 Live from San Francisco, celebrating 10 years of high-tech coverage, it's theCUBE. Covering VMworld 2019, brought to you by VMware and its ecosystem partners. Welcome back to San Francisco, day three of our coverage here on theCUBE of VMworld 2019. I'm John Walls, glad to have you here aboard for our continuing coverage here. Dave Vellante is also joining me as is the sartorily resplendent, Eric Herzog, CMO of and Vice President of Global Storage Channels at IBM Storage. Eric, good to see you and love the shirt, very nice. Thank you, well, always have a wine shirts when I'm on theCUBE. I love it, and a long time, CUBER too we might say, I'm sure. I think he's got the record. Yeah, might be. You and Pat are neck and neck. We'll go to the vault and see what we can do. Well, since Pat used to be my boss, I better, you know, couch out a pat on that one. Let him win. We'll let the old show at IBM Think, maybe we'll flip that. Okay, there we go. Let's just start off a big picture. We're in all this hybrid, multi, all this discussion going on this week, obviously. Just your thoughts about general trends and where the business is going now, as opposed to where maybe we worked through three years ago. Well, the good thing is for IBM Storage, and we actually came to your partner entity, Wikibon, when our new General Manager, Ed Walls joined and we came in and we saw Dave and John at the old office or at your offices and we did a pitch about hybrid multi-cloud. They gave us some feedback of how to create a new slide. So we created the slide based on Dave's input and we were doing that two and a half years ago. So we were running around telling the storage analyst, storage press about hybrid multi-cloud based on IBM Storage, how we can transparently move data, things we do with backup, of course, in archive. We've got about 450 small and medium cloud providers there backup as a service engine is our spectrum protect. And so we talked about that. So Dave helped us craft the slide to make it better because he said we left a couple of things out. But you guys, Eric owes you. There were a few other analysts I'm sure you talked to and got input, but you guys really were the first to kind of combine those things in your marketing presentations. But let's, I'd love to get an update on the business. Yes, okay. Help people understand the IBM Storage organization. You guys created the storage business, you know, years and years and years ago. It's, you know, you've got your core business, which is, you know, I call them arms dealers, but there's a lot of recent IBM, you know, the cloud division, you've got the services division. But so help us understand the sort of organizational structure and the business. So the IBM Storage division is part of IBM systems, which includes both the mainframe products, Z and the power server entity. So it's a server and storage division. The Z guys in particular have lots of software that they sell, not just mainframe. So they have a very, very large software business as do we. As you know, from looking at people that do the numbers, we're the second largest storage software company in the world and the bulk of that software is not running on IBM gear. So for example, Spectrum Protect will back up anyone's array, Spectrum Scale, and our IBM Cloud Object Storage are sold as software, only software defined as the Spectrum virtualize, you could basically create a J-Bot or J-Bot through your favorite distributor or reseller and create your own array. It's our software, but all of the infrastructure would actually not be ours, not branded by us, and you'd call us for tech support for the software side, but if you had a bad power supply or fan, you'd have to call the reseller or distributor. So this very robust storage software business, obviously you make sure that we're always compatible with the other server elements of IBM systems, but the bulk of our storage is actually sitting connected to some server that doesn't have an IBM logo on it. So that's the bulk of our business connected to Intel servers of all types. And that used to include, of course, IBM's Intel server division, which was sold off to Lenovo. So we still have a very robust business in the array space that has nothing to do with working on a power machine or working on a Z machine, although we clearly work very heavily with them and have a number of things going with them, including something that's coming very shortly in the middle of September on some new high-end products that we're going to do. When IDC counts all this stuff, do they count, do they give IBM credit for all the storage that lives inside of the IBM Cloud? Do you get credit for that? We do not get credit for that. So when they count our number, it's only the systems that we sell and the storage software that we sell. So if you look at, if we were a standalone company, which would include support, service, everything, some of which we don't get credit for, right? The support and service, there's a different entity at IBM that does that. The services group, the tech support, that all goes to someone else. We don't get revenue credit. So hypothetical, I don't think this is the case, but let's say hypothetically, if pure storage sold an array into IBM Cloud, they would get credit for it. But if your array, and I'm sure this happens, is inside of the IBM Cloud, you don't get credit for it. That's true. Interesting. So it's somewhat undercounts. Part of that is the way we internally count, because we're selling it to ourselves. But that's accounting. It's not, it's more of an accounting thing, but it's different when we sell to anybody else. So for example, we sell to hundreds of cloud providers who, in theory, compete with the IBM Cloud division. So you get credit for that, and we get credit for that. But you don't get credit for your own cloud. That's exactly the way, that's the way it works. But if we were a standalone company, for sake of our own, we were Zog and Store, and I bought the company away, we'd be about a $6.3 billion standalone storage software company. That's what we would be if we were all in, because support service maintenance, if we were our own company with our own, right, legal entity, just like a NetApp or the other guys, we'd be standalone. We'd be in that low $6 billion range counting everything all in. When we do report publicly, we only report our storage system business. We don't even report our storage software business. And as you notice, a few times our CFO has made comments, if we did count the storage software business, it would be X. And he's publicly stated that, probably at least two times since I've been in IBM when he talks about the software element. But legally, we only talk about IBM storage systems when we publicly state our numbers out onto Wall Street. That's all we publicly report. So, you're like a walking sheet of knowledge here. But I wonder if you could take the audience through the portfolio. Oh, sure. It's vast. How should we think about it? And the names have changed. You talk about, you know, 250 arrays, it's the old sand volume controller. Now it's a spectrum virtualized. So, take us through the portfolio. What's the comment? It's pretty straightforward. We have really three elements in the portfolio, all built around, if you will, solution plays. But the three real elements in the portfolio are storage arrays, storage systems. We have entry, mid-range and high-end, just like our competitors do. We lead with all flash, but we still sell hybrid. And obviously for backup and archive, we still sell all hard drive right for those workloads. And we have file, block and object, just like most of the other guys do, for an array. Then we have a business built around software. And we have two key elements there. Software-defined storage. And we sell that software completely standalone. It happens to, by the way, be embedded on the arrays. So, for example, Dave, you mentioned spectrum virtualized. That ships on flash systems and store-wise. But if you don't want our arrays, we will sell you just spectrum virtualized alone for block, spectrum scale for big data AI file workloads, and IBM Cloud Object Storage, which all of them can be bought on an array, but they also can be bought as just standalone software. It's a single component. Yes, it's a software. So, part of the advantage we feel that delivers is some of the people that have software-defined storage that are array guys, it's not the same software. So, for us, A, it's easier for us to support and service. It's easier for us to develop and have leading-ed features that are not running two different pieces of software, running one that happens to have a software-only version or an array-embedded version. So, we've got that. And then the third is around modern data protection, and that's really it. So, a modern data protection portfolio built around spectrum protect and protect plus and some other elements, a software-defined storage where we sell the software only, and then arrays. That's it, it's really three things in a nutshell. Now, there are all kinds of components underneath the hood, but what we really do is we sell, we don't really run around and talk about all flash arrays. We talk about hybrid multi-cloud. Now, all of our all flash arrays, and a lot of our software-defined storage, will automatically tier data out to hybrid multi-cloud configurations. We just, so we lead with that. Same thing, we have one around cyber resiliency. Now, the one thing that spans the whole portfolio is cyber resiliency. We have cyber resiliency in arrays. We have some software on the mainframe called Safeguarded Copy that creates immutable copies that has extra security for the management, right? So, you've got management control, and if you have a malware ransomware attack, you can recover to these known good copies. So, that's a piece of software that we sell on the mainframe only. How much growth have you seen in that in terms of? Cyber resiliency for a resonating state. It's pervasive, right? It's pervasive, so we've got, for example, malware and ransomware detection also in spectrum protect. So, let's take an example. So, I'm going to steal from theCUBE, and I'm going to ask Dave and for your, I want a billion dollars. And Dave's going to laugh at me because he uses spectrum protect. He's going to start laughing. But if I'm the ransomware guy, what do I do? I go after your snapshots, your replicas, and your backup data sets first. I make sure I've got those under control. And then when I tell you I'm holding you for ransom, you can't go back to a known good copy. So, ransomware goes after backup snaps and replicas first. Then it goes after your primary storage. So, what we do in spectrum protect, for example, is we know that at Wikibon and theCUBE, you backup every night from 11.30 to 1.30. Takes two hours to back you up, every night. It's noon. There's tons of activity in the backup data sets. What the heck is going on? We send it out to the admin. So, the admin for theCUBE Wikibon takes a look and says, hmm, no server failures, so that you can't be doing a lot of recovery because of a bad server. No storage failures. Hmm, what the heck is going on? Could be a possible malware ransomware attack. So, that type of technology, we encrypt it, rest on all of our storage arrays. We have both tape and cloud air gapping. I was going to ask you about that. So, we've got both types of air gapping. I used to hate tape. Now I love tape. Everybody loves it, right? No, I used to hate it, but now I love it because it's like the last resort, just in case. And you do air gapping. When you do air gapping with your customers, do you kind of rotate the, it's like the Yasser Arafat used to move every night. He's sleeping a different place, right? You kind of rotate the weird analogy. You do some stuff. Yes, there's a whole strategy of how we outline how you would do a tape air gap. When you do a cloud air gap, of course you're replicating or snapping out to the cloud anyway, so they can't get to that. So, if you have a failure, we have a known good copy depending on what time that is, right? And then you just recover back to that. And even something simple. We have data at rest encryption. Okay, a lot of people don't use it or won't use it on storage because it's often software-based and so there's a permit hit. Well, in our DS platform on the main frame, we can encrypt with no performance hit. On our Flash system products, we can encrypt with no performance hit. On our high-end store-wise, we have four models on the two high-end store-wise models, we can encrypt with no performance penalty. So why would you not encrypt all your data? When there's a performance penalty, you have to sort of pick and choose, oh my God, I've got to encrypt this valuable financial data, but boy, I really wish it wasn't so slow. With us, there is no performance hit when you encrypt. So we have encryption at rest, encryption at flight, malware and ransomware detection. We've got Worm, which is important, obviously. Doesn't mean I can't steal from Wikibon Cube, but I certainly can't go change all your account numbers for all your vendors for sake of argument, right? So, and there's obviously heavily regulated industries that still require Worm technology, right? Immutable, and by the way, you could always, if it's Wormed, you could encrypt it if you want to, right? Because Worm just means it's immutable. It's not a different data type, it's just a mutable version of that data. So the cyber resiliency is interesting, and it leads me to another question I have around just R&D. So a lot of companies in this industry do a lot of D, developing next generation products. I think, look at EMC, when you were there, you know this. There wasn't a ton of core R. Yeah, a lot of patents and stuff like that. IBM does core R. Lot of research, you got a lot of research facilities, Brainiac scientists. I wonder if you could talk about how the storage division takes advantage of that, either specifically as it relates to cyber resiliency, but generally. Yeah, so as you know, IBM's got, I think it's like 12, 12 or 15, research only sites that that's all they do. And everyone there's, in fact, my office happens to be at the Alamedin Labs, and there's two labs actually here, the Alamedin Research Lab and the Silicon Valley Lab, which is very close, about five miles away. Beautiful, Alamedin. And almost everything there is research. There's a few product management guys. I happen to have a desk there. Every once in a while I'll see a sales guy or two, but essentially, there are all reachers with PhDs from the leading inverse. Now, at Alamedin and many sites, all the divisions have their own research teams there. There's a heavy storage contingent at Alamedin, as an example. Same thing in Zurich. So for example, we just announced last week, as you know, stuff that will work with quantum on the tape side, so you don't have to worry about, because one of the things obviously that people complain about, quantum computing, whether it's us or anyone else, the quantum computing, you can crack basically any encryption. Well, guess what? IBM Research has developed tape that can be encrypted, so if you're using quantum computer, whether it be IBM or someone else's, when you go with quantum computing, you can have secure data, because the quantum computer can't actually crap the encryption that we just put into that new tape. That was done at IBM Research. How far away are we from quantum actually being able to be deployed in even minor use cases? Well, we've got it available right now at IBM.com for betas, so we've got several thousand people who've been axing in and entities. We've been talking publicly in the three to seven year timeframe for quantum computing, and there's other. Quantum scares the crap out of me, should it? Well, no, because if you do the right sort of security, you don't, but the power, so if you're envisioning one of my favorite movies, iRobot, right, where she's doing her talking, and that would really be quantum computing, in all honesty, but at the same time, the key thing, IBM is all about ethics and all about how we do things, whether it be what we do with our diversity programs and hiring, and IBM is always, you know, at the forefront of doing and promoting ethical this and ethical that. And what you do with customer data is huge. Yeah, and what we do with the customer data sets, right? We do GDPR, for example, all over the world. We're not required by law to do it, really only in Europe. We do it everywhere. And so if you're in California, if you happen to be in Zimbabwe or you're in Brazil, you get the same protection of GDPR, even though we're not legally required to do it. And why are we doing that? Because we're always concerned about customer's data and we know they're paranoid about it. We want to make sure people feel comfortable with IBM and what we do. Quantum computing will end up in that same vein. But you know, I don't worry about you guys. I worry about the guys on the other side of the fence. Well, yeah. Those are the ones that I worry about. Yeah, well, it's the same thing. Because new capabilities, new opportunities. Pat was on, of course, and you know, he talked about it in his speech, and he talked about Action on the Cube yesterday about some of his comments on Bitcoin. Yeah, yeah. And he mentioned that was based on blockchain. What he said was blockchain is a great technology. They've got blockchain is, you know, IBM is a big believer in blockchain. We promote it all over the place. And in fact, we've done all kinds of different blockchain things. We just did one announced it last week with Australia, with the Australian. I think it is with their equivalent of Wall Street. We've done some stuff with Merrick, the big shipping container thing. And it's a big consortium. That's all legal stuff. Pat was really talking about someone using it the wrong way. Very specifically, he pointed out that blockchain is a great technology if used ethically. And IBM is all about how we do that. So we make sure whether it be quantum computing, blockchain, et cetera, that everything we do at IBM is about helping the end users, making sure that we're making the right, for example, open source. As you know well, the number one provider of open source technology pre-Red Hat acquisition is IBM. We submit more into the open community than everyone else. Now, are we able to make some money off of that? Sure we are, but we do it for a reason because IBM believes as Dave pointed out in this core research, open computing is core research. And we just joined the open foundation last week as well. So we're really big on making sure that what we do, ourselves as ethical, now we try to make sure that what happens in the hands of the people who buy our technology, which we can always track, is also done ethically. And we go out of our way to join the right industry associations, work with the governments, work with whatever we need to do to help make sure that technology could really be iRobot. Anyone who thinks it's not true, if you talk to your grandparents, go to the moon, what are you talking about? Yeah, watch Star Trek, it's all we come to now. Yeah, I mean, if your iPhone is basically the old communicator, the transporter is the only thing, I wish I could have the transverser. As you know, Dave knows this, I'm afraid of flying, and I've got like two million miles on United and Dave always laughs about how I fly, so I'm waiting for the transporter. I need that so I don't have to fly anymore. Oh, there's a cone over here, go stand up, maybe with a little bit of luck. I'm still not selling my Bitcoin. No, no, hang on, I'm holding on. There's always a comeback, or not always, there could be a comeback. Bitcoin's doing well. Eric, always enjoy it, and always incite it. Thanks for the time. Thanks a lot, man. Good seeing you, as always. Thanks. All right, back with more VMworld 2019, The Cube, live in San Francisco.