 Live from the Palace Hotel in San Francisco, it's theCUBE at the HGST Press and Industry Analyst Briefing. Brought to you by headline sponsor HGST. Here are your hosts, Stu Miniman and Jeff Frick. Hi, welcome back. We are here live at the Sheridan Palace in downtown San Francisco at the HGST Industry Analyst and Press event. It's been an exciting day, a lot of new news, a lot of new product introductions and a lot of really transformation in the data center that's driven by the underlying really storage technology and the stuff for all this big data's got to actually sit. Joining by this segment with my co-host. Hi, I'm Stu Miniman with wikibond.org and joining us for this segment, we're pleased to have Mike Cordano, who's the president of HGST. Mike, thank you so much for joining us here on theCUBE. Great, thanks for having me. Yeah, so we were talking before before the camera started rolling about just the diversity of opportunities. I think Steve Milligan said this morning, the president and CEO of Western Digital, which you guys are a division of. So can you start off for our audience, talk about what is the opportunity in data today? Yeah, I think we see a broad set of opportunities, right? We see lots of infrastructure changing around us, other requirements of that infrastructure are changing very rapidly and that's being driven by innovation out of a hyperscale cloud service provider. So our opportunity is to develop down to general vectors. One is very high performance, which we're doing through our flash products group, lines of products and innovation, and secondly is around the massive amounts of data, so a more capacity-centric story where we're innovating around and through our Elastic Storage team. So we really want to develop opportunities that are at both ends of the performance spectrum all the way up at tier zero and then in a new sub-segment that we call Active Archiving. All right, can you walk through for us some of the really the journey of HGST? So it struck me, you said over 7,000 patents from the heritage in disk drives and it's not just hard drives and flash, SSDs, there's a lot of software that you've done in-house and through acquisitions, so who is HGST? What makes up the company today? Yeah, it's a very interesting story. Obviously it goes back to IBM and the invention of the hard drive, but through time we've accumulated lots of complementary assets around storage, so obviously you've got the roots of HDD but we've coupled with that in the last several years, a lot of NBM or flash-based assets, so both at the device level, but increasingly importantly, we're adding now capabilities through software value add through three acquisitions last year to deliver value on top of the devices themselves. So while you see us go, as we'll take those assets, we acquired three companies, Vellabit, Virident and Estec, each were unique in their own right, two of them were largely software providers. So if you look underneath them, we got software product, software algorithms and software developers more importantly, so that's really helping us create a level of data services above the device itself. We're operating now at a fairly low level, but we want to deliver data services that we can package and deliver to the market as a new building block that can be consumed whether it be by our traditional OEM partners or by a cloud service provider. All right, so, good, go ahead. Yeah, so when we saw the consolidation in the disk drive industry, it really got down to the device and we're starting to see some consolidation around the flash market place, but you guys have aspirations to be more than just a device. Where do you see the kind of things like device affinity and some of these expansions in software? Where does HGST fit into that flash ecosystem? Yeah, so I think where we see where we fit is, obviously we think there's a foundational element of devices whether they be flat, MVM-based, forget flash, because there's next generations of that coming, but also rotating magnetic media, but that's not enough for us. So now what we see is an opportunity to move up the stack. We use that term sort of liberally now. And what we mean by that is really moving up the next layer of the stack and delivering really a new aggregation point so we can deliver a more value added building block to the marketplace. So I think we announced some products that are evidence of that today, both on the flash and on the drive side. Yeah, I'm wondering if you can say how do you feel you can differentiate yourself from your competition in the marketplace? So specifically guys like Seagate, like Sandisk, we talked in the session this morning, you said there's some design differences, but fundamentally, what is your vision for where you fit? Yeah, so I think where we sit today, we're in a unique position of our competitors. We have a broad portfolio of HDD of course and there are competitors that have that and we have a broad portfolio of SSD and growing. We're uniquely positioned to have both today. So we've got a bit of a head start, so we're happy about that. But for us, we're looking forward to competing on different dimensions, right? It's not just about aerial density capacity or performance, which is in the devices world over time. We now wanna be able to look out beyond us, understand the applications and workloads we're operating in and be able to develop solutions that are more uniquely tuned for that. So that's a very broad world. I think there's room for a number of us to compete there. I think where we think we're well situated is we're ahead of the game in acquiring the capabilities to deploy to this market. So I think we've got a good head start. We have much more to do, but it's a broad world and certainly we see it as there's room for a number of us to be successful, but we're off to a good start. We're very comfortable about our position and bullish about our future. Mike, you talked about a couple of things earlier today that I picked up on one I thought was real interesting. The data's value increases over time was a statement that you made. At the same time as the real business impact of, what do you keep, what's it worth, your quotes, and what's the business impact? And then you've got this other thing, these cloud service providers now that are delivering hyperscale that never seen before, generally single or not a whole lot of applications are really changing the game in terms of their requirements, they're building custom boxes, et cetera. I wonder if you could talk about how these things, big data, how much do you keep, business value, hyperscale, also I think really what those guys have done is shown the value of latency, really spelled it out clearly, not just in the financial services, but I want to see my picture now and there's actual value to that. How that's transformed your business and where you see that growth opportunity that comes from that. Well, that's really underpins this notion that we actually rolled out two years ago at the broader WDC analyst day. We talked about explicitly wanting to invest, we call it the barbell approach, which means outside the traditional sort of storage array, we want to really invest at the very highest end, so the performance application acceleration into the spectrum, and then we were non-specific two years ago, we got much more specific today, we want to create a new category of storage, because we do believe when you think about the data growth that's out there, the challenges around how much data you can store, there's room for a brand new category and it is elastic to price. It's got to have certain performance attributes, you have to be able to access it rapidly, that's why tape and traditional deep archive technologies may not be appropriate for it, but if we can deliver adequate accessibility at a much different cost point, that really opens up a new segment that as we see it today does not exist. It does not exist. So, Mike, one of the biggest challenges for the big storage companies today is the cloud providers themselves, because they're typically not going to buy a storage array from EMC or NetApp, just because it doesn't fit for what they're doing. You guys are in many of those accounts. Can you talk about your relationship with some of the big cloud providers and what have you learned from them that's helped drive some of your product roadmap? Well, I think the biggest advantage to us has been the cloud service engagements for us has been, and this started probably five years or so ago, that put us directly in contact with an end user so we could understand exactly what was happening, what their needs were, and we began to sort of educate ourselves and understand here's the opportunity. So you combine that sort of access and insight with the fact that much of the innovation that was happening in those same places, we're in a really cat bird seat position to understand, well, if we can innovate based upon that knowledge and that understanding, it puts us in a unique position to deliver value added to the market. And they're really pushing limits in ways that the enterprise clients just didn't push it? No question. I mean, they're operating at a scale that you can't see anywhere else, so it's testing the infrastructure in new and different ways. They're also delivering services. I think Dave talked about in his presentation, this statistic that says all of new cloud scale applications, 75% of them are data intensive. That's creating a new application environment with new requirements. And we're right on the front line of understanding that. We have an opportunity to begin to innovate against that challenge. All right. Are there any, you shared the example of LinkedIn. I talked to Brendan earlier about Netflix. Are there any other big cloud guys that you can share? Unfortunately, we can't, we talked about the ones that we could talk about. So I think we're happy to say we're engaging across the broad waterfront of the hyperscale guys, but we need to maintain our confidence. All right. I won't poke too hard on that then. So you've talked a bunch about going up the stack. And there's a little bit of a natural tension between your customers, which you said broke into two pieces, the OEMs, who's server and storage guys, and the cloud guys. So where do you guys feel that you can really innovate and add value there? And how do you create kind of a new building block beyond just the device itself? Yeah, our sense is we have to architect in a modular way. Because depending on who the customer is, they're going to take more or less of our technology, right? So if you think about building at a foundational devices level, layering value out on top of that, depending on who we're talking to, depending upon their strategy, you're going to see them want to take more of that. So we're not going to create a vertical solution that can only be sold in that way, because that would limit our market acceptance. We want to be able to sell, if you think of a layer cake, we want to be able to sell one layer or two or the entire cake, depending on the customer and requirements. So that's the way we're thinking about building out our capabilities and solutions. And it really lines up nicely to the way the market's evolving as well. All right, can you give us a little insight? Your workforce itself, how much of it is today focused on software versus hardware? And where do you see things going over the next couple of years? Well, I think today, I mean, obviously in our employee population, we have a manufacturing operation. So the bulk of our employees are in the operational side. But if we think about development or engineering part of the company, we still have a preponderance of the engineers that are working on hard drive. But that has grown substantially around, excuse me, around both flash-based assets as well as software. So where we had, if you go back, we probably had had people working on software. This excludes firmware, which is a nice distinguishing point. We probably had less than 100 people before. We really got serious about moving into the software arena. Now we've got approximating 500 people and growing in the software. All right, so it's interesting. I'm a hardware guy by background, studying mechanical engineering. And all you've heard for the last bunch of years is software is eating the world. So where do you see the value of hardware as software becomes a greater component of IT? Well, I think it's interesting to see. I think there's been a misnomer in the industry where it's sort of like, let's go to the cheapest, most commoditized hardware and the software guys will take care of it. They'll make it work in any environment. What we see as things evolve is, frankly speaking, there's more specialized requirements being asked for from the hardware. So I think we're just going through one of those natural cycles where the hardware infrastructure is gonna change. The traditional kind, it was sort of multi-use, may not be the way it evolves, but in certain high-scale applications, there's specific needs that people have from the hardware. The fact that we see that coming, we can innovate against that. And we can do it in a way that we connect it directly to the higher level values of the stack is an important differentiation for us. We talked about this device affinity, that's what we mean by it. Yeah, absolutely great point there. I mean, if you look at Amazon, they're not just buying off the shelf, they're working on it. I'm curious, the other one that gets a lot of discussion lately is the open compute that Facebook's driving. What's your take on things like open compute and open stack and the like? Yeah, I think we're generally in support of that. We think it's an important trend. In fact, many of our customers, when we deliver a solution, if we're not creating a sufficient level of openness, they're just not gonna buy. So whether it be a hardware open community or a software open community, you'll see us be very active in that and generally speaking, supportive of it. So Mike too, just circling back to the service providers, the cloud service providers, you said we're always on the cycle, right? And now it seems like everyone's kind of cycling away from kind of general purpose servers. Now we hear over and over again at AWS Reinvent and other people that they're building purpose-built machines. So are you seeing that trend? Is it getting anywhere outside of the hyperscale providers and how does that help you guys deliver, I guess it does, the different component level pieces to fit into those? Yeah, we do see that trend continuing. You saw it in our announcements today. Even within the capacity enterprise range, we now have three drives we announced today. They're all purpose-built and targeted at slightly different slices in the marketplace. I think that's being appreciated. I think some of the applications or architectural sort of slices we can carve off have enough scale to justify a more purpose-built architecture. All right, so we've seen this consolidation of the marketplace been going on for a while. How do you see the evolving landscape out there? You partner with a number of the NAND suppliers. As you look, how would you describe where we are in the overall marketplace? Well, I think we're in early innings. Obviously, there's well over 100 companies providing SSDs in the market today. That looks awful a lot like the hard drive business if you go back in time. So what we're focused on is, I think over time, that will consolidate, it's a natural evolution. What we're focused on is delivering and creating enough value that we're one of those players as time goes on. All right, so a lot of announcements here. Can you give us a little insight to kind of a team and what you're most proud about for there? I mean, it's kind of tough. We know the software piece came from some of the acquisitions, the hard drive, helium you've been working on for a while. So I hate to ask you to choose, but what do we take away as kind of the highlight for this? Well, I think first I want to talk about, I think the cultural we're building at HGST. What I'm proud of is how our employees, whether they be new employees through acquisition or the traditional employees that have been with HGST a long time, have really embraced this culture of change. We couldn't do any of this if it were rejected by the Borg, if you will. There would be no opportunity to successfully make this transition. So part of transitioning a company from one business model to another is a cultural impetus. And frankly, I'm most proud of that. It's really been an underpinning and enabling capability to some of these things we've been able to do. So we can think of very interesting market strategies. We can find interesting companies to acquire. But if we don't create the right capability within our culture to deliver that, we're not gonna be successful. But now if I come to the products themselves, I think, listen, the helium platform has been something we've been very excited for a long time. We've been slow to push the gas pedal on that. From what you heard from us today, we're fully down on the accelerator. So I think that's a huge deal. And I think I would combine this general, what you heard from both Gus and Dave around value-added solutions. Really, there's a general acceptance that our future is gonna have a heavier software component, but with a tightly integrated flavor relative to the hardware. So those two things, it's hard to pick on the specific products, but I mean, we're excited about them all. All right, so Mike, us in the analyst world always like to come up with the analogies. So you definitely rejected the, is HGST going to be kind of the next EMC? When I see things like creating flash clustering and volume management, maybe are you guys the next Veritas? Are you gonna, where do you strategically want people to think of HGST as they think about storage going into this next era? Yeah, I think strategically we want to be a storage infrastructure enabler. And we're going to do that in a way, given I think strategies that I've reasonable insight to with a number of our customers that's compatible with them. So we think there's a very long runway that we can innovate in a way that they'll want to buy these increasingly valuable building blocks that we're going to deliver. So yeah, we think of ourselves as a storage infrastructure provider and that's beyond devices. So there will be a level of data services that we need to deliver with that. There's no question. I think how that evolves over time will be interesting. And we're going to do that in a collaborative way with our best and most important customers. Great, and will you continue on the exact position that you've proven that's a good strategy for bringing in new innovation, new folks? Yeah, I think we will look at all ways to grow. Certainly organic. We'll take these assets we've acquired and grow on them, but we're continuously looking for new and interesting innovative technologies. I don't think we're necessarily done with the acquisition campaign. Good, and what's keeping you up at night, besides from Cathy today? Well, yeah, this today, but actually what's keeping me up? Great job to the team. They did a good job. Yeah, they really did. It was a fantastic job by all of them. I think what keeps me up at night is we have a lot of change happening. So we're obviously looking at a very dynamic market around us. We have to interpret that and figure out our course in action. And then we're now down to, as we discussed today, execution. So we've got to be able to realize and deliver on the promise we announced today. So those two things would be the two things that are top of mind. Good, well those are good things to work on. Execution is always a good thing to stay focused on. So, Mike, thanks for stopping by the Cube. Great insight, a lot of exciting new products, but really kind of a change in direction in terms of adding more of a software component and really trying to move up the stack, as you've said, a number of times. So I'm Jeff Rick, we're with the Cube here at the HGST industry analyst and press event. We're at the Sheridan Palace in downtown San Francisco. We'll be right back with our next segment after this short break.