 From Las Vegas, extracting the signal from noise. It's theCUBE, covering InterConnect 2016. Brought to you by IBM. Okay, welcome back everyone. We are here live in Las Vegas. This is SiliconANGLE Media's theCUBE. It's our flagship program. We go out to the events and extract the signal from the noise. I'm John Furrier, my co-host Dave Vellante. Day one of three days of wall-to-wall coverage. We do it every year. We go to all the events, go to SiliconANGLE.tv. Remember, Cube Madness starts March 15th. So check that out. It's always an annual tradition. The NCAA and March managed to do a Cube Madness where the guests go up against each other. But we're here at the IBM InterConnect 2016 event. All the most powerful people are here. Entrepreneurs, executives, customers, telling their story with digital transmissions about the cloud, about data. It's all about user experience. This segment is an update with Brian Gracely. Wikibon ads. Brian, great to see you again. Hey, great to see you guys. So you've been out scouring the floor. You've been in a lot of sessions. There's a lot of developer action going on. A lot of cloud, a lot of hybrid cloud. So what's your report? What are you seeing and what can you report from your digging in here at IBM InterConnect 2016? Yeah, so I mean, just a huge amount of announcements, huge amount of things going on. They call it cloud plus mobile. It's pretty much every technology in the industry these days. So it's hard to sort of segment it. But a couple of big takeaways. I mean, I heard you talk about it. The IBM messages digitize everything. It's for the technical people, it's everything as a service. Everything is a service, essentially take everything open source that's cool, everything that's popular, operationalize and make that a service. So this whole idea of how do I get started with it, they're sort of taking that barrier out of the play for it. Huge story around hybrid cloud. So basically they call it dedicated, which is, it's in their cloud, but it's sort of dedicated to you. So the old multi-tenancy story, the regular shared services stuff, and then they've got local, which some companies want to call that private cloud. In their case, instead of you having to ramp up your skills and all that stuff, they're gonna help operationalize it and run it for you. So taking a lot of that operational cost and letting the stuff live on premise. So that's a big piece of their story. And then I've been really impressed with the Bluemix, the Bluemix piece. It's obviously, it's built on Cloud Foundry. We're seeing the Cloud Foundry ecosystem glow. But integration with everything, everything from Watson to messaging services to queuing services to, we saw the stuff about Apple and Swift. We've got this whole Apple programming thing going on. They're gonna put a bunch of hooks around Swift in there. So really making it very robust. When we talk about digitizing, digital business, digitizing the enterprise, they've got a really interesting story at this point. We say barriers to entry, meaning with the cloud, removing that. You mean how they're onboarding people, the messaging, literature, all the above? Everybody says, the technology's not that hard to get to the cloud. It's always people in process. Well, and then the conversation stops. And you go, I can't hire people. We can't change our process. It's hard to deal with. What they're basically saying is like, here, it's like private cloud in your data center, but we're gonna help run it for you. So we don't have to retrain you. I mean, you can get trained up as you go. But I said in a number of sessions, and customers are basically like, I worry for my operations people because they're probably gonna start getting consumed by some of these IBM technologies taking over for them. They're gonna have to become DevOps. Heard that a couple of times for people. So it's become a reality. A scary way, or more like freight train coming, or in a good way. You know, it's still early customers driving this, but yeah, I mean they, and the thing was, these were business people talking, leading these conversations. They didn't seem to have any qualms with saying, look, if my operations people don't get on the train and don't get going, you know, that's business. How do those skills translate in your experience? I mean, the operations guys, can they become sort of DevOps? I mean, some, yes, I'm sure, but. It's some yes and some no. I mean, is the technology really complicated? No, I mean, the good technologists that we know that we have on all the time, they're learning, right? We've seen them in the VMware crowd. They've gone from, you know, I'm hands on keyboards to I'm scripting to I'm automating. That's what it is. It's more a mindset of like, you know, do I wanna just have a silo or am I part of something that's driving a product? And I think it's that collaboration piece and you know, where do I fit in the org chart? That's the hard part. The skills, you know, technologists learn skills. They're pretty good at that. That's the organizational piece that's hard. What do you make of the VMware announcement? IBM announced today, Carl Aschenbach was up on stage, you know, with Robert LeBlanc. Yeah. What do you make of that deal? I think it's potentially very good for IBM. It feels a little bit like a white, like waving a white flag for VMware in terms of their owning their own cloud destiny. You know, I mean, we haven't heard, this is the first thing we've heard since the vCloud Virtustream joint venture kind of went away. I mean, it feels to a certain extent like VMware saying, you know what, I'm outsourcing vCloud Air to IBM. Customers, if you need a public cloud option, these guys are really good for the enterprise. But I don't see what VMware gets out of this thing. I mean, it seems like a one-way trip to the IBM cloud. Yeah, yeah, yeah. So it reminded me, I tweeted, I think it reminded me of the NetApp AWS deal, you know, it's sort of on ramp to software. Yeah, it was interesting. I mean, you know, Carl Aschenbach was on stage today and they said, hey, folks, what do you think about this? And there was sort of very... Jeb Bush moment. You got a golf course. Clap for me. You got less than a golf club. Ask people who are not excited. Yeah, I mean, that's what I take away. There was not a lot of clapping. No, no, there were a lot of people clapping about, you know, Swift and putting things on Linux and open source and stuff, but VMware and IBM. So I got to ask, I want to get your take on this because Jamie Thomas was on, I asked her a question. I said, you know, if you can go back and any conversations internally at IBM around, their experience with open source, IBM has been a great leader in open source. You go back, they have a big enabler of Linux. They've had a great open source, but sometimes, you know, so I said, if you can go back learning what you've learned, translation, what would you do differently in this new era? And basically her answer was pretty solid. And she said, get in early and make a difference. So are they getting in early? Obviously, Bluemix is not early. They're catching up to Amazon and they are running as fast as they can to check the boxes. But outside of Bluemix, is IBM getting in early and these key initiatives with open, with collaboration with some of the communities? Yeah, I mean, I think in terms of probably the top five or six contributors, they're big in Linux, they're big in Docker, heavily involved in Cloud Foundry, although- Spark too. Spark, you know, there's a number of places they're in the top five or six, right? Do you have to be top one or two for all of them? You know, most of them are dominated by the company that started it, you know, whether that's Hadoop or Docker or whatever it is. I think the smart thing they're doing and the difference between now and 15 years ago is, you know, before it was, I was going to drive services, now I can drive cloud business with that. And I think that's the differentiator is, you know, if I'm just driving services, that's a hard business to scale. I'm driving this as cloud and you know, you've had lots of charts, we talked about this. You know, now you can start to drive marginal economics and really kind of scale that business. Well, I think this is what's happening in IBM's business. We didn't have time with Scott Habner to talk about this, but IBM was such a services led company under the Gersner transformation. It was fine, it was great. One throat to choke, threw off a lot of cash, but it's a hard business. And IBM wasn't a product company and now they're really becoming a product, come a services company that's within the cloud product. And that is a game changer. The big question I have though is their software portfolio is so fragmented. You know, can they bring that together in a way that a customer can actually consume those services easily and cost effectively? That to me is a potential headwind for IBM, but I wonder if you have a thought on that. Yeah, I agree with you. It feels somewhat fragmented. It feels sometimes like, you know, the names change sometimes, so you're keeping up. You know, as a user, you're having to keep up with their portfolio. I haven't been to a lot of IBM shows before. This was one of the first ones for me. I noticed there's a lot of IBM people here. So they do give off that vibe of even though the technology's evolving, we're always going to have a lot of people there. It's a customer event. They do a lot of sales motions here, so that's the Oracle that's the same thing as they show. But that's one of those things they're going to have to overcome. I mean, it's interesting. You hear them talk about, we've had X thousands of people sign up for Bluemix or X thousands of people sign up for, you know, the container service or the data service. And, you know, the follow up question probably needs to be, and how many of them stay? And how many of them are able to sort of get going on their own versus, you know, needing to call in and drive services? Because that's... So you're saying there's a lot of potential group thing going on around IBM talking to themselves? I don't know that's that. I, you know, you can only sign up for so many free accounts yourself. The people that I've heard that sign up for it tend to like it, but it just, it's, there's a weird disconnect it feels like between. IBM does a great job of talking about business and changing business. And then the technologists kind of, they don't dig into the weeds a lot. It's don't worry it'll work. And, you know, it's an interesting connection. Well, IBM's SaaS business is a relatively small part of its software portfolio today, which I see in its problematic. That has to change. IBM's got to, and it's not easy for them to sort of sassify their entire business. But having said all that, I'm interested that you're impressed with Bluemix. John, you were here and I, when Bluemix was announced and it was like, okay. Yeah, they announced it. And they announced essentially a self, no, it was a self-service. They actually shipped code on that day. Right, no, that's true, but it was a shell. There wasn't a lot in there. And they were like looking for people to, hey, come on, get into Bluemix. Now it feels like they're on that flywheel effect with Bluemix. Oh no, since the day they announced Bluemix, they have a full team of guys who know what they want to do and they know they're behind and they're humble. And they had their notebooks out, snapping lines and just running like the wind. And I can say that, I've been watching them. And they've had gaps, Dave. We know, with the Elastic Beanstalk on Amazon, we use that Redis. They've got Redis now, they've got auto scaling, they've got the APIs, and they're bringing Watson in. They're enabling businesses. And I think that is unique to me about what Bluemix is doing is they're taking more of an enterprise approach that enables some entrepreneurial activity. Amazon kind of does that by their offering. Not really saying, hey, use our stuff and here's some IP. You pay for it all. So, but Brian, I want to get your take on something different. So, you know, we at the Wikibon, Brian's been focusing a lot on end user outcome driven problems, whether it's DevOps and that transformation. So I know that you've been deep in looking at the practitioners and looking at some of those things. So I want to ask you a question, get your take on this. If you were advising IBM and they're here, you say, and they say, Brian, you know, in a closed room, okay, we don't want to screw this up. What should we do and not do? What's your advice to them? What would you say? Look, you're in a good tech here, we tweak this, don't screw this up, do that better, double down on this. What's your advice to IBM? Yeah, I think to me that the thing that ruffled, I don't want to see ruffled people suffer, but had people kind of, you know, that murmuring you get when people are talking is, there's that, they do a great job of, how do I help you drive your digital business, right? That's, to me, that's their calling card, they do that incredibly well. And the transition piece feels like the, how do I get there? It's always these wonderful outcomes and you don't hear enough about how to get there. How, you know, how do I help those customers get there? The interesting thing is- See the playbook. What's the playbook? And don't give it to me just as a red book. It's got to get somehow simplified. It's got to get, but what was interesting, I sat in a session just a little while ago, company called Spigot. They basically do crowdsourced innovation for enterprises. So the idea being, you know, you have a large enterprise, there's probably a lot of great ideas out there. How do I tap into that? And it was really interesting to hear how these guys said, we ported from, we took an application that we had homegrown, used to run ourselves, and ran it on Heroku, and ported it over to Bluemix. And the way they talked about giving those guys feedback, you know, it was like very iterative feedback. It was essentially like DevOps kind of feedback. And what was interesting was hearing how they said, we weren't making custom changes anymore. We were making changes that we had to think about, is this going to impact 100 customers, 1,000 customers? And it was a very positive conversation. Customers are very positive about it. The IBM guys were very humble about saying, look, we've been learning as we go along, like you said. I think that piece has got to come across, because their end story is very positive. It's very, very strong. It's how do I convince customers that I can get you there without it being this massive, massive, long services engagement? You can do that, and you can do it on demand. It's a powerful story. Dave, I want to get your thoughts. I mean, you're an analyst for years, you're a chief analyst at Wikibon, so we do theCUBE together, and I know you have an opinion that's why I'm teeing it up for you. IBM, I mean, I like IBM's messaging. I think IBM always has smart people, and they always pick a good vector. I think execution is something that they kind of get out of their own way sometimes. But what's your take on the business? Because now you're talking about consolidating business that they've had good cash behind the data cloud and user experience. The software silos that exist within the company, you have a lot of different CTOs out there, you got a lot of different groups. Is IBM, can they pull it off? What's your analysis? Yeah, I definitely think IBM can pull it off. I mean, I've been waiting for this turnaround to actually take place for a long time. And I think that, you know, Ginny Rometti, when she took over, she was running strategy at IBM. This is like, I don't know, whenever it was six, seven years ago. And so she came in and said, all right, we have to make some big bets. And they've made some enormous bets, obviously on cloud, on the middleware piece. They've streamlined their organization. They take big components of their services organization and put them in the product groups. The thing that people don't talk about a lot is when Gerstner made the decision to go services, it basically de-emphasized products. Not that IBM didn't spend a lot of money on products, but you can't really name a product where IBM was number one, except for mainframes, you know, and thinkpads for a while. But that was kind of it, all right? So now IBM's got to get its product mojo back and it's slowly reorganizing. I think Ginny's still tweaking. We saw the middleware pieces kind of went into the systems group and now I guess they're back in the software group. So they're still tweaking things. But generally speaking, I think IBM's got the organization right. So that's, to me, that's number one, is you got to get the organization right. Second is you got to place your bets. And I think IBM's placing bets in the right places. I have said it a million times, Dell's by an EMC, IBM buys the weather company. What does that tell you? Look how IBM's building out this media platform, this content distribution network, file transfer, Ustream capabilities, really interesting horizontal play around media services. So what I see IBM doing is right on is they're basically building out horizontal capabilities on which people can build new businesses. And I think they're positioned very, very well. The other thing about IBM is they invest heavily in R&D and they throw off cash. IBM threw off $13 billion last year in free cash flow. That's serious dough. And they got some, the executives are smart. Pappaciano and the people that are getting promoted are really solid. Pappaciano, computer science degree, obviously making some good moves. The management team seems solid to me. I like their chances a lot. And I think to me, their only challenge will be them getting in their own way from some legacy or just organizational stuff being the 400,000 people company. I think that's not a question of do you need to be more heavily in SaaS? You know, do you have to? Yeah, they do. This is what I was gonna say. Their software business is a challenge because Steve Mills basically transformed IBM into a software and services company, at least he owned the software side, but it was a big giant sort of hairball of an organization that now is being pulled apart by different pieces and streamlined and reorganized. And that's still taking a long time. They're not there yet. And the minimal contribution from SaaS is somewhat concerning. They need, do they need, they do need a fusion-like integration capability. That is Blue Mix. That's what Blue Mix is all about. Well guys, thanks so much. Brian, good to see you. We'll see you at some of the events. They will have our ears down to the ground. We're reading the tea leaves, talking to people in the hallways. This is day one is over. Day two is gonna be pretty huge. We got Kevin Egan coming on. Bob Picciano coming on at 1230 SVP. Always looking to talk to Bob. That's Steve Robinson. We're gonna have the youngest cube guest ever, a 12-year-old on tomorrow. Genius in the cloud and development, of course. I'm excited to meet the CEO of GitHub, a company that's certainly changed software development. Big fan of Git and GitHub. Looking forward to talking with Chris. Again, big day to many other great, more powerful people on the cube. So stay tuned for tomorrow. Day two coverage. Take care, good night.