 Live from the FIIA Barcelona Grand Villa Compensator in Barcelona, Spain, it's The Cube at HP Discover Barcelona 2014, brought to you by headline sponsor HP. Here are your hosts, John Furrier and Dave Vellante. Here in Barcelona for HP Discover 2014, the European edition of The Cube, HP Discover, Extracting the Sims from the Noise, I'm John Furrier with Dave Vellante and no better guest than help us extract that signal. It's Sargalai, Chief Operational Cloud of HP Cloud and also SVP and GM of the new business unit, NFB business unit. Sorry, welcome back and always love to have you on, get the broad day to get the truth, signal, welcome back. It's great to be here as always. We love having you on, very candid conversations, it's always been great. But you've always been in the hot areas, your hands and all the good stuff you took over the cloud when it was a small little band of folks trying to rub a nickel together to make the cloud work. You've built that out, operationalized, built that team. Now that's exploding and growing like crazy, it's blowing up, as they say, in a good way. Still got some work to do, we can roll up it this morning. But still marching down the right path. We're on a good path. What's new now? You got NFB business unit that Bethany kicked off. She was previously the GM of the networking group. So you're the right guy for the job, obviously. So what's going on? What's going on in your world right now? Well, like I said, at HB, we're doing a lot of things. NFB is a big opportunity for us. Network function, virtualization is really all about the cloudification of what the telcos are doing. We can talk more about that. And I've done 20, 25 years of networking, working with the service providers, built up the cloud. And so it's actually a great place for me to go build another thing at HB the same way I did in the cloud, because it's a good fit for the things that I bring. And a lot of the value there also is we do really need to bring the cloud, but you need a networking person to do that. So you're kind of getting a reputation within the HB as a builder. And you move fast, break stuff, which is OK. Bull in the China shop, OK. It makes things move. We heard from the new executive of Convergent was first saying, hey, Meg wants to go faster. So you've said that on theCUBE. Meg wants to go faster. She's committed to innovation. What is the innovation around NFB? What's the big hot button there? Is it just the telco revenue opportunity? Is there some tech angle there? Has it all had cash opportunity? Well, I think the interesting thing about NFB, first of all, is why does NFB exist? So the thing you have to understand is the telcos have built a really good business and a really good infrastructure over the last 10, 15 years. Very resilient, but it's not that flexible. It was built to keep the network up, not to provide fast services. And they've been very successful there. The challenge they have is that now they're living in a new world, the world of the over-the-top providers where most of the value was extracted out of the network by people running on top of them providing services and they can't really tap into it because their network is not flexible enough. And so they have to, you know, move to those new technologies, right? If you want to compete against someone, first look at what they're doing. And these competitors were all born in the cloud moving very fast as in Netflix, this is the Amazons, Apple, of course. So what NFB is all about is really, hey, how do we get the telcos to be able to provide the same resiliency and capability they have today, but on top of newer technology, cloud-based technology, both from a hardware perspective, but also from a software perspective, so they can actually have a lot more agility. So really when you think about NFB, I mean, it's almost like when we talked about cloud a few years ago, you assume costs will be reduced, but the value is agility. If all you want to do is reduce costs, there's a lot of easier ways to do it than NFB. And NFB is about agility, it's about the fact that your network needs to be programmable, that you should be able to roll out services very fast. And that will allow these service providers to provide much better services that are being valued, right? Providing voice or just providing a carrier, that's not that valuable anymore. Look at the market caps of the telcos versus the market caps of the OTTs, right? So we've got to help the telcos move to that space. It's almost been like a guerrilla war for the young nimble companies, it would be Agile, Bill on top, you say over the top, obviously, that's been over a decade of over the top, you know, started out small little apps, and then SMS, you start to see the trend, and clearly it's just crushing it all, types of media applications running on the top. So, okay, I'm a telco. What do I have to do to be more nimble? I mean, is it a rip and replace, is it a migration, is it pure tech, what's the disruptive enabler to get those guys back in the game, because, frankly, Google, Amazon, are competing with directly the telcos, so I don't see them providing services to, or maybe they will, who knows? I mean, that's a really good point, and I think the way you have to look at it is the same way you have to look at the cloud, right? The cloud was about building a flexible infrastructure that allows people to dream up of new services, not here's the magic service. So the first thing the telcos have to do, or the carriers have to do, is build an infrastructure that is flexible, that allows for very innovative activity that may not be done by them, it may be done by other players, but they can give them a service. I'll give you an example, right? I mean, Google would love to pay the telco if they could have some API that they could call inside the network to give them some more information. They can, the telco doesn't have that. So the first thing the telco needs to do, right, is figure out, okay, how do I make my network more service-oriented? And that's really what NFE is about, right? They have to move to these cloud-based infrastructure that is more flexible. It's not about a silver bullet, it's about having flexibility and being able to do things quickly. That's really what this is about, and so it's not, okay, I'm gonna do this one, special service. Now, the thing is, they have an installed base, right? I mean, it's one of these things where people say, you know, you have an installed base, that's the good news, because you have revenue. The bad news is, you can't just flip it on and flip it off. It's not a green shield. The telcos know that. The good news for them is HV knows that very well, right, where normal and sustainable, what we did was the, you know, in the cloud, right? You have an installed base. And so it's a process, but they got to start somewhere, but they got a burning platform here, because, you know, the cost per bit, the amount of money they can get per bit is getting lower and lower and lower, and the capacity requirements are there and we're getting higher and higher and higher. It's not sustainable. They have to be able to move up a stack, and the only way to do that is with more nimble infrastructure. So it's not a wholesale rip and replace. Is it a piece-parts rip and replace, or is it building a layer on top of the existing infrastructure? Yes, to all those things. So, look, overall, it's about making your network, your network capability flexible. And so as over time, it's about moving away from monolithic systems. So if you have various, you know, elements like a DPI or a firewall, all those things should be running in a cloud somewhere. They shouldn't be in this monolithic thing. And the reason for that is a monolithic appliance, right, that gets you know what, every three years, someone does a new appliance, and also it's very hard to enter that space, right? If there's a little startup, I mean, to have to spend a year just getting the hardware to be compliant. And so by moving this to a cloud infrastructure, you're now opening it up to a bunch of other folks to innovate their for to telco. In terms of how it is, it's going to be over time. You're not going to rip and replace, but you're going to start moving services over that infrastructure. You're going to build your NFV infrastructure. You're going to build the layer that allows you to run those services from that work, and you're going to start moving different services. Now, how are you going to decide what to move? You're going to decide what to move based on what makes sense. There's certain things. There's no innovation. It doesn't matter. Like if you have a big, big router, that may get moved to NFV one day, but how much value am I going to get? On the other hand, mobile services, virtual CPEs where you can move and give services much faster to your enterprise clients, those things, you can move very quickly. So it's going to be a process. The biggest challenge, actually, that process is how do you manage all this while this is going on? Because the telcos have their OSS and VSS systems, and they're like, I don't want to have two separate things. We have a product actually called NFV Director that helps you do that because it provides sort of a wedge between them and allows you to manage the old and the new. So it's an evolution, not a revolution, but you got to get going. So I'm inferring from the tone of this conversation that a lot of this is coming, but the awareness from the telcos that they had to do something has been around for a long time. So where are we in terms of that migration to this new style of computing within telco? Well, again, I would say, again, NFV is the tip of the sphere of them moving to these technologies. They're at various stages. I think Etsy came out two years ago, was NFV and the telco world sort of works based on that where you have a standard to start with. And so Etsy came up with that and that sort of was the spark that led the charge. And then since then, over the last few years, we've been doing a lot of trials. You know, this is how they work. In fact, we have over 20 POCs now with the different telcos and we talked about those at top 25 that we're running. And I think this year has been the year where it says, yes, this actually works. It's not just a standard. It's not just a thing that works. I think then the year coming, the 15, is where you're going to start to see real deployments of people doing things like virtual CB. And it's a no brainer to do a virtual CB. And they're going to start doing it. But this has been a big time. Like this is the same as, I mean, you really have to think about this. And this is why coming from the cloud, having been busy getting the enterprise into cloud for the last few years, it helps it's a similar journey. It's a cultural journey as well. I mean, they've built whole mechanisms of culture in order to keep the network up and how they do upgrades and all this stuff was helping them. They had to do that. It's been very successful. Now all of a sudden you have to upgrade the network every few days. You think you're going to do that without changing culture? So it's a whole process they have to walk through. The good news is they know they have to do it. And we now have the technology to do it. But it's going to take some time. Do you buy the premise that they just have to be good enough and others it's not likely that they're going to be as agile as the Greenfield guys. That's a moving target. Because they have an install base that they just have to be good enough. They have to have certain areas. I mean, the Greenfields can't compete against them in certain areas anyways. I mean, they have a REITs and they have an ability to do things. They have leverage. So, you know, it's not like they have to, they have to start in that process. They have a lot of assets, but they have to make a decision, right? They could decide, you know, Telco can either decide to say, you know what, we're going to go down the food chain and just be provider of dumb pipes. And, you know, we'll make a little thing on it and so forth, our mark cap will be low, but we can do that because it's something cost. Or they can say, no, I want to be a services, I want to be the services business. They have a lot of leverage. They have customer contacts. They have a lot going for them. So, I'm not concerned about that, but it's a question of getting on a journey. On the other hand, they have an installed base and they have an installed network. They just got to keep on working. So, the Greenfield guys at Netflix taking share of the tan, obviously, do you expect there'll be a big share shift within the Telcos? In other words, the guys that moved to NFV fastest are going to steal major share from the guys who don't? Or is that not the case because it's so much? I think that's going to be geographic places. There are areas that have, you know, I don't know if the FCC is listening, but there are areas where there's a lot of competition, like Europe and there are areas where there's very little competition, like not Europe. So, I think, you know, if you look at Europe, it's pretty interesting. They're very innovative, right? Some of these guys are very innovative and they're also branching out, you know, parts of Eastern Europe and Africa there's a lot going on over there. It could be big share shifts. Yeah. In North America, it's a bit more stable, but there's people who, I mean, there are 18 teams, very aggressive domain too. I think in North America, it's more going to be, okay, the share of the wallet, how does the share of wallet shift between the Telcos and the OTTs? Whereas in Europe, that's going to be true too, but there you will also see potential for, hey, I can roll out surface faster. I'm grabbing share. Yeah. So let's talk about the impact of OpenStack, because obviously there is OpenStack in the Paris event was here in Europe. Very telco-oriented from what I heard when we were here. Cube didn't make the trip, but what's the impact? I mean, is there an opportunity for OpenStack? Is it going to slow it down? What's your take on it? And how does it impact the overall OpenStack ecosystem? Well, I think it's actually great for OpenStack, but I mean, you have to think, when you think about NFV, right? One of the core parts of NFV, and there's a whole Etsy model, we won't go into this, right? Because people might fall asleep, they're left to quite fascinating, maybe not for this audience, but in there is something called the NFVI, the NFV infrastructure platform, which includes the hardware and the quantification layer and a bit of management. And basically you need a resource manager for these GNFs, the virtual network functions. And the question is, what is that resource manager going to be? And of course, because a lot of NFVs about being open, that's why we have our open program, they're more and more going than saying it. I want to use OpenStack. Why wouldn't they want to use OpenStack? For two reasons. A, they want to open platform because they're open sources, the new open APIs. And B, they want to do the same thing they do in Enterprise, right? The top goes in Enterprise 2, they want to have separate systems. And so the opportunity for OpenStack is to be that cloud management layer, which by the way, just billions of dollars, this is not like pocket chains. And OpenStack is actually now the default to do that. It is. The question is who is going to provide category capabilities, as you saw, we made an announcement was whenever around that. So we feel very good about Helian being sort of ending up being that platform of choice. Okay, so let's talk about HP now internally. So the cloud group had a sub-progression, right? We saw that when Beery was working on it, he was basically rubbing the sticks together, making it happen, he took it over, you built it out, you go get some funding, you went to Megan and said, okay, we got to do this, you got behind it, it bolted up, think came in, now Martin's running it, things in place, you've got operational, Salesforce, everything's built out, we're building out fast. NFV, similar track, is the same progression, you've got to build a team around it, across pan-HPs, what's the build out, what's the progression for the business unit? Well, you know we have it all planned out down to the team, right? Like always. Like we did in the cloud, we talked about agility, but no, NFV is some of that, but it's not a one-for-one, it's some of that in the sense that there's a kernel, and then you build around that kernel, across HP, with budget, right? Because I'm not going to replicate things. If I need a server, that's super thing, I'm going to go to Antonio and get that, and just give them some money so I get what I want. If I want, carry it right inside Healy, and I'm not going to build my own open-stack team, I'm going to go work with health and work with those guys, I'm not still in the cloud also, but Martin Tarantin said, look, here's six million dollars, go build this, right, we'll work on this together. However, the other part that NFV is, is NFV is also sort of a vertical view for service providers for HP. So it's a broader thing. There are similarities in terms of how we build technology, but it's a bit broader, because it's more and more the service provider to carry a lens from what can HP that we serve us. So it's basically, you could, I mean, some people actually strike that as a vertical and say, hey, we have a telco team to go after it and for it to integrate it. What you're saying. That's an interesting way to look at it. So, yeah, of course, yeah, you can staff against it, but here's the conflict you just brought up, which is, okay, I'm then going to replicate concurrent processes and functions that will overlay against another group, say Helium, for instance. If NFV is going to be a part of Helium, why would you want to reinvent that? We just said that. No, no, no, I won't replicate it. What I'm saying is, you said you won't replicate it. I set up a technology, right, a solution, right? We're providing solutions. I set up an architecture and a solution. Some of that solution will come from my partners, right? Because, and it could be multiple partners, right? It could come from the NAPs, it could come from Nokia, it could come from Ericsson, the VNFs, like we're not going to be the big builders of the VNFs. It could come from Alcatel, come from startups. Some of that solution will come from within HP that I will fund, but not from my business. It could be from CMS. It could be the NFV director, Helium as well, but I will set the agenda for it and the way I will set the agenda for it is a budget and Meg is going to give me a budget to go drive that. Now, a vertical is more about an approach. Okay, who at HP is thinking and saying, okay, what should we, how should we approach the top those? Kind of HP, but even there, I'll be leveraging existing teams, I'm not going to build a whole team. Now, I do have an NFV, I do have Overlay Salesforce to drive that with the sales team. Yeah, got it. So you're going to pick a mix and match. You're going to set the architecture, set the agenda, set the architecture, and then fill in the gas. And also for customers, be the one throughout the show, which is always the most important thing that's when we build Helium. If a customer, if there's an NFV customer for HP, he wants to know there's one place, they just want to go looking for different business units, right? So I serve as that person for them to go and show. Thanks, Sam. Well, Sara, thanks for coming on theCUBE. I know you're super busy, squeeze us in during our lunch break. So again, no pranks today for David, John, but hey, we're happy to have you. CUBE alum, great to have you on, Sharon. Just give us a quick two cents final word, give you the final word. What's the show all about this year? You can summarize for the folks watching at home. What's going on here in Europe? What's the theme? What's the big to do? I think as Mac showed right, and I think you guys saw, innovation engines live and well here at HP. Whether it's in storage and PCs and Helium and networking and software innovation engine as well in a life of HP. And I think that's beautiful for some of us who've been here for a few years during the harder times, that's great to see. It's really, really fun to see. Sargalite currently the COO of HP Cloud and SVP and general manager of the NFV business unit. I'm sure that will evolve and change. So great to see you on theCUBE. We'll be right back into this short break. This is theCUBE. I'm John Furrier with Dave Vellante.