 Live from San Francisco. It's theCUBE. Covering IBM Think 2019. Brought to you by IBM. Hey, welcome back everyone. This is theCUBE's live coverage in San Francisco, California. Moscone Center for IBM Think 2019. It's the wrap up of our four days of wall-to-wall live coverage. All the publishing on SiliconANGLE.com. Look at the journalism team cranking it out. Dave Vellante just put up a post on Forbes. Check that out. And Stu's got the team cranking on the video. Stu and Dave, four days. Team's doing a great job. Tons of video, tons of content, tons of data coming through theCUBE. We're sharing that live. We're sharing it on Twitter. We're sharing it everywhere on LinkedIn. What's going on with the data? Let's synthesize. Let's extract the signal from the noise. Let's assess IBM's prospects in this chapter two, as Ginny says. A lot of AI, a lot of data, a lot of, IBM is an old company that has so much business, so many moving parts, and they've been working years to kind of pivot themselves into a position to run the table on the modern era of computing and software. So what do you think, Dave? Well, I mean, this has been a long time coming, and we're here. You pointed out, John, to me privately, that IBM's taking a playbook similar to Microsoft in that they're cloudifying everything. But there's differences, right? There's a bigger emphasis on AI than when Microsoft's not in AI, they of course are, but when Microsoft cloudified itself, there wasn't as much of an emphasis on AI. Ginny Rametti said, well, the first chapter was only about 20%. The remaining 80% is going to be chapter two. We're going hard after that. I wrote in that post today that in 2013, IBM had a wake-up call. They lost that deal to Amazon at the CIA. They had to go out and buy software because their product was deficient. Their cloud product was deficient. And by the way, it looks like they're going to lose the Jedi contract by the DOD, another agency. That's a $10 billion contract. It looks like they're going to lose that one, too. We can talk about is Amazon's lead extending in cloud? And so IBM cannot take on Amazon head-to-head and infrastructure as a service period at the end. It doesn't have the volume. And they know that, I think. It doesn't have the margins, and they know that. They got to rely on, it's as a service business, it's SaaS, it's data, it's data platforms, obviously AI, and now Red Hat. The fact that IBM had to spend or spent $34 billion on Red Hat, to me, underscores the fact that it's cloud and its 10-year attempt to commercialize Watson isn't enough. It needs more to be a leader in hybrid. And let's talk about the Red Hat acquisition, because Ray Wang was on theCUBE yesterday as an analyst and said, oh, private equity prices are driving up $34 billion, pretty much market in today's world. He thinks they overpaid and could have used those services. You debated that, you know, you've heard me say that, hey, I could use that $34 billion and cobble together stuff, but you made a comment around speed. They don't have the gestation period there to do it. So if you take market price for Red Hat, Stu, with OpenShift's accelerated success, since Kubernetes really accelerated its adoption, you got IBM now with a mechanism to address the legacy on premise into cloud modern. And you got what those cloud privates do. This really is, I think, a secret weapon for IBM. And to me, what I'm pulling out all the data is that Rob Thomas and Interpol, the CDO, they have a great data AI strategy as a group. They have a team, it's one team, and this cloud private is a secret weapon for them. I think it's going to be a very key product, and not a lot of people are talking about it. Well, John, it shouldn't be a secret weapon for IBM, because, of course, IBM is a strong legacy in the data center. We talked about Z this week, you talked about power, and you talked about all the various pieces. Red Hat absolutely can help that a lot. What we noticed is there wasn't a lot of talk about Red Hat here just because it's going through the final pieces we expect later this year to come out, but it's about the developers. That is where Red Hat is going to be successful, where they are successful and where they should be able to help IBM leverage that going forward. The concern we have is culture. IBM says that Red Hat will be separate, there will be no layoffs, they'll keep that alone, but when I wrote about the acquisition, I said we should be able to see, for this to really be a successful acquisition, we should be able to see the Red Hat culture actually influence what's happening at IBM, and to be honest, when I talk to people around this show, they're like, that's never going to happen still. I just want to make a point about the price. Ray was saying how they overpaid, they made the private equity thing. IBM's paying $190 a share. If you dial back to June of 18, Stu, you and I talked about this in our offices, Red Hat was trading at $175 a share, so they're paying an 8.5% premium over that price. Yes, when they made the deal in the fall, you're talking about a 60% premium, so the premium is really like single digits over what it was just a few months earlier. And Cisco, Google, Microsoft, all could have gone after that. I think it's a great buy for IBM. It definitely helped there. So from my standpoint, looking at the show this week, first of all I was impressed to see really that data strategy and how that's pervasive through the company, and AI is something that everyone's talking about how it fits in. John, you commented a bunch of time. Ginny mentioned Kubernetes two times in her keynote, so they're in these communities, they're working on all these environments. The concern I have is if this is chapter two, and if AI is one of the battlefields, Amazon's all deep into AI. I think heavily about Google when I talk about that. When I talk to Microsoft people, they're like Satya Nadella is Mr. AI, that's all they care about to the big, hyper-jungle angle there. I don't think Microsoft has a lot of meat on the AI ball either. No, look it, here's the bottom line. AI is a moonshot, it is an aspirational marketplace. It's about machine learning and using data. AI has been around for a while and whoever can take advantage of that is going to be done. There's low hanging use cases of deterministic processes that you throw machine learning at, no problem. Doing cognition and reasoning, a whole nother ball game, you got state, this is where the, why I think the cloud native piece is important as a linchpin to future growth because that wave is coming. And I think it's not going to impact IBM so much now as it is in the future because you got developers with red hat and you got the enablement for cloud growth, modern cloud, stuff in any cloud. But IBM has a zillion customers, Dave. They have a business, they have mission critical workloads. And you pointed out in the Forbes post that we posted on and on Silicon Angle that IT economics are changing and that the cloud services market is growing. So IBM has pre-existing big mission critical companies that they're serving. So you can't just throw Kubernetes at that and say, lift and shift Z's there, you got other things happening. So to me, that is IBM's focus. They nail their bread and butter, they bring multi-cloud to the front of the table, throw hybrid at it with cloud, private cloud and they're stable. Everything else is just, I think, window dressing in my mind because I think you're going to see that adoption more downstream. Well, the other thing you gave me for the piece, actually, you helped me understand that IBM with red hat can use cloud native techniques and apply them to its customer base and to really create a new breed of business developers. Probably not the hoodie crowd, necessarily, but business developers that are driving value apps based on mission critical apps and using cloud native techniques. Your thoughts on that? The difference between Oracle and IBM is the following. Oracle has no traction in developers and cloud native. IBM now with red hat can take the cloud native growth and use containers and Kubernetes and these new technologies to essentially containerize legacy workloads and make them compatible with modern technology, which means if you're in business or in IT or running a lot of big shops, you don't have to kill the old to bring in the new. That's one factor. The other factor is the model's flipped. Applications are dictating architecture. It used to be infrastructure dictates what applications can do. It's completely reversed. We've heard this time and time again from the leading platforms, the ones that are looking at the applications with data as a fabric in there will dictate resource, whether it's one cloud or multiple clouds or whatever architecture, that's the fundamental shift. The people who get that will win and the people who don't won't. And the other thing I pointed out in that article is that Ginny kept saying it's not back-end loaded, the Red Hat deal, it's not back-end loaded. IBM has about a $20 billion business, captive business in outsourcing, application management, application modernization, and they can just point Red Hat right at that base, bring its services business, do you've made this point? It's about scaling Red Hat. Red Hat's what, a three and a half billion dollar company. And so that really is, she was explaining the business case for the acquisition. Yeah, absolutely. I mean, we've watched IBM for years. The Lumix had a little bit of traction but really faltered after a while that application modernization. You hear from IBM, similar to what we'd heard from Cisco a few weeks ago, meet customers where they are and help them move forward. We did a nice interview this week with a UK financial services company talking about how they're modernized what they're doing, things like IT ops, new ops, these environments that are helping people with that app development. Because IBM does have a good application workflow. There's lots of the infrastructure companies don't have apps. When was the last, I got a question, I got a direct message from the crowd, I want to get this to you, but I want to ask you guys a question. When was the last time you saw a real innovation and disruption in a positive way around business applications? We're talking about business applications, not a software app that's going to create a category. We're talking about blocking and tackling business applications. When have you seen any kind of large scale transition innovation, transition and innovation at the business application level? Google Docs? I mean, think about it, right? So I think this is where IBM is an opportunity. I think the data science piece is going to transform into a business app marketplace. I think that's where their value is, so. Workday. ServiceNow. It's like the classification of everything, I mean. ServiceNow, features become products, products become companies. I mean, this is a big debate. I mean, you could win. But that's not really not a business, I mean, it is a business app, but it's more of an IT app. Right, Workday, I would say, is an example. Yeah, and look, here's one of the flaws in that multi-cloud picture is it's, I'm going to take all this heterogeneous environment and I'm going to give you a multi-cloud manager. We've seen that single pane of glass discussion my entire career and it never works, you know, so. I'm a little bit uncertain about that. So Andy Jassy makes the case that multi-cloud is less secure, more complex, more expensive. It's a strong case that he makes. Now, of course, my argument is it's multi-vendor. It's not really multi-cloud. Here's the Silicon Valley. So you don't have any control over that. It's not a procurement thing, it's just a way that people go by. Well, I think the world has changed with cloud. I'll give you a Silicon Valley example anecdote. It used to be an expression in Silicon Valley and venture capital community. If you were a startup or an entrepreneur, you'd have to build a platform. And there was an old expression, that's a feature, not a company. That's kind of a joke within the VC community and that's how they would invent deals. That's a good feature. Three to four was a feature. That's a great idea. Now with cloud as a platform and with all the stuff that's coming to bear, horizontally scalable, all the things that IBM's rolling out, sets the table for a feature to be a company where you have an innovation at the business model level. You don't really need tech anymore other than to scale up and build it out and that's all done for you by other people. So people who are innovating on, say, an idea, well, let's change this little feature in HR app or let's, and that could be district workday or let's change this feature. Features can become companies now. So I think that's my observation. I think that's- I think it's really interesting. And it could live in the cloud marketplaces too. It's so easy to get that scale if I can plug into all those marketplaces. IBM for years has had thousands of partners in their ecosystem. Of course, Amazon's marketplace, growing like aim busters. But this is what Jerry Chen said when we were at re-invent last year. And we were asking him about Amazon, will it go up the stack? Will it develop applications? He said, well, look, what they're going to do is give people a platform for application developers to build those features, to disrupt, to your point, the core enterprise apps. Now, can IBM get there before Amazon? Who knows? All right, guys, let's look at the big pitch. Zoom out your thoughts on, think, 2019, what IBM thinks, Stu, what's your final thoughts? Yeah, final thoughts is, I think IBM first of all is coming together. Just as this show was six shows in last year, it was in two locations and some of the pieces come, there's cohesive. I heard through the four days of interviews, we saw a lot of different pieces. Everything from talking about augmented reality through storage and we talked about the Z and those pervasive themes of data, AI, Dave, what do you call it? It's the innovation cocktail now in cloud. Data, AI and cloud, put those three together. Innovation sandwich, innovation cocktail. I have a cocktail and a sandwich. That's your big takeaway. My takeaway, Dave, is that you nailed it in your post. I thought, you should go to Forbes and check out search on IBM. Think you'll find the post by me and Dave, a lot of them, it's really written by Dave. I think to me, IBM can change the game on two fronts. I learned and I walked away with a learning this week about this business apps. To me, my walk away is, there's going to be innovation at a new genre of developers. I think you're going to see IBM target, they should target these business apps guys, as well as with the cloud, Dave and Red Hat. I really think highly of that acquisition from a speed standpoint. I think the culture of Red Hat, although different, will be a nice check against IBM's, natural ability to blue wash it, which means you don't want to lose the innovation. I think Ginny, saying Kubernetes twice on stage, is a sign that she sees this path. I think the cloud private opportunity could be a nice lever to bring open shifts and Kubernetes into that growth. I think AI is going to be one of those things where they're either going to go big or go home. I think it's going to be one of those things. I love the venue way better than last year in terms of the logistics. I like the new Moscone, easy to get around. May next year, May 2020, is going to be better than February here. I would have liked to see Ginny sell harder. I mean, she laid out a vision, she talked about a lot of high level things. I would have liked to see in her cell the new IBM and Red Hat harder. I guess they couldn't do that because they weren't worried about compliance, and monopolistic behavior, I guess. But I'm really excited to hear that story and a harder sell on the new IBM. I think if they can take the Microsoft Playbook of cloudifying everything, going with the open source with Red Hat, and then just getting the great SaaS app revenue up, they're going to can do well. All right guys, great job. Thanks for hosting this week. Lisa Martin is not here today. I want to thank Lisa Martin, she were out there watching. Great time. Guys, thanks for the crew, thanks to IBM. Thanks to all of our sponsors to make theCUBE do what we do, and thanks for all your support to the community. I'm John Furrier, Dave Vellante, Stu Miniman, thanks for watching. See you next time.