 Okay, we're back live here inside the Cube in San Francisco for EMC's V-spec launch, and our next guests are Peter Colyopoulos from Arrow, not Arrow Electronics, Arrow E. C-S. A-C-S, and Barbara Speedcheck from Brocade. Guys, welcome to the Cube. So this is a conversation around the channel business, however you want to frame that, relative to services, high-end services, cloud, mobile, and social. The world is evolving very fast, relatively fast, since like 2007. I kind of look at the iPhones, they kind of the seminal moment of the world we live in, was that Macintosh moment back in the 80s, but the iPhone kind of set the tone for this whole revolution, you go back to the iTunes. The cloud was making its way in here, you got cloud computing, mobile, and now social. It's crazy, so the customers are crazy. We heard another panelist say, there's margin and mystery, right? So margins were great in the early PC days, client server, and then margins go down, specialization happens, polarization in the channel, and then fight for services, and now we're in a whole new growth market. So I'd like to get your take on, Peter, what you guys see as the main driver right now for the channel business. Is it customer confusion? Is it just an economic boom that we're hitting? What do you see as the core thrust, or as driving this thermal growth? Well, I think that, John, I think there's a couple of things. So first of all, the model has typically been selling hardware and software, right, and sort of being happy with what margins are in the product, and as time has gone on, the squeeze has gone on for margins on both hardware and software, and then there's a run toward services, and services can be rich if you're reselling, it's not so rich, reselling the services. If you're developing your own services and creating practices and then driving that into the customers, it can be very profitable, and I think you'll see that most of the successful channel partners out there have got that blend set up, right, X amount of hardware and software product and Y amount of services, and what they're seeing with cloud, and I think that's the mystery part of it, there's a lot of areas that the customer needs education on, right, which way should I go, public, private, hybrid, how does this all fit in, what about my data migration, what about all my data, how do I get it on, how do I get it off, what's the security that I should use, and I think it's in those areas that the partner base has been able to come up with services that they can offer to the customer to help guide them, right, to help guide them through the mystery and get them to a place where they say, okay, here's a good way to start, right, and now I can sort of begin to follow up on that, and I think that's going to probably continue for a couple more years, you'll see the move to more services, and then what's going to end up having is how do we monetize the cloud model, right, in terms of, you know, getting more OPEX revenue, if you will, if you're a partner, as opposed to getting CAPEX revenue, right, and that's where the model is clearly headed. I think, you know, you can argue. You mean OPEX being more integrated in with the customer? Yeah. From a services standpoint. Yeah, exactly, from a services standpoint. The old days run their health desk to now actually run stuff for them. Right. Run backup, run recovery, disaster recovery, things like that. Either on-prem or off-prem, or, you know, providing services around, you know, I'll sell cloud by the bite or storage by the infrastructure as a service, you know, getting that service revenue in that becomes much more recurring, right, and that model is something that's going to happen, I think the big question is, okay, so how fast? How fast does that transition happen? And I think that's, you know, an open question. So would you say that over the past few years, prior to where we are, like now, there was an elite core of folks that had a lot of assets, like you guys, who were, you know, well-capitalized, a lot of customer install base and new service. You had the ability to invest in an elite core that could actually solve some of these higher end problems. But for the most part, to do it's really hard, right? The barriers to entry to come in and say, hey, I'm going to be a cloud broker or service provider. It was kind of hard. You really kind of had to have your act together. But now, this announcement today kind of highlights to me that, okay, when we've got some turnkey things we can actually put in there. So kind of, it opens the door up for more guys to come in, more competition for you, maybe more partners. I think more partners, and I think, again, what it's trying to do, and, you know, if you look at the continuum, and Jeremy talked about it, but if you look at the continuum of component pieces, all the way up to, you know, pre-built solutions, you know, this is somewhere in the middle of that continuum. So it offers the choice in that, well, okay, I don't have those three parts, but I like these three parts. Now I can still be participating. And of course, you'll be able to work with the install basis origin site. So, you know, the example I always use is, so what if I'm the guy who bought, you know, a piece of equipment yesterday, and today something new comes out and I can't use what I bought yesterday, right? That's sort of a bad position to put a customer in. I think this kind of an announcement allows you, no, you don't have to give that up. You can still incorporate it and you can still get leverage from that. And still succeed in terms of moving the customer to that maybe first starting place in the cloud. So I think it helps accelerate those people who may have been reluctant for any number of reasons to adopt cloud, to now being able to get it in the game. It's a trust too. It's like a viability from a product standpoint, mark product market fit, if you will. And then trust, having someone who's not going to drop the ball and actually follow through. Barbara, what are you seeing? Okay, now the vendor equation is interesting, obviously, because you have in the channel business, all the big whales in there in strength. We had Cisco on earlier and they were pumping their chest up. But Cisco has an entrenched position and depending on who you talk to, they're like, you know, love them or hate them. I mean, there's this different perspective, but they've always been entrenched, right? And so you have a lot of the gear or products, hardware products that have evolved into full-blown solutions that kind of integrate into other areas. You have some partnership here. I have a little VCE here. I got this purpose-built machine here. As a vendor, how do you navigate the channel relationships and programs? Yeah. What are your key thoughts there? Yeah, a couple of thoughts. So first of all, I want to comment and expand a little bit on the whole transitioning comment because I think the channel transformation has never been bigger than right now because you mentioned the iPhone, but whether it's records to electronic books to electronic, I mean, there's been this classic product to customer broken chain, but there's also been a major deconstruction of the IT network, right? With virtualization and cloud and the customers needing more like agile, application-aware environments, I think one of the solutions you offer is you put those stacks together, right? And one of the key messages to channel partners was the only way to differentiate is if you take the complexity out by taking those stacks, right, and putting them in front of the customers, which is what you refer to. You know, a lot of what Cisco does, they income in and our competition, you know, puts them into, especially the powerful incumbent vendors can put them together, but what is exciting about this announcement is I think the ability to have this in a more modular, flexible architecture augments that whole desire of channel partners for transformation again because what they want to do is, they're, I wouldn't even call it, they just want to do services, right? That stands for like services. It used to be break fix or implementation. Nowadays it means they might even want to do their own hosting, they might do their own, you know, like you said, backup recovery services, managed services. So what we do as Brocade as a vendor, we've been saying the last two years, we help you to stay this point of integration. I think stacks and monolithic architectures usually are not that good for the channel partners. Well, that's a good lock-in for most people, but I think that's where I see that, the kind of vendor gymnastics go on as the lock-in. They have to use the stack and they use the scare tactics or their pricing or price pressure. You know, but I think what you're, if I understand you correctly, what you're saying is that channel partners want, essentially push-button delivery, right? I mean, Lego blocks. I don't want to have to spend money to hire talent at its cost, right? I mean, you got to, you know, you want to go into the cloud business and hire engineers, it's expensive and they're hard to find. And if I could hire just basically the equivalent of consultants slash techs that get it and push buttons and work with customers, that's a much better solution because it's not when they're more of them. And that's a great key differentiator because you absolutely ride the customers are looking for that ride. They want to outsource that skill set because it's high cost, it's a whole discussion, CapEx versus OpEx. But the big question is where's the point of integration? And that's where, I don't think the lock-in discussion is only about the cost and so on. It's also from a channel perspective, if they're the point of integration of the solution, which is what VSpecs gives to them, that means they can do that wraparound, if they can do that service to the customer. And what VSpecs does with this whole support layer that we've put together, EMC, to bring in all these ecosystems of vendors together, enables the reseller, even if it's a smaller one, if they're servicing the SME space, that usually have then the same challenge with skill sets and certifications. The whole wrapper we do around VSpecs enables them to do exactly that point of integration for a customer. Yeah, I mean, Peter, I want to get your comment on that too because if you think about it, what I hear from in marketplaces, I was just talking to a CEO, just took his company public in the past eight months and this company's going gangbusters, kind of a confidential conversation, but he said, look, I can't hire engineers fast enough. We're outsourcing most of our R&D, not because we don't want to outsource R&D, it's because the talent, to get the talent in, I can't meet my deadlines for go-to-market. So the concept of shadow IT was brought up earlier, again, one of my favorite words that gets kicked around is that people just want to get the job done, right? The customers have delivery times, they have SLA's to their business. You guys want to go out and actually sell them products to meet that and you get paid and you add value, you get paid more margin for the more value, right? So with that in mind, what is the key areas for that point? How do you eliminate some of those shadow IT problems that a customer may have? And as a solution provider, you're a trusted partner. Does this kind of product from EMC kind of help there? And if it does, how you compare and contrast with the other vendors? Well, I think it does, I think that one of the things that we look at is there's a number of ways you can try to eliminate or substitute for the shadow IT. One of it is, and one of the things that we try to bring as a distributor is we have people that are certified that we have on staff to be able to do staff augmentation both on the vendor side as well as on the partner side. So any time you're looking at resource, right, it's always about, certainly from a partner standpoint, coverage and capability, right? Can I get the right coverage? Can I get the right capability of someone to do it? And if one or the other is short, which usually it is somewhere, or I can't put the right person in the right place, what do you do about that? Do I pass up on the business? Do I partner with another partner? Or can I go back to my distributor who acts as a safety net for me? And they have resource that I can subcontract and put them on site, get it done and deliver for the customer. I think that's, we certainly do that and we certainly view that as one of the differentiators for ourselves. I think from the customer standpoint, the idea of push button, I think the reason that they wanna do push button and you talked about some of that already is I wanna get out of the maintenance of the equipment and the watching it and waiting for updates and trying to make sure that my firmware levels are right. And I wanna move on to more value add for my company with IT, right? And if you look at some numbers on how much money is spent in a current budget on just keeping everything running, as opposed to me doing something that can help generate revenue, it's at a kilter. And I don't think anybody ever imagined it would get into that situation, but as things got more complex and you got sprawling the IT center, that's what happens. You see partners, channel partners and integrators, well, we've talked about solution providers, ISV, SVRs, being app providers, I mean, like getting into the app business on an accelerated basis where they're actually writing apps, actually doing the agile, fundamentally integrating that in-house as a function, almost like an ad agency would have a creative department. You know, that's a good question. I don't know if they're all ready for that. There are some that are starting to go that way, but I think the model is going to get interesting with cloud and we talked about this, you know, when people talk about, well, what about adoption of cloud? How's that all going to happen? And one of the differences with adoption of cloud is it actually started on the consumer side, much more so than on the B2B side, which is something that's never happened before where the consumer actually adopts first. So it's not going away anytime soon. The question is, and I think it's a real question that I don't profess to have the answer to, but all right, so the way we build applications today is that the way we're going to build them in the cloud? Or do you end up having things like an enterprise app store? Yeah, I was just going to say that, right? That kind of divides it up and you start to go to a different one. And again, this is the whole realms of SOA architecture is what I was going to be cataloged. So I mean, I think ultimately, I agree. I think my view is, and this is kind of what my prediction is, is that to get to win the channel business, you got to have like an HP who said the old Bible catalog of all the parts. You got to have a part of this. And those part lists are now prefabricated infrastructure. Oh, you want some private cloud to support low latency, 10 zillion users, multi-tensile product? If I can answer that, I think that same catalog and modular architecture goes to services because we were talking about, do we have partners that write apps now? Do we actually have partners that do hosting? Do we have really managed services? I mean, these are all big words, but this is all what I call the cloud of entity. This order, they're all trying to find their place, including distribution, right? Do you guys are, do we do cloud aggregation? Do we add our own services? Some of them are adding huge service organizations like yourselves, but I think the modularity is key because you will note this classic, we used to have the VARs and the SIs and these nomenclatures, I think, are gonna explode over the next couple of years. And I hear partners talking about it now, are they there, right? But I think as a vendor, the more you can do in terms of modular offerings, helping them on their way, the more successful you can be. We tried to vet that out on another interview, but what's the layout of the current channel, if you want to call it an ecosystem? Weird solution providers and subcategories, the old classic ISVs. Well, I got only a couple of minutes, so I want to kind of ask some different questions, which is going forward. Obviously, the channels used to having some support and the partnerships are critical. EMC's talking here about their brand, is the flagship into the accounts, that's their logo. You guys can draft under it and provide services. What's going to be different, Pete, and Barbara, in your mind, going forward over the next five to 10 years with the channel, is obviously supporting margin and getting out business opportunities, joint selling, no channel conflict, the normal table stakes. Beyond the table stakes, what do you see that's new? What that could be a new offering, Pete, that you say, you know, I see this could be a new level of equivalent of a co-op or MDF, like fun. Interesting, so one of the things that we began offering to our partners, and we'll continue to build it out, is if you look at the value chain and you look at where distribution sits, just think where they are, okay? There's only a couple of people who have the whole picture of what's being sold to a particular customer, and we're one of those people. So what if I'm able to monetize that data using things like advanced analytics? You're the big data business. And I'm in the big data business, and I got big data, I got a lot of it. Customer data, trend data. Customer data, trending data, and that's what we've actually released in our advanced analytics. You're the splunk of the channel. Yeah, I don't think I'd quite go that far yet. But certainly, if you talk about a value that you can bring, as I like to talk to our sales people about it, and they always get a chocolate, I said, let me make this really simple. How about if I can find you better leads faster? Yes. To me, that's a huge win for the partners, and I'm using data that I already have, that I'm able to leverage, and I'm able to point them in the right direction on, what's the probability if you buy A, you're going to buy B? I think that's a huge thing that actually the partner, and I would ask Barbara, I'll bet every one of your partners complains about, we all say we're doing demand generation, right? They go, yeah, well, the leads I get, yeah, they're sort of okay. We all sort of suffer through that. What about if you can make that, I'll give you less leads, but I got a better hit rate. Huge win. I'd love to have you hook up with Alice Williams, one of our senior editor writers and editors about that story. I think, because we are obviously big data is only one of our wheel houses that we love to program in. I think that's a real successor. I want to think what we're theming up this year is how people are using big data. So we looked at having a category of big data and like a publication, but no, we see data as a fundamental disruptive enabler, like TCPIP did back in the old networking days, like the computing cycle on the PC. So it's not a category, it's every category. So that's a great example of differentiation and competitive advantage. I think using the data that you got as a lever for predictive analytics, obviously at the end of the day it's about sales, right? So you got to drive business, market research, how to serve your customers. So that would be really something I'd love to see you should do. And I think that's a real cutting edge case that I'd love to do a little side report on that. Okay, well guys, thanks for joining us on theCUBE. Big data is again rearing its head here as an advantage. Again, big data is big. This is theCUBE. We'll be right back with more information and interviews right back to this.