 Live from the Mandalay Convention Center in Las Vegas, Nevada, it's The Cube at IBM Insight 2014. Here are your hosts, John Furrier and Dave Vellante. Welcome back everyone, live here in Las Vegas for IBM Insight. This is a wrap-up day one of The Cube's wall-to-wall coverage here at IBM Insight. It's The Cube, our flagship program when we go out to the events to extract the civil noise. I'm John Furrier with Dave Vellante, my co-host this week. And we had a great guest. We had Steve Mills on earlier. We had Inhi Chousa, couldn't get her in because we had a celebrity. We had Katie Lindendahl, awesome correspondent for CNN, former ESPN, today's show, she'll be back tomorrow. We had Ray Wang on, we had Analyst. We had a lot of analysis, we had some startups. CataLogic is a hot company, I love that. Jim Kobielus, the big data analyst. Bob Paciano, who is really stellar today. I thought he was on his game day big time. I thought Kirk Bourne was really good too. The astrophysics professor. Frans Dill, who worked at Proctor & Gamble. So we had some heavies on today. I really feel like we accomplished a really good, good program. I think I learned a ton and I was really excited we had some super geeks on who could look back and look at a historical perspective, kind of where we've come from in data, data science, and how it's gone mainstream. So you know, and again, we had the executives in, laying out, laying out there then. Steve Mills was awesome, just laying it all out there. So very cool, would you? Yeah, the content inside used to be IODs. It's always really good. You get a good mix. I agree, Mills nailed it. I mean, he was very forthcoming, right? He basically said, look, we got slow growth or no growth businesses. He didn't say businesses that are in decline. Many of them are, but that's probably a one time anomaly. He doesn't look at it that way. But it basically was transparent about it. Said, look, we got huge, but delivering billions of dollars, but we're a $100 billion company. So it's going to take some time. I actually, I'm confident that IBM's going to get through this little bump, John. I mean, I've seen it before. IBM's in way better shape now than they were in the last, like, huge transformation. Much, much better shape. Here's why I love what IBM's doing. I'm, as you know, I'm really critical when it needs to be critical. And I am not afraid to lay down some cover fire on that. IBM is not failing, okay? I think Wall Street really is misunderstanding IBM. IBM might need to move a little faster and kind of like, you know, get second gear going pretty quickly on this. But you heard Steve Mills at the end of the conversation. And if you go to, if you're watching this and haven't seen the video, go to YouTube, look at Steve Mills, 2014 insight. At the end, I asked him a specific question about Watson and he went on for a good 15 minutes. He is excited, Dave. He saw his inflection of his voice kicked up. That's a software guy who's saying, this is so exciting. I mean, Steve could say, hey, you know, I'm done at the beach. You know, he's a player. You know, he's like, this is super exciting. Then he went on to elaborate on how difficult Watson is to do and how game changing it is. So I think it's kind of an interesting lull right now. IBM's gotten hammered on Wall Street from the whole earnings debacle. And I think that's just a trigger happy Wall Street. Hedge funds kind of figuring out, maybe it's not a sure, is it a long? How do I make the play? And I think- Well, I'd be a missed, you know, when it was a pretty bad missed. I mean, they missed top line revenue by a billion dollars. I mean, Wall Street's going to punish you for that. And you know, in Wall Street world, the first disappointment is often never the last. But, so the question is- Never miss a good crisis, right? Well, right, no, I agree. And so that's the point is it's a buying opportunity. It's just a matter of when. It's always hard to time these things. Buffett backs out, so that's interesting. What's that? You know, Warren Buffett backs out of his investment. Well, you know, I think that you have to put together your investment criteria and make the call. So there are certain things you want to see from IBM. The stabilization of some of those, you know, slower growth businesses, the critical mass of the new businesses. You know, Watson getting more than, you know, a couple of hundred clients, you want to see them into the thousands and tens of thousands. The thing about Watson, John, is this, there's virtually no competition there. I mean, there will be, but- Yeah, the rich keep getting richer. That was your theme. I really liked that line that you brought up and you had some other good comments. I thought we're fantastic around the same thing. Inflection point, we heard Bob Pichiana really school us on, hey, don't, there's a shift and an inflection point. Know the difference is a nuance. Shift, everyone moves, inflection point, things are happening in parallel. Context computing, okay? Really interesting. And that's inflection point around cognitive. Insight is in the data and versus business process improvement. Speed, we heard from the survey folks. Speed is the number one thing people want, not concept, it's like moving into production. This is the future of IBM, this whole digital world as Ray Wang pointed out. Immersion of augmented reality with Oculus Rift. This is the new game-changing environment. This new software around these new user experiences. And finally, Steve Mills said, it's in the cloud, it's on-premises hybrid in between and there's an evolution around the information technology. And that was key. And at the end though, he said, it's about the CAMs. CAMs, C-A-M-S, cloud, analytics, mobile security, and social, and that is what they're betting on. So, Dave, there it is. I want to talk about the markets where we were riffing on Wall Street. I think that we had the Alibaba top in the market in September and then we come into October and October is always nasty. We're coming to the end of October. In October, you had a couple of misses. IBM missed, there was some disappointment around Amazon. So the street is really confused. So when IBM missed, it took down all these hot companies like ServiceNow, like Workday, like Tableau, and then ServiceNow blew it out of the park. You saw Frank Slootman's announcement. We bet on Frank, Frank's a good bet. And then all of a sudden they bounce back and now they're off a little bit, some profit-taking. People are really confused about the enterprise. It's like you said earlier today, John, you were right on. The enterprise is hard. You can't just throw your hat in and say, okay, I'm going to go after the enterprise. It's really, and complicating things is this bifurcation of you got the born in the cloud, born big data, and you got these legacy companies. But I tell you, I look at this and I say that, as you just said, I said earlier, the rich keep getting richer. It's just a matter of how fast they can transition. And I think these companies are going to continue to do well. They're going to continue to throw off cash. And I like the way IBM's positioned. I mean, I think there may be some near-term pain, but midterm, I really like IBM. I do, I think Wall Street is always trigger happy, but I think the cloud market, I think they lost some margin. There's a cost of transitioning and IBM moving quickly and making the big bets. And then they're moving quicker now, but they're not really shifting, Dave. This is not a deviation. We've been at IBM Edge. We saw IBM Edge in the storage side certainly get transformed. Then you see Impact Pulse, IOD, now Insight. I mean, if you look at what they've done, they've been on a focused mission. Their North Star has always been analytics. Yeah, they've cleaned it up on the execution side, went from concept to vision, execution, tactics. And now you're seeing some meat on the bone. There's a rumored announcement coming on Wednesday. It's supposed to be game-changing. 4.5 on the Richter scale from what we're hearing. I mean, I've been speculating it's something with Cisco. I mean, I don't know if that's the case or not. I do think IBM selling its x86 business to Lenovo opens up the doors for something with Cisco, although indications are it's something else. If we were riffing on Apple, I mean, on the Richter scale, I kind of agree with you. Apple 1.5, 2, interesting, but we'll see. I hope this is bigger. So interesting, I asked Ray Wang a question, pointed question, you know how I get with some of these pointed questions, there's always an underlying sub-question involved. So I want to ask you the same thing. We talk about, I look at what it takes to win, right? Leadership, go to market, that's clean. Certainly, cost wise, cost per order dollar, how you want to look at it, direct sales, indirect sales, an innovation engine, technology leadership, and confidence in the value proposition that customers will buy and you can win with that. So I got to ask you, Dave Wang, let's go down and let's discuss, let's evaluate the leadership. IBM, they're not asleep at the switch. I mean, I think they got muscle. Steve Mills is going to make some moves and I want to see what his bets are. And I think with these larger companies, you have to throw in M&A prowess. I mean, this is one of the things where somewhat critical, more than somewhat critical on with HP is you've got to have M&A prowess. Who's really good at M&A? IBM's really good at M&A. Oracle's really good at M&A. EMC and VMware are really good at M&A. I don't like IBM's M&A, I got to tell you. Why? I love IBM's M&A. Why do you say that? I'm, I like, okay. I like IBM's M&A, but right now I don't like it. And I'll tell you why I don't like it. The market's moving too fast. There are some things, they got to have a horse in the game now as a placeholder, because IBM's got a lot of muscle. If they get too arrogant and do just tuck under. What don't you like? Soft layer? You don't like soft layer? No, I like soft layer. Yeah, I like soft layer. Because you were not really so sanguine. No, that woke me up to that. I was not happy with soft layer. I didn't see the logic there, bare metal hosting. There wasn't certainly no cloud involved, but with hybrid you can argue bare metals of service. It's a natural progression. I can see the progression there. And then I can see the assets coming around. That's not a tuck under, right? That's almost a billion dollars right there. So I think that is what- Think about the big acquisitions at IBM. PWC was a phenomenal acquisition. Cognos, a very good acquisition. 94. Now tell them about within the past five years. Let's stay in this solar system, okay? Okay, Cognos still sort of early 2000s, right? Past five years. No, no, sorry. I take that back. PWC was after 2000, because Carly tried to buy it. But so- I'm not saying do the EMC like acquisitions. A lot of tuck ins, right? A lot of small, little deals. IBM is sort of tight when it comes to acquisitions. They're very tight IRR. So I like their financial, they're a good M&A company. I think that- What don't you like about IBM's M&A? I don't understand. Like they're two small deals. I think I want to see them do bigger deals. I think this tuck under is great from a product standpoint. Look it, here's the deal with M&A. There's two types of M&A's. There's, I need market position. There's three types of M&A's. Market position, pure like EMC. Like I'm going to buy data domain and be a money machine and crank the cash register. Market position and then product tuck unders. Where they say, hey, that's a startup I'm going to pay 50 million, 100 million, 200 million, 20, 30, 100 employees. I like this conversation. So that's, so I said, M&A's one, M&A's one. Now the other is developers, right? Yeah. Okay, so. How would I rate developers? Yeah, with IBM. I think that I give IBM a good position. I think they need to modernize a little bit but they're doing it. I see they got a developer heritage. IBM is a developer heritage. If you go back and look at all the successes in the database side, software, certainly in open source, they've done really well. I think IBM is one of those heavy hitters in the developer community. That doesn't flex their own muscles and I think they're going to do well there. So I don't think there's any. So I would think, I thought you were going to say something different. I thought you were going to say M&A to help development. Maybe I would like to see IBM get more aggressive in the software space, the application software space. I think they're lagging on the developer side on the cloud for sure. Well that's what I'm saying. So what about, I mean Salesforce too big, right? That's too big of a nut to swallow but that would be a blockbuster model. I think Salesforce is vulnerable if IBM could take them out. I mean, IBM has social business. They have a lot of the stuff that's been playing in the enterprise software. If they can move quickly in the cloud developer shift, and this is where I think they need to sharpen the saw on developers as the cloud developers. I think Amazon's winning but I don't think, if Amazon moves to the enterprise before IBM tools up in the cloud, IBM could be in the world of hurt there. So I think if they get the developers in the cloud, social business, they could go instantly after Salesforce and win against Oracle. So if you look at Oracle, Salesforce, around marketing cloud and human capital management, not from a workflow standpoint, I'm talking about engagement standpoint. They could change the game on those guys right there and put a dent in that market in my opinion. Well, and so where IBM should have some developer mojo is with Watson, right? We heard from Steve Mills, you know, the opening up of Watson in terms of developers' ability because you said who really cares about the hardware that's underneath? They really don't care. I think Watson could literally destroy Salesforce. Literally could change the game on Oracle. They could automate their core business and reduce the steps and just decimate and go to the customers with a value proposition of double the performance for half the price. I mean literally that kind of functionality. So Watson is something that if it can materialize in a way that they're talking about with intent computing, context aware, semantic and then cognitive computing, that's a game changer. That will certainly change the dynamics because they can come in and commoditize competition and innovate at the same time. Sorry about cloud. So we think about cloud. You got to talk about Amazon. You know my position on Amazon that they are going to have the volume, the marginal cost of Amazon infrastructure as a service and this whole race to zero. Amazon, Google, Microsoft have the advantage there. Now, a company like Oracle, who's going heavy into cloud, has the additional advantage of pricing power because they own the database and the application. IBM to a lesser extent, but they certainly have database with a lot, they got a lot of SaaS, but not to the extent that Salesforce or an Oracle has that SaaS Mojo. But they could develop that same kind of pricing power in the stack, not could, they have to in my opinion, to be a player. So I think IBM can do it. I think Oracle can do it. HP will see because HP in my view is purely infrastructure as a service and pass, you were just at the HP event the other night. What are your thoughts on HP and cloud? HP's cloud is really, really getting good. I didn't just look under the covers, look at the infrastructure side, but I think it's going to be solid. You know, the only thing I see about the cloud is this whole cloud foundry aspect of it. I'm really nervous that cloud foundry is really they're betting the ranch on. So they're putting all their eggs in one basket with cloud foundry and betting on Paul Moritz. So that is a huge deal for IBM to put everything on cloud foundry. And it's a win for cloud foundry because cloud foundry's federation now increases. So the risk though there Dave, in my opinion, is IBM and HP truly don't have their own clouds. They're buying into a federation transport model. And that's just to me, I would never go down that road. I was a software guy. It's great for EMC and the federation. Great for EMC. Isn't it awesome? It's like a leech around. It's a complete win for EMC and EVMware. How was Pivotal able to pull that off? That's Paul Moritz right there. I think Paul Moritz came in, pulled the Godfather move with, you know, if you look at Paul Moritz, who's never been on theCUBE by the way, I don't know why he won't come on theCUBE. Steve Mills, you know, kicking butt on theCUBE. Joe Tucci's been on theCUBE. Joe Tucci's been on theCUBE. Come on, Paul, come on theCUBE. But Steve Mills, if you think about guys like Steve Mills, Paul Moritz. These are old timers, man. They've been like old timers like us. They've been around the block. They've seen this movie before and they're grandmasters. Imagine Moritz, Larry Ellison, Steve Mills, Joe Tucci in and around a table. What would they do? I mean, they'd just dominate if they were on one team. How about Michael Dell? You throw him in that mix? Yes, I think Michael Dell, I think Michael Dell. It moves, he made it. If Michael Dell put a posse together, that would be dangerous. And I think, you know, I just don't see his posse. He's got Marius Hoss, where I think he's a hitter. You've got Sam Greenblatt, who's a hitter. You know, if Michael can put those kinds of hitters around him, then it's different damage. Or I think we can kick some ass. Dell's got the eye of the tiger. He understands how to compete. He understands how to win. I'm really a big fan of Michael Dell, because, you know, he's a winner. I mean, no doubt. He certainly got complacent over the years, made billions of dollars. But now, taking Dell private to me, I give him a lot of props for that. Yeah, he's not complacent now. Yeah, I mean. All right, well, good day today, John. Dave, start-up community. What's your take on it on the East Coast? What's going on? I think the East Coast start-up community continues to be, you know, in the shadow of the West Coast. I think New York is where the action is. I think that still Silicon Valley, you know, Internet of Things, Cloud, Stas, you know, it's exploding out in Silicon Valley. I can say New York, New York's actually looking pretty good in the developer community. Bits and pieces and pockets coming out of MIT. It's a big day at NYC. What's your takeaway? You guys were down there in New York City. Obviously, we're in an analytic show here. What is the, you know, the Wikibon community now really winning in the analyst market around Wall Street, you know, as O'Reilly Media really kind of goes in and talks to the geeks. Wikibon has really established themselves, Dave, as really the capital market's choice of analysts for it. Well, I think our strategy, John, has always been to focus on the business and the business value and business outcomes, and that's really what we did at Big Data NYC. I think you saw a couple of themes. One is that Hadoop comes to the enterprise, Hadoop meets the enterprise. The enterprise is really coming to Hadoop, so the average age of the folks that are attending things like Hadoop World is going up, and I think that's bringing in disciplines around data warehousing, data integration, the old ETL business, it's mashing together with some of these new ones. I think what you're seeing there, John, is for every dollar that was being spent on the traditional data warehouse and BI business, that's being baseline now, and what I see and what we see in our research is that for every dollar that was spent there, people are spending 30 cents on the new stuff, so it's not a one-for-one replacement, so there's headwinds in the legacy business, and the new business isn't growing fast enough. Now, the bet is the data volumes are going to be so high that that 30 cents in the dollar is going to be more than triple in terms of the volume, so the business will be there, and it will more than offset the softness in the traditional data warehousing business, but nonetheless, that's really what's happening, and so you're seeing that big transition now. The other thing you're seeing is you're still not seeing a lot of software companies that are public or are going to be going public anytime soon. Probably my guess is John Hortonworks is going to be the first. I think you'll see Hortonworks maybe announce an IPO if the market conditions are right before the end of the year. I think they have to start thinking about doing that. It may be MapR too, right behind a Cloudera, as you know, no. And so I think the big data market is still a services-led market. 45% of the revenue in big data is services, and I don't see that changing anytime soon. Software's only about 20% of it because so much of the software's open source, so people are still trying to figure out how do I make money in big data, and the answer is by applying big data. It's Uber, it's Fitbit, it's Zipcar, it's Airbnb. These are the companies that are the new value producers in big data. Obviously Amazon, Google, and Facebook are the poster children, but there are many, many others emerging. That's where the money is. That's where the investment thesis, I think, needs to go. How well are these people leveraging this digital matrix that's emerging? Dave, great analysis. Again, what a great day today. We've got a big day tomorrow. Inheach, Vice President, rising star within IBM. She's a CUBE alumni. You probably know her from the multiple interviews we've done. She's awesome. We've got, again, stellar lineup. We've got Carla Gentry coming on, data nerd. She's one of the influencers. And again, we're live here inside the Digital Experience Lounge for the second screen for the people online who aren't at the event and want to get that experience in the moment. This is the CUBE. We're live and we'd like to bring you all the great interviews. Obviously, a lot of influencers out there look for Brian Fonso, variety of others. Veronica Belmont's hosting and her own awesome kind of cool vibe here. She's fantastic. Good to see her and I've seen her in years. And she's just a really great social broadcaster. I really like her a lot, Dave. She's super cool. Of course, IBM's got a lot of coolness going around. So if you're an influencer or a blogger, podcaster, want to do some crowd chats, it's all wide open. Really excited, Dave. Looking forward to tomorrow. So if you're watching tomorrow, you're going to have a lot more action coming your way. Thanks for watching. That's a wrap from day one. I'm John Furrier with Dave Vellante. This is the CUBE.