 from Las Vegas, extracting the signal from the noise. It's theCUBE, covering IBM Insight 2015, brought to you by IBM. Welcome back to IBM Insight, everybody. This is theCUBE. I'm here with Paul Gillan and George Gilbert and we're going to wrap day one. We'll be here for two days. This is the first day of Insight. We heard the keynotes this morning. Big themes by IBM talking heavily about cognitive new era. Not a ton of product stuff today. I'm expecting we're going to hear some of that tomorrow, guys, but let me start with you, Paul. What are your thoughts on what you heard today? Well, you know, if you listen to what the stock market is saying, what the analysts are saying, the 13 straight quarters of declining earnings, 13 or 14, whatever it is, you would get the impression that this is a company that's on the decline. But I have to tell you, this is a huge crowd here today. You walked into the ballroom today. The opening keynot wasn't held in a ballroom, it was held in a stadium and it was absolutely packed. And there's a lot of customers here, a lot of business partners, a lot of IBMers too, but it was a very energetic crowd. They were excited about what they were seeing. It was a well-staged presentation. It was very coherent and very upbeat. And I have to say, those who would say that IBM is accompanying on the decline need to come to events like this and see that there's still a lot of customer enthusiasm for what they're doing. And they have made a lot of tough decisions about this business over the last couple of years, smart decisions, and they're putting a lot of wood behind this big data and analytics arrow. And it seems like the message is resonating. Yeah, I've said a number of times, IBM has to shrink to grow. And that's sort of exactly what's happening. So I don't get freaked out about the declining revenue. I, as well, I want to see that sort of bounce off the bottom. But to me, the more important thing about IBM, and George would love to get your take on this in terms of specifically where they're putting their emphasis, but is IBM spends on R&D? And it's very clear where they're going with their R&D dollars. They've made a zillion acquisitions. They said, okay, let's cobble that together into an analytics powerhouse. Huge bet on Watson. Let's pour money into cognitive. So then, okay, let's do cloud. Let's buy software. Let's get the blue mix thing going. Let's pour money into that. Let's get the developer crowd. So major, major initiatives, you know, and then put in mobile and some partnerships around that. Compare that to some of the other large tech players. HP now is splitting up. You know, what's HP investing in? The machine, you know, memrister. You know, public cloud. They just killed their public cloud. So, you know, there's, and they don't spend nearly as much on R&D as IBM. Oracle spends a lot on R&D, but it's very focused, you know, on Oracle stack. Okay, fine. I'm okay with that because they're spending a lot of money on R&D. R&D is the lifeblood of the technology business. If you don't spend money on R&D and you don't have the ability to do M&A, you're going to fall behind. And I think that's what we've seen with HP. IBM, I think, is in a position where at some point they can grow. But George, so what's your take on IBM's analytics business specifically? That's really what this event is all about. Well, I started the day thinking, you know, there was BlueMix, which was a little bit after the fact in terms of Amazon as a platform, as a service coming together, and that there were several databases with a little bit of overlap on them. And I also wondered, we talked about this when we did the kickoff, like what was Watson? What did it look like to a developer? And the thing that I came away with today was that Watson really is pervasive. It has become pervasive since last year. And what was actually really eye-opening was that they're talking about exposing it to developers and even business analysts and in users through something called WorkSpaces, which was pioneered many, many years ago for data scientists, frankly, and programmers. And now they want to make those as easy to use as spreadsheets. And that sort of brings it all together for me. So you have BlueMix, and underneath that you have SoftLayer, you have the databases on top of that, and then you have Watson exposed through what's essentially like a spreadsheet. Then there's a whole lot of go-to-market stuff after that, but take that as a tech stack that's very coherent now. So, I mean, the market has a gazillion databases, right, they're exploding. So IBM's got what, five of them? You got DB2, you got Informix, you got DashDB, you got IMS, you got Natesa, what else? To be fair, they're doing what Microsoft did, which was Microsoft was on a package software release cycle. So for every couple of years, another sausage would come out, you'd call it SQL Server 2012 or 2014. Now they have, I think it's quarterly releases of SQL Server on Azure, and then every couple of years they'll squeeze out another packaged version, and that's how IBM does it with DashDB. So they've integrated capabilities from Natesa, they've integrated capabilities from DB2, and basically DashDB is the tip of the spear, and so it's not quite as messy as it sounds. But, I mean, owning a database, there's so many databases out there, there's a lot of open source alternatives, it's not a great growth engine for any company, including Oracle. It seems to me, Amazon has got a huge amount of coverage over re-invent and over all the products they announced there and just a huge lead they have in the cloud. People say, well, where's IBM and all that? Well, IBM doesn't have to compete with Amazon in the cloud, because Amazon's got a coherent hybrid strategy, they've got a good cloud story, they're in the top four, they're going to stay there, and they have to be in the race, but they certainly don't have to challenge the leader. They have to have one good coherent story to tell, and I think it's clear that between Watson and the analytics portfolio, they are lining up around this analytics as really being the place that IBM leads. And that's as good a story as anybody has right now, certainly as good as what Oracle has to tell, and maybe what Amazon has to tell. I think the question I have about IBM Analytics is just pulling together all these piece parts. You know, there's been 25 acquisitions in analytics, they have a very fragmented portfolio of different products that are oriented toward different markets, and I don't see a coherent message yet about how you sort all those out if you're a customer. I think they're good technologies in their own right, but why is Tableau able to build the kind of head of steam that they have? Why doesn't IBM own that space? I think there are still gaps. They have not really lined these technologies up in a way that they all fit together. So we've got, I'm just pulling up the Wikibon cloud forecast for 2015. It's got Microsoft number one, Amazon number two, Salesforce number three, IBM number four. And the reason why IBM's number four is they participate in all those markets. I think IBM said in the last 12 months, in the last earnings call it said they've done nine billion in cloud. Now, the way they count cloud is maybe different than what we count cloud. And I know that what Amazon counts as cloud, 100% what we would count as cloud, same thing with Salesforce. And I think actually, for the most part, same thing with Oracle. I think Oracle's got a pretty clean accounting of cloud. I'm not sure if IBM's is as clean. HP really doesn't have a public cloud, but so their cloud business sort of comprises a lot of on-prem stuff. Generally, I think that when we talk cloud, we're talking about public cloud capabilities. But so, and so we've attempted to sort of strip out the kitchen sink stuff and IBM comes up fourth. This is the forecast for 2015, so it's still to be determined as we got a couple months left in the quarter. But I think IBM does have to be a major player there. I think IBM's actually looking pretty smart right now getting rid of its x86 business. We were kind of negative about that. But you look at the hard times and hardware and you look at a company like Dell who actually is embracing the collapse in hardware pricing, great, come on into our world, taking EMC and driving its cost structures into the EMC culture that's going to be interesting to see how that all works out. But I think Dell's the right company to do that because it's unsustainable. You talk about a slow-motion collapse in infrastructure software pricing, same thing's happening with hardware. So IBM, somebody said on theCUBE today, you can, it was the guys you interviewed from the micro factory guys. They told the car, 3D printed car, yeah. He said he trained under, the CEO trained under Michael Porter. He said you could either go high volume, low cost, or you can go differentiable. What do you think of IBM? Mercedes or Volkswagen? So clearly IBM's not trying to, when does IBM ever won really in the volume market? Kind of lost in PCs and micro electronics, disk drives, those are schlocky businesses. And IBM's not a schlocky company. That's a quote from Al Shugart, actually. So I think it's the right play. Street's not buying into it though, George. But it's so, I mean I go back to something I said earlier in the kickoff, which is IBM's business model is to solve hard problems for big companies and also at high margins. And when they get in trouble it appears is when they lose sight of that margin issue or they thought with PCs that they could maintain high margins cause they were like, well why would anyone buy a PC from anyone but us? So to your point about IBM going through a transformation, I mean just think of a metaphor. You know you got a caterpillar curls up, goes into a cocoon and out comes a butterfly. It's just a little bit of a process and yes they'll shrink. But you don't measure a company by its revenues. That's not how you value a company. Well it's a revenue. We got a lot of revenue selling dollar bills for 90 cents. Yeah, well you're right. And we're seeing that a lot of companies are out there today driving revenue with dollar every dollar revenue takes two dollars of expense to get there. Well that's the more relevant metric when you put the two together. I mean I do like, I think there are times when revenue multiples, when you get a market that's kind of settling down nicely and starting to throw off some profits. I think revenue multiples are actually a reasonable thing to look at. But they're very misleading when you've got these so-called unicorns that are growing like crazy and not making any money. You know it's going to be interesting to see, you got guys like you mentioned Tableau, you got ServiceNow is another one doing very well work day. These guys are not profitable or they're barely profitable companies. It's hard for them because as public companies they've got to report earnings, they try to earn some kind of profit. At the same time they've got to grow globally, they've got to invest in R&D so every dime they make goes back into the business. And oh by the way a lot of that is you know they're always reporting non-gap. You know they're doing a lot of stuff to you know stock options and the like and stock buybacks not so much these smaller companies but it feels like we're in the middle of this transition and something's giving. You know the Dell EMC acquisition is a sign of the times and we've talked about this at Big Data NYC last month. I said it was overcrowded, overfunded and profitless. Peter Goldmark I thought had a great analogy. He basically for those of you who didn't see it he said that and you remember this George I think you did the interview with me. There are a lot of companies that it looks like the nose of the plane is pointed up but they're losing altitude and when funding dries up the nose of that plane is going to point down and it's going to get ugly and then you're going to see companies like IBM and others who are strong at M&A, swoop in and start picking up assets. But the question I have for you George is with all this open source where's the IP? And that's why people complain. The ecosystem complains about IBM and its behavior in open source. We know IBM's committed to open source but they'll say oh yeah but it's insisting on doing its own Hadoop distribution for example. But that's IBM trying to protect IP isn't it? Well I don't know if I'm answering exactly your question but let me give it a shot. The model that people who subscribe to an open source business model believe in is we'll get the design win with the developer typically. You know someone who downloads it, gets it up and running. And then when we have to go to support to put it into operation or I'm sorry to go to operations to get this thing up and running in production then we'll sell them some technology whether open source or not that helps keep it running at low cost. The problem is if you have a whole stack of different companies who are going to go to IT ops and say we'll help you keep this running and just buy our little console. You know you're like in Alice in Wonderland or some kaleidoscope with all these random mirrors. And it doesn't do you any good. And so there has to be consolidation. And I go back to why we see Azure, Amazon, Google, IBM providing a management framework that others might be able to plug into. Otherwise the economics of open source where the value comes from helping people run your software just won't work. So IBM of course talks about business outcomes and we of course always want to say okay but how do you get there? So we were at Pentaho World a few weeks ago and we had a couple of customers on. We had FINRA on, we had NASDAQ on, a couple others. And what they were doing they were taking diverse data sets Paul and they were ingesting them into the cloud and then they built out the sort of end to end data factory, data pipeline and they would blend all these diverse data sets of data integration and clean the data and then they would operationalize that data by embedding analytics into their systems and putting access to the analytics giving access to the end users. This whole citizens analytics thing that we talked about we said wow that's really impressive, it's unique. Pentaho is a really pretty robust platform. Company Hitachi just bought for their internet of things play and we said the only company that we think has the capabilities to do anything like that is IBM. The question we had is but we didn't know how integrated it was. Certainly Pentaho made it sound like it was highly integrated. You talk to customers it seemed like it was. How integrated is IBM and can you answer that question any better today than you could three weeks ago? I did come away with two questions from Pentaho which is when someone says they're integrated it's their definition of integrated and it sounded pretty integrated. The other one was embedded analytics which worked for the OLAP cube but if you needed sort of machine learning or something you had to sort of slide something else in there so you lose the collaboration magic between the data scientists. And security was kind of a bolt on as well. Yes, the IBM was talking about really sort of cradle to grave integration and I can't remember off the top of my head all the levels but it did appear to go further. The point they made was the moment you drop out of your integration pipeline into something like Tableau you know snip all your governance is gone. Now it's possible that Tableau and Pentaho can do proprietary integration just the way Tableau did it with Informatica but there's one thing that Pentaho did not talk about that we heard about here which was data wrangling is not a matter of trying to tie together a couple dozen data sources where you would have them coming from operational systems. When we talked to Inie Cho Su she was talking about data feeds coming everywhere externally internally when you're talking 100, 200 more you need machine learning to figure out how they all come together and there's not too many companies offering that. And you're saying IBM has that depth. Paul, I wanted to ask you for the CIO CDO perspective I thought that was an interesting conversation that we had and you were kind of defending the CIO's position of this really should be the CIO's job but my question to you is the CIO sort of narrowed his or her scope and sort of failed to be able to take on that job of I would tend to agree with you. When I started Wikibon we started with this whole notion of information asset and liability management that is the CIO is your job to manage information manage it as an asset and protect the company from liability. That sounds a lot like the CIO CDO's job that's evolved so should that be the role of the CIO or is it too late? Are they just sort of keeping the light of the disk drive on? I mean the words data and information are interchangeable so why do we need a chief data officer or we have a chief information officer? Well maybe it's because the chief information officer is not doing his or her job. That's why I think there's a turning point right now for CIO's I just got back from a conference with about 70 CIO's from very large companies and this was an undercurrent that I sense very strongly that they are at a point now where they either have to get strategic or they're going to be forced back into a niche where they're just doing infrastructure and they don't want to do that. But how many CIO's have the skill set, have the time, have the vision to be able to step up and deal with data more strategically? I think that's always been a tough shift for CIO's to make going back a couple of decades but now it's kind of like the rubber needs to meet the road because data finally is strategic to these organizations and somebody has to define strategic value from that data and if it's not the CIO then it's going to be somebody else. Now my personal opinion is I think it is going to be somebody else. I think the role of the CDO is to be a change agent to help companies get to the data driven organization. I don't see the CIO doing that. I do see the CIO however, the imperative is to have a strategic role as a business enabler. The CIO really should be a business person that says okay, you got to get stuff done. Because everything in business is a project, it's an initiative and it's got a beginning and you got to fund it and it's got to throw off an ROI and there's a technology component to it. The CIO in my opinion should be somebody who really understands that business imperative and can support and facilitate that business imperative. I see the CDO as more somebody who's really trying to understand how to transform the organization, not that the CIO doesn't have transformational role as well, they do, but specific to using data as a competitive advantage. I don't see that as the CIO's role. That's not the skill set that has gotten CIOs to where they are. What defines a successful CIO historically has been budget management, uptime, availability, stick to the numbers. Not getting in the way. Don't get in the way, ideally everything just works and we don't even have to be aware that you're there. So that's what you need for success and now you've got this transform the business that really the skill sets don't align very well. Well, and what about the Chief Digital Officer? Well, I just don't think that's happening. Well, should it be happening though? No. Well, right when you disagree, right? You would come on and say, oh no, the Chief Digital Officer. This is an obsession with C titles. The C title is a corporate officer. It's a very important person. We had the Chief Customer Officer for a while. That was hot. Chief Innovation Officer. These titles come and go. I think CDO may actually have some legs, but I'm not. Well, I think it may. I'm not in favor of creating a lot of new C-low titles. Especially in financial services, healthcare, and government. To me, the Chief Digital Officer is really the Chief Strategy Officer. Right, and it's fine to have it or whatever, if you want to call it CFO, the VP of strategy. Somebody who runs strategy and your strategy is to enter the digital age and digitize your physical assets. That's a strategy play. Now, do you want to put somebody in charge of that for a period of time? Maybe, but is that sustainable? No, because eventually the whole business becomes digital. You know, I'm listening to you guys, and I think you're answering your own questions. Like when you talk about the CIO being responsible for our availability and uptime and all those things. To me, that means CIO now spells Chief Infrastructure Officer. And when you talk about CDO being the Chief Data Officer, when we talk about, we don't use really the term anymore, the API economy or sort of exposing microservices for your company where people plug in and deal with your company programmatically. But that's what a CDO would deliver. You would be part of someone else's supply chain. You're a supplier of analytic data feed and data services. And so yes, that's very strategic. That's top line sensitive. Whereas someone who just cares about keeping stuff running is the Infrastructure Officer. Hi, gents, we have to wrap. So that's it from day one. What are you guys looking for tomorrow? I mean, anything you didn't see today that you want to hear from tomorrow or any kind of closing thoughts? Let's start with you, Bob. I think we have a great lineup tomorrow. We have Bob Picciano, who's huge. He's responsible for this whole business. He'll be a great interview. We have Joel Colley of Information Insights as a Service. We have Merv Adrian from Gartner, who's on the schedule. And Jason Silva from National Geographic's Brain Games. I can't wait to hear your own thoughts. He's been on before. He's going to be great. So really good lineup tomorrow. IBMers, non-IBMers, Jim Harris, best-selling authors. I think it'll be a lot of variety. And I'm looking forward to it. The only thing I would add is, in the areas where we said, OK, so we had questions about nailing them down to specifics, we'll get another shot at it tomorrow. Yeah, and from my standpoint, I always love the business angle. And IBM's last public statement was they had a $17 billion analytics business that's huge. It's been growing 20% a quarter for the last three quarters. This is a $20-plus billion business on the way to $25 to $30 billion, a third of the company's revenue and a real engine of growth and margin, because it's high-margin business. So I'm really interested in learning more, particularly from Bob Picciano about that. So very gracious with his time, really thrilled that he's coming on. And a good lineup for you tomorrow. So check out ibmgo.com. ibmgo.com is the digital experience for IBM Insight. There's a crowd chat on there, which we're hosting as part of that site. Or you can get there directly at crowdchat.net slash ibminsight. Join the conversation, tweet us, text us. Thanks for all the support. Thanks for watching, everybody. We'll see you tomorrow.