other than Eucalyptus that they can point to. And now Eucalyptus belongs to the helium product family, but it's the same strategy and perhaps even more powerful because we can provide Cloud in a box, we can provide Cloud in a rack. And Eucalyptus is packaged into a very compact form factor. So it's easy to deploy quickly. So does it change somewhat HP strategy vis-a-vis the recognition of Amazon as another arrow in the quiver? HP's strategy changed a year ago when they internally decided not to be a head-on competitor to Amazon web services, but to build an enterprise Cloud offering that indeed has a public Cloud, but the role of the public Cloud is to serve customers who also have managed Clouds and private Clouds. So we stayed back then, decided not to be a head-on competitor with Amazon web services, and that allows us to be partners instead. So, okay, and hence OpenStack, OpenStack investment. And hence OpenStack. And that decision, it's still competing, but a head-on competing because you saw the race to zero, HP saw the race to zero and said, wow, to compete in that we have to be Google-scale. Right, let me take issue with the race to zero. In business there are no races to zero that work. I agree with that. You can lower your unit prices, but I believe that Amazon web services has the ability to have great margins and probably has great margins. Let me tell you what I mean by race to zero. When I talk about race to zero, I mean race to zero marginal economics, like software marginal economics. The marginal economics to go to zero, that is a race to zero, and that will be the defining economic paradigm for Cloud, not a race to zero profits. But it's all over the planet. It's not just Cloud computing. The whole planet is becoming more efficient. And the fact that we had outsized margins in the 90s, 80s and 90s for ISVs, that was the anomaly. It was the big margins that were the anomaly. Everybody is now operating in a much tighter ship. That's not true, though. ISVs still have Microsoft. Do they? The software vendors, of course. Microsoft, Oracle... Microsoft is not an ISV anymore. Microsoft is operating abroad. Ah, you're talking about... Pure play ISVs. Who are they? There's just one or two. Yeah, but software... Yeah, but software and Red Hat. Yeah. Maybe Simon Tech. Microsoft doesn't sell software anymore? I mean, most of the revenue from Oracle, Microsoft still comes from... What does Microsoft CEO say? Cloud first, mobile first? Sure. Does it say software? Okay, but it doesn't. No, but... Okay, so let's carry this through. So if you're just... If you're really only selling infrastructure as a service, that's one economic model. Yeah, I didn't mean only. I'm saying that either you become an infrastructure provider, and software is just one component of it, or you are a cloud or mobile company, but the pure red ISVs are disappearing. Sure, but they're disappearing by taking their software and bundling it into their cloud, like Oracle, for example. Some of them, yes. And Microsoft's doing the same thing. Yeah, exactly. We have to do that. But here's the point I'm making. But that's what I'm saying what we're doing at HP. We are an infrastructure provider. We have hardware, software, services, managed services, and few have that breadth of offer. So I want to unpack that a little bit, because the software component is a lot smaller than, say, an Oracle or Microsoft. Luckily, yes. That's why we can sell to the software. I love this debate. Luckily. Okay, so tell me more. Why is that a good thing? Because I would think, wow, I have software at Marginal Economics. Wow, I'm going to be more profitable. We are the aircraft carrier. We have decided that we have an even landing field for everybody. And then we build all the way up to that level, and then we build nothing on top of it. That means we can partner with and we can sell to nearly everybody. For instance, nobody is as strong with telecom operators and service providers as HP, exactly because we let them run their business and we provide the underlying infrastructure for them. Yes, so your point being that a lot of people won't work with Oracle because they're competing with Oracle as a software player, but they will play on HP's platform. And that's your unique advantage. I understand that, but it's a different economic model when you agree with it. Okay, so talk about that a little bit. My point is it's a powerful one because it's partner-friendly and if anything, there are more companies to partner with today than before. The world is larger. There are companies from different, many more nations today participating in the world of IT. Can I get in on this? So hold on a second. Yes, I'm sorry. So it's a bigger, this is the last thought. It's a larger volume than, say, an Oracle. I'm using Oracle because they're very narrow. Yeah, I agree. Okay, larger volume, but potentially less profitable. Is that a fair comment? Every business can be potentially less profitable. You need excellence in management to make it profitable. I believe we have excellent management. And you're comfortable that you have a profitable business model? As am I. Let me weigh in on this. Dave, let me weigh in. What do you think, John? Let me weigh in on this. So let's say Amazon. So Andreessen Horwitz tried to unpack the black box. Okay, they did that post a while back. I think I shared it on my Facebook about, you know, is it a profitless business? The big debate about Amazon, are they making any money? And they are making a ton of money. They're hiding the ball. We talk about that all the time on theCUBE. They're hiding it in growth. Yeah, they're growing and they're reinvesting. So it looks like a race to zero on paper. But what they're doing is they're flattening the platform to zero and winning on tooling. So what they're actually doing is making margin on packaging, kind of like services on top of it. So it may look like a race to zero from a cost perspective. They lower costs. But increasing the pricing on packaging, tooling, which is similar to their retail business. Agree. Complete platform commoditization. Here's the difference. The thing you're missing. You don't agree with that. No, I do agree with that. The thing everybody's missing and the thing Andreessen Horro was missing. I feel like I'm going to tend this much. I know. I'm sorry to put you in the middle. But think of outsourcing. The old school outsourcing for things like simple things like infrastructure provisioning was very manual and was a bad business. We can agree on that. The bigger you got, the harder it got and it was complicated. It didn't work for customers. It was a little bit more efficient than doing it yourself. Amazon's changed that. Infrastructure provisioning now looks like software margin of economics. That's what I mean by the race to zero. That's a very powerful economic model. My question is always how does IT, how does CIOs, how does HP, how does Oracle, how do you compete with that? Your answer is aircraft carrier open ecosystem. I like that answer. Let me also state that I believe there's a growing trend in public cloud of the type Amazon Web Services presents. I believe in Victor Hugo when he said you can stop an army but you cannot stop a thought whose time has come. At that time has come and we shouldn't fight it. We should allow it to happen. But it will not take over everything. Like previously when we predicted there would be three computers needed in the world. That was a stupid prediction. To say that we need just one public cloud is an equally stupid prediction. Many people need control over their assets and they are capitalists. They want to own the means of production. If you are a Marxist, you share the means of production but the capitalists will want to own the means of production. So that's really insightful and I love the Hugo analogy. I will say however in my opinion it will define the economic model of the future. So not one cloud but an economic model that is more powerful than anything we've ever seen. This is why those who provide the infrastructure need to have an end to end solution where they charge margin in one place not multiple places and they need to be very efficiently run organizations which is what HP is now becoming. It didn't used to be. When HP was taking Amazon head on my feeling was HP didn't understand that economic model. Let's not talk about the past. And then realize that we have to. But it's good because it's a reference point. But our point is that HP is moving in the right direction now. It's finally turned that corner. I agree. HP is moving in the right direction. Definitely. It's got the strategy now right. The strategy and execution. If you have the wrong strategy and you're good at execution you have a bad strategy. You have great execution. You need both. I want to answer a specific question. So Eucalyptus is part of HP Helion Cloud. You're selling HP Helion Eucalyptus? Yes. Helion OpenStack is the foundational platform that underlies everything we do. To the specific use case of Amazon compatibility we sell Eucalyptus as part of the Helion platform. Okay. So that's on the slide. It's on the price sheet. We're selling it. We're closing deals. We close the deal with a big retailer. We close the deal with a big security company. We're expanding with existing customers like Nokia and others. NASA is a big user and so on. Great. I agree with HP's strategy on this tape because I've said that. Competing against Amazon head on would have been a disaster. Too much build out going on in real time and they're adding new services way too fast. They would have been chasing their tail and then that would have been a race to zero for HP. I believe that would have been a bad strategy. So now the enterprise is wide open. With OpenStack you now have bringing legacy and new modern tooling to the enterprise. Eucalyptus great pickup. Big miss by your competitors. The enterprise cloud is clear. It's a hybrid, all that stuff. I buy that. The question for you is now that you're in the HP cocoon and you're in the HP fold Is it the cocoon? It's going to explode and be a butterfly soon. I think it's a battle ship with all kinds of metaphors here. It's going to be a butterfly someday, the cloud. What to make customer solving customer problems. What problems do you see out there as the head of the cloud group that you're seeing pop up because it's a huge customer base. Right. And they've got a lot of challenges. You just gave a talk in the innovation theater about IT and doing all that stuff. Great messaging and all that stuff. But I got to ask you, what problems specifically are you guys solving for customers? What's the common pattern that you're seeing? Two things. One is we collect all this amazing open source technology and package it into something that's easy to consume. That's difficult to do but we do it. Number two is all our customers have an existing install base and a legacy install base of applications and workloads and data centers and we need to protect that investment. So it's a very delicate balance of the journey from the old to the new and deciding on each step which workloads you leave at the old stage, which one you migrate, which ones you can lift to the new. So managing the journey is one of our specialties and there are few others who know how to do it. Do you see mobile infrastructure as a key item on the list no customer needs? Yes, just look at Mendix, the partner we had on stage yesterday. They have an application platform where you build mobile applications nearly in real time, deploy them on a helium cloud and you can have a business application that's mobile first and underneath and all the scaling helium cloud powers it. So one of the trends that we're seeing you mentioned is a bad dumb prediction to say it's only going to be three computers now, one cloud or three clouds. So that implies that you see multiple clouds out there. So we always think that we think there's going to be zillion clouds out there on the market. What do you think on that and what's your insight in multiple clouds? What are they going to look like? Well, read Ray Kurzweil's books he says that compute will be all over the place and Amazon now has a plan of putting compute in very few places close to cheap energy but then there's other clouds that need to be close to the data so you have data gravity but then you have population gravity. You need compute power near people because they need low latency access. So we will see clouds, small clouds, medium sized clouds and large clouds all over the place. Some of them will be placed near cheap energy, some of them will be placed near the data, some of them will be placed near information, some of them will be placed in a secure place just to stay away from the rest of the time. You could argue, you could even argue clouds will take a long tail distribution where you could have app clouds just for unspecific applications. You could have a cloud in a backpack. Martin, so it's great to have you on the queue. One quick question if I may. So how should we look at your business a classical way of looking at the cloud business is infrastructure as a service, platform as a service, software as a service. Is that the right way to look at HP's business? Maybe in terms of the way you might report in the future or should we be thinking about it in terms of on-prem hybrid managed. I mean how should we look at the cloud business in terms of a framework to understand it? I think we are learning now. I would let the markets dictate it to us but I think we are learning that SAS is one category and PAS plus IAS is another one. So IAS and PAS are very much linked to each other. You can divide them or you can put them together. Then of course you will have the different deployment options but application workloads won't know where they are deployed and now we spend all our energy talking about where it is deployed. Five years from now we may look back and say what a silly question. You just have compute power and the applications run on it. I don't know but we have to be prepared for the fact that we may be obsessing about the wrong questions. Your current thinking is that PAS is IAS plus PAS has two parts. There is middleware in PAS and there is the language framework. You can already divide PAS into two and then you see that the strong IAS vendors are slowly moving into the middleware space. You saw that with Amazon. Databases of service, messaging, queuing, all of those things and then provisioning becomes its own and the language framework is a world of its own. We use these terms to make it simple but we must watch out to simplify its realities. But in your organization it's the infrastructure of service and the piece of PAS that you just described. Right. We will build stuff for a workload centric world. You have the workloads. We have everything the workload needs. We got a great but I want to ask one final question. I'll see you're new. You're the head of the ship, the battleship. You're the captain of the cloud group. No, I'm not the captain. I'm the captain of the cloud group. I mean the machine room. Shifting from diesel. The good news is you go to the machine room and push some levers. You're still in the trenches. I love that about you. What's the vision? What's the plan? New style of IT is nice bumper sticker but there's a new way of doing business. Your customers are consuming and being marketed in different ways. You've got to build a community fast. You've got to get customer wins under your bell. What's the plan? What are you going to do? You've got your own CMO with Bobby Patrick. You've got a marketing team. You've got engineers working around the clock. What's the plan? I'm so simple so I can hold only two things in my mind at one point. On the one hand we are creating the best products in the industry and on the other hand we're delivering them to customers. That's the plan. Innovate and make a customer. In all channels. We will of course engage in all kinds of things to make it happen but the main idea is to innovate, which the company perhaps didn't always do and then to really serve the customer which is difficult today because the customers are changing. And the score board to you what's it look like on the score board? Customer wins? Customer production deployments. Martin Miko's here, the senior vice president general manager of HP Cloud great new addition. You can look at this shipping and available with HP Helium Cloud got that out as well. Great to get that update. We are here inside the Cube Live in HP 2014 in Barcelona. We'll be right back after this short break.