 Live from the Hilton at Bonnet Creek, Orlando, Florida, extracting the signal from the noise. It's theCUBE, covering Vision 2015. Brought to you by IBM. And now your hosts, Dave Vellante and Jeff Frick. We're here live at IBM Vision 2015 in Orlando. Mina Wallace is here with Neil Dodgson. And Mina is the Vice President of Risk Analytics and Neil heads up client solutions. Folks, welcome to theCUBE. It's good to see you. All friends. Yeah, how are you? Great to see you. So Mina, let's start with you. Risk Analytics, what's the state of risk analytics today? What's the state of risk in general? Then we can get into the analytics piece. Well, you know, I would say that, I mean, we've been in business for a long time on the risk side. And I would say there's a tremendous amount of momentum in risk nowadays. It's a focus at the boardroom level. It's a focus at the front line level. It's just very topical throughout the whole organization. You know, we're with IBM and it's not that typical actually for an IBM conference to have such a strong focus on risk. But through the acquisitions that IBM has done over the last number of years, the area of risk is becoming more important to IBM. And we're just seeing a tremendous amount of momentum. Now, Mina, did you come in with an acquisition or? I did come in with an acquisition. Financial risk company called Algorithmix. Right, okay. About four years ago. Out of Toronto, a lot of companies in Toronto and Ottawa that were acquired by IBM. That's true. That's absolutely true. You guys are the crazy hockey fans or? We're crazy hockey fans with not the greatest hockey team. I don't know if that's going to go viral on here. I'm from London, so we don't follow ice hockey whatsoever, so I'm sorry. I'm from Boston and we do. And we're lamenting. Yeah, I know, I know. We weren't mentioning New England Patriots and what they've been doing at least. Yeah, oh my gosh, yeah. It's in the news, you and your football. They say there's no such thing as bad press. Yeah, exactly. Okay, so Neil, what's your role? I run the Customer Solutions Group globally, so I have a team of risk subject matter experts. I think risk is one word, but within risk, risk management, there are many, many different lines of business which you would know about because you do risk management on your own accounts. And when we do it, you go on holiday, you look at the phone exchange rate, that's risk management. You've got, if you've got a mortgage, if you've got a kid's school fund, you're all taking decisions on risk management. So it's across a wide spectrum. So I've got a team of SMEs, we go into clients, we find out what their problems are and we try and help them solve them. Simple as that. Good memories. So the conversation on risk has evolved, let's just say. So maybe 10 years ago, nobody was talking about, and even five years ago, nobody's really talking about the opportunities associated with analytics. It was all about risk, risk, risk, risk, risk. And there's kind of a more of a balance now, which I think is a good thing. I wonder if you could comment on that, the balance sheet, if you will, between risk and reward. How do you see that within organizations? Now you're focused on the risk side, I know. Well, let me start with, who do you deal with? Is it the general counsel? Is it the CEO? Is it the board? All of the above, the risk professionals? You know, yeah, I mean, there's a very strong risk subject matter experts in finance, in organizations today. So there's a chief risk officer, undoubtedly. It used to be that perhaps that function rolled up into a finance function, but that's very rare now. You would find, you'd find it very much of a separate function. And now you have a chief data officer because data has such an impact across your organization, certainly an impact on risk. So that's another individual that might be involved in this conversation. Audit and compliance function might be part of risk, might be a separate function, reporting up and sometimes into the general counsel. So it can be kind of, I don't know, the number of risk professionals really has exploded if you look at who might describe themselves, pardon? Great news for software company. Yeah, it is great news for software company. No, I think, I was sitting, well, because we did the plenary speech and we had a panel discussion and I was wondering why risk now in financial services is so in vogue. And, you know, if you look at other industries, the airline industry, pharmaceutical industry, the energy industry, they run massive risks, but what's the difference between them and financial services is they actually affect people's lives. So if you have a major disaster, you know, an aircraft goes down, you produce a wrong drug. It was then only in 2008 that the risk came into affecting people's lives in financial services. When actual we had banks collapse, hedge firms go down, asset managers go down, and that's when it had a real tangible impact and I think that's what's made a major impact. It now affects, and if you go and look at Greece, there were people, because of Greece, there were people in Greece, because they were so bankrupt, were committing suicide on the streets just as a protest against what had happened in the financial markets. And I think that's why the regulators now have got really tough, and why we're seeing what we're seeing. So, Minor, you mentioned a chief data officer, so, I mean, typically you think of the CDO in highly regulated industries, financial services, healthcare, government, is that sort of where your, are those your peeps, you know, your homies, if you will, or is it more broad based? Well, ours is really the chief compliance officer now at the moment, it makes you sure. But I mean, within those industries, is it those industries that are more sort of risk aware, or is it more broad based? Are you, in terms of where you're finishing? You know, wherever there's regulation, there's going to be the need for risk management, and there's regulation across most industries nowadays. I think the point that Neil was making is a really important one in that, you know, when you regulate something for the safety of your clients, or your passengers, or whatever, that's a different kind of thing than regulating it for the financial well-being of your client, you know, it's a less tangible impact. So I think what financial services is being asked to do by the regulators now is really protect them from some catastrophic failure, which, you know, losing their pensions. You know, we had some examples in, you know, of some of the untoward gentlemen in New York who was basically at Ponzi schemes, that basically waved out the savings, you know, you just can't let that happen. And there's really no regulation in the past that would prevent that from happening. And so regulators have sort of swooped in, and they're making all of these demands and organizations to comply with these things, which is driving us to build solutions that enable technology to help that. So, I see, so you say the nuance there is versus, say, some kind of, you know, transportation disaster where lives are at stake. Health care is kind of a two-headed animal there, isn't it? A two-headed monster with regard to people's lives, but also privacy. Yeah, privacy is a big thing and financial services is all, absolutely. But you made a comment earlier that I'd just like to go back to you said, you know, in the last 10 years, has things changed and was different over the last five years? I would say the big difference that I've observed even in the last 12 months is predictive, is the ability to look in the future. So, it's not good enough to establish, you know, risk to make sure that you're well looked after, but it's really important, like they talk about systemic risk, but what if this bank had a failure? What then would happen to all the other institutions if that bank had, you know, failed? And so, you know, looking into the future of what might happen if certain, you know, certain kinds of things happen, interest rates fall, commodity prices fall, and so, you want to look at your portfolio for your individual account holders or for your funds that you're managing, you know, from a predictive perspective? I think that's the biggest change you've seen. It is, I mean, that's, I mean, for best practices, they should be doing that. It's financial planning. Yeah. But now, we have strict regulations around the world that you have to, especially in the U.S., your regulators have got really tough over here. So, there's... We are prone to knee-jerk reactions over here. Well, I think Lehman's might have had a lot to do with that in 2008. But, no, they really, now with the C-car and the D-fast, you have to do forward projections and you have to submit your plans and also the concept now of living wills. So, you have to tell the regulator and the public how you would pay them off if you started to go insolvent. And there's specific rules around it now, very rigorous rules. So, it's more than just process, I'm hearing. It's substantive. Oh, yes, it is. Yeah, absolutely, yeah. Totally substantive. Because, again, five, seven years ago, you really couldn't provide the substance because the technology wasn't there to support it. But now, you've got things like Watson that allow you to do more predictive analytics and other technologies as well, not just Watson. I think five or seven years ago, the boardroom conversation would have been a documentation of historical things that happened. Why did that thing happen? And they would describe why it happened. Whereas now, if you look at some of our leading edge clients, some of the clients that are here at the session this week, they're on the board agenda, every agenda. They're part of the board package. They're showing, the board members are engaged in the process and understanding business unit to business unit, product line to product line, where the risks are, what the issues are, year over year, or months over months. And it's very much a fabric of the conversation. And to do that, you needed all the data, but you need the technology to get at the data. But you need also the culture within the organization to make that point of view that everybody is taking an interest in and accountable for. And that's, I think, the leading, how many organizations would be like that, maybe 10% or something? I don't know, not that many. So they're really at the leading edge of things. Is it fair to say that the risk discussion used to be a lot of it, anyway, centered on physical events that could happen, disasters that could happen, and the probability of those occurring, which would be based upon looking back, as you were saying. How often did it happen in the last 50 years? What's the expected loss, disaster, how often is it going to occur in the next 10 years? Kind of thing, versus now interdependencies in the financial services system. Other sort of blind spots, maybe? That's where I think, well, I'm probably more excited than others about Watson and Watson Analytics and what that can do, because if you do go back to 2008, 2008 was a smoking sort of dormant volcano, but there was lots of indicators which were leading up to what was happening in the financial markets. Now you would hope that if that data was feeding in, Watson could look at it now and predict what conditions would actually start to lead to that financial crisis, and then potentially they could avoid it. So I think Watson makes risk management really sexy. Was the financial crisis, though, in some regards like a failure to act? I mean, people had the information, they just sort of chose to ignore it, or sort of smoked down, rhetoric, or... Or was it really a black swan event that wasn't critical? I would like to think a bit more of an ostrich event where people were burying their head in the sand and chosen to ignore it. It was a black swan event, obviously. But look, you had those things called ninja mortgages in the US, no income, no assets, no job. I mean, does it take a sophisticated Watson or a sophisticated risk manager to... I wouldn't lend it. They're called teenage kids, aren't they? And we don't lend them money. Okay, so there's a good example. Yes, as you're saying, it's a black swan event, although, by definition, black swan events aren't supposed to be predictable, but this one was. So Watson, because Watson had helped us, clearly it could have, right, with this black swan event. Talk about it. I think it could start to pick up warning signs and correlate those warning signs early on as to what was happening in the market. I mean, we're going to go into the details of what was being seen, but rumors around the market, there was a discourse between some of the interest rates around the world and no one understood why it was happening. And visualizing the interdependencies is something that you can bring to the table now, right? Where does visualization play in risk management? Well, it's become more and more important now. I mean, you've got paper on your desk there, but I said it earlier that now, all of the board of directors, they use iPads. I know it's a paperless boardroom in most of the banks, the top tier banks now. So they're all wanting visualization on the iPad. They all want to be able to drill down in a report. They all want to do the nice snazzy and... Yeah, what's behind this number? Yeah, yeah, exactly, yeah. Yeah, you want to look at exceptions and you want to drill down into exceptions and understand it, so nobody wants to... It's now got to, so I don't know in the US, but in the UK, Annette, non-executive director was the cushiest job you could have. You got paid £250,000 a year. Four times a year, you turned up for a board meeting. You read the papers and it was a nice club. Now that actually, if they've signed it off or not recognized it, they can go to jail. So you've got actual non-executive directors resigning from organizations because they don't want it. So they've got to, as you say, you've got to challenge, be able to visualize it, be able to look at it, drill down, find out what it is and raise that sort of issue within the organization. So what are the products behind all this that you guys are working on? Well, we've got a product called Open Pages and Open Pages is sort of the platform that allows you to collect all the information and establish all of your key risk indicators and controls and so on. But in addition to the platform, you have Watson cognitive analytics that we're using as the, is really to extract the value out of that data. I mean, at the end of the day, the last, I don't know, decades has been about collecting data from the right sources, making sure you have controls and that sort of thing, automating processes, but it's really the ability to extract the data and visualize it. So Watson analytics, Cognos 10.2 is, is really an interesting product. Why are you smiling, Dave? No, Bill just texted me. Oh, tell mine I said hi. Because I knew that that wasn't that. My brother says hello. I knew that what I was saying was not causing a smile on your face, but anyway, no one ever smiles when you talk about risk management. Oh, Cognos 10.2, ha ha ha. It's a very somber product. It's a very somber topic actually. Risk, right, you can't smile when you talk about risk. Okay, so you've got, so OpenPage is one of the few companies that you've acquired that aren't based in Canada, right? Wasn't that a walk-in? Yeah, that was Boston, yeah. So we, like actually, we're the results of the merger between OpenPages and Algorithmics because there's a lot of value between the governance, the governance capabilities of pages as it relates to financial risk and really looking at those two things together. So it's actually, it was a brilliant move. By IBM to bring these. Inspired, predictive, wasn't it really? It was actually, it was predictive. And then you layer on top of that the analytical capabilities that are more part of the traditional IBM, you know, in terms of Cognos and SPSS and now Watson onto, you know, best of breed solutions that are managed risk already. You add on that ability to analyze and visualize data. It's a really powerful, I think, very unique value proposition. Well, I mean, you have observed the software industry and it changes over the years. And IBM was, you know, pre-Cognos was nowhere in this business, didn't have any assets. Yeah, yeah. And that was number one. Yeah. How do you get all the assets working together? Is that something that you're cloudifying? Is that a challenge for customers? You know, I think if you talk to customers, I think customers will say that that is a challenge. And so clearly it's something that we have to do a better job of. We went through a reorganization earlier this year, which one of our executives might have been talking to you about today, solutions offering. So how do you take a step back and you sort of look across the boundaries of your different assets and say, what combination of assets can we bring together for the greater good? And that's actually a very positive move. As opposed to, you know, when you acquire a company, how do you really best integrate it? And if you can integrate it in a way that does leverage the assets across the portfolio, that's pretty powerful. So we see that happening. Well, no doubt. And IBM's been a, has got a great track record of acquiring companies. I mean, picking up companies at great value. Cognos was a big, probably IBM's largest acquisition. One of the biggest, maybe TWC was, Yeah, it was. Yeah, PWC would have been. Maybe it was bigger, but 4.9 billion for Cognos. 1.2 billion for SPSS, two large acquisitions, but lots and lots of other tuck-ins that you've now cobbled together to create this powerhouse. I wonder, should ask Bob Pitchiano, if you guys use the analytics to figure out, okay, the organization, right? Yeah, yeah. You should ask Bob. You should ask Bob. Yeah, that may not be. I'll ask him an insight the next time I see him. That's how you do it. How the decision was made as to how to organize. Yeah. You know, because get that right and good things can happen, right? But the interesting thing is that, where we come from in terms of the risk analytics group, is we've always sold solutions rather than products. So we can take many of our products and we can solve the solution of the particular financial institution. And we've now had this year with the announcements from Ginny and Q1 that we've now gone to much more of a solution-based approach to IBM in the analytics division. So really for us now, it's opening up lots and lots of doors for as more than we had over the previous two years with the acquisition side. Well, I think that's an imperative for IBM personally. I've said, I mean, IBM made great business out of taking complexity and bringing services to the fore, but the world is changing. And IBM still has great services business. There's tons of complexity to solve, but people want to buy solutions. You must be seeing that in your client base. Right? Yeah, no, yeah. Well, again, we come from the background where we're used to selling solutions. So when I talk about assets, I mean, whether it's a service, you have to bundle the combination of things to say, this is, it all works. You're not just going to give you a piece of the solution and you figure it out, figure out how to make it actually work for your business. We're really bundling it together to say, you've got a business problem and this is what's going to solve that specific business problem. That's actually a new development for IBM as opposed to here's a piece of technology that's going to be one of the pieces that help you solve your problem. So it's a cultural change. I mean, I think that's one of Jenny's challenges with all of us is to sort of make that cultural shift. But I'm going to go back, ask Bob this question. I think that what analytics is used for, for sure, in IBM is to analyze market trends and market growth and so on and so forth. So as an example, recently, we're in a competitive situation and the executives from this organization said, well, how important is this to IBM? I mean, IBM, you know, 100 billion dollar company and you know, how important is this particular solution line to IBM? And so the answer we gave is, the market is booming for this solution line. So therefore we know, it's not just because, you know, IBM is investing in us and we think it's important, the market is growing and IBM knows the market isn't growing. So that's the place that they want to be. And that was what the customer really wanted to hear. They don't want to hear that. They know that IBM is not going to spend a lot of money in a shrinking market. So what, so back to the analytics question, do they know the market, you know, do they do a lot of analysis around the market trends and what's growing and what's not growing and what industry areas they should be investing in? You know, absolutely. And that's kind of where your compliance and risk is one of the growing markets. So IBM wants to be there. Healthcare is another one and IBM will talk about healthcare. The stakes are very high. Go ahead. I was just going to say, you know, facts are really good, but one of the rather global banks said that somewhere between 70, 80% of this year's IT budget was going to be related to GRC issues. Now that could be security. It could be the GRC, the controls and the compliance. That's a huge amount of money. And that's one of the reasons why IBM wants to be in that space in financial services. It's not just financial services. They say we're in healthcare. We're also in the energy industry as well. We can provide solutions in that. So it's exciting times at the moment. Well, I sort of say the stakes are very, very high, you know, for corporations. They're sitting on a lot of cash, brand value, large market caps that can really be affected by these events. But I'll make a prediction. You ain't seen nothing yet. I can agree more. We are living in an environment of such low interest rates that certainly, you know, if you turn to your kids and say, hey, interest rates at 7%, they're going to look at you like you're some sort of what? The minute we start to see the Federal Reserve tightening the interest rates, the shockwaves around the market. We've seen that. I don't know if you've not realized the turmoil in the markets at the moment because of the expectation on the Federal Reserve. People are pulling money out of the emerging markets. So there's something going to come up in the next couple of years. Well, geopolitical factors. We'll still sleep at night. Don't worry about that. Yeah, well. That's why you guys are here. Oh, yes. Mine and Neil, thanks very much for coming to theCUBE. It was really a pleasure having you. Oh, no, thanks a lot. Keep right there, buddy. We'll be back to wrap right after this. This is theCUBE. We're live from IBM Vision. Right back.