 Las Vegas, expecting the signal from the noise. It's theCUBE, covering Interconnect 2016. Brought to you by IBM. Now your host, John Furrier and Dave Vellante. Okay, welcome back everyone. We are live here in Las Vegas. This is Silicon Angles theCUBE, our flagship program where we go out to the events and extract the signal from the noise. We are at IBM Interconnect 2016. This is our fifth year now doing all the IBM events. Now Interconnect, now the Cloud Show. I'm John Furrier with my co-host Dave Vellante. Our next guest is Eric Herzog, vice president of storage and software defined at IBM. Welcome back, CUBE alum, great to see you. Great, thank you very much. Always love helping guys out of theCUBE. Thank you very much for including us. Our pleasure. We are very cognitive today. We got cognition going on theCUBE. We have all kinds of real time. We've got APIs and notifications. And we're going to extract some insight and predictive and prescriptive analytics from you. So first, what's going on with storage and software? Obviously, storage right now, you're seeing a huge change. Dell buying EMC, which you know a lot about EMC. IBM buys the weather company to contrasting strategies, but storage still is the center of the value proposition. We also heard Robert LeBlanc say on stage today, cheap compute. He didn't say cheap storage. Storage. They did. They did. He didn't say cheap. It's no longer about cheap storage. I stand corrected. But you're talking about a commoditization of resource. Still valuable. And I always said, what's wrong with cheap compute? Want more of it. I want more and more compute. So storage is actually changing. The software value is there. Last time we spoke about that, what's the update in context to cloud? What's the storage equation? What's the storage angle? Well, for us, there's a huge value proposition when both the cognitive side and in the cloud infrastructure side. Obviously with the tumultuous change in storage, both from just where the world is going, we believe that you ride the wave of flash and software defined. And that is our mantra. As you know, one of the industry analyst firms who tracks the numbers, we were number one in flash capacity shipped and number one in flash units last year are all flash. And we've been number one several years in row in software defined storage. So while the storage envelope is changing, if you open up that envelope, we're writing the change inside that envelope, which is flash, software defined, converged infrastructure with our pure power product and also with our partnership with Cisco on the versus stack. That's two years in a row for a flash leadership, right? Yes, same thing with software defined. Well, the good thing is, while the other guy leads in revenue, we believe in a fair price for an outstanding award-winning product line. On the software value, now let's talk about where that fits in. We had multiple guests on today. We had Jamie Thomas, former GM of storage, now thinking in more systems view, it's horizontally composable infrastructure now, our DevOps infrastructure as code. How does that change the equation? Certainly we want storage, but now you got software driving the change. Where's the value points there? Well, when you look at the software defined infrastructure, the magic fairy dust is in the software. So we can work with our own hardware. We can work with our competitors hardware over 300 different arrays from our competitors are completely compatible with our software defined solutions for storage. And we can use with white box if one of our channel partners or end users would rather have white box storage, bear hard drives from C gate or WD and some flash and just a wrapper of metal. We, our software provides the value add for integration into hybrid cloud configurations, into cognitive configurations, into the oceans of data and big data and into analytic environments, all powered by software defined storage. Okay, so you've been on less than a year now, right? You came on last summer, right? Yes. Mid year. So what, nine months? Roughly? Yes, yes. Nine months? What are the big learnings that you've encountered? And then we'll start from there and then we're gonna get into really how you're gonna transform. Yeah, I think the big learning is the world is evolving and a lot of the customer base hasn't gotten there yet. So we're gonna take them on that journey with flash, software defined, converged infrastructure. So we're gonna lead that charge. We're gonna ride the wave, not fight the wave. Sometimes IBM has fought the wave. We've changed that in the storage world. So we're gonna be a leader. We're already a leader in flash. We're a leader in software defined. Our converged infrastructure, particularly with Cisco, had an incredible year last year. You know, for our first year, we had over 250 customers, over 400 units sold. And while there are others who are bigger, in our first year, that was one of the best first years in the converged infrastructure of any vendor. And that's the power of our software defined portfolio, our flash portfolio, and the things we deliver from a storage perspective that helps customers, they convert either to software defined infrastructure or converged infrastructure. So that case, so that sort of answers the question as to how you're gonna deal with, I mean, it's not unique. You got old stuff that's declining. You got new stuff that's growing like crazy, but still not big enough to offset the decline of the old stuff. You got currency headwinds, but there's light at the end of the tunnel in terms of that transformation to those newer architectures. Is that fair? Yes, absolutely. Last year, if you look what it was in the channel with our award from computer reseller news as the best enterprise storage provider in the world, and that was in the fall of 2015. So when you look at the channel and what they're looking for from their provider, unlike the guys in Hopkins and in Austin who were emerging, they didn't win that, IBM won that. So great solution for our channel partner base. We've won awards for software defined for all flash. We did very well in the hybrid array category last year with several product to the year awards. So again, yes, we have an older installed base. One of our big goals this year is to refresh that installed base with software defined with all flash with a comprehensive family of hybrid arrays to make sure that people understand this is where the market is going. This is where you need to go to drive cognitive value, hybrid cloud value. Quite honestly, it's all about applications, workloads and use cases. And even though I've done storage for 31 years, let's face it, most CIOs can't stand storage. So you have to put it in the language that they understand which is software value ad and how it can enhance their ability to meet the business SLAs that the CIO is under pressure from the VP of operations, the VP of marketing, the finance side, and of course ultimately the CEO. So in this business, I've been in the business, maybe not 31 years, but maybe 35. Anyway, so the product portfolio is very, very important. One of the criticisms I've had of IBM over the years has been just not enough product innovation coming out, great R&D, but doesn't hit the pipeline. So when you came to see us in Boston, you showed us a little glimpse of the roadmap and it's very clear that's accelerating. I wonder if you could talk about that. What can you share with our audience? Sure, we've done a couple of things. First of all, we have the Flash Religion. We acquired a Flash company, get started, but so did several of our competitors. In addition to spending money on that acquisition, we've invested over a billion dollars in engineering resources on the Flash side. Software defined, we're spending a billion dollars in that. As you know, we recently bought the award-winning and market-leading object storage technology with Cleversafe and we spent money on that. So IBM is putting its money where its mouth is. Its focus is on storage and how storage enhances hybrid clouds, cognitive, big data analytics, and deals with these oceans of data that our customers are facing. And how do you manage that? And how do you make the data more valuable and more productive to the business? Cause that's what it's about. It's not about storage. It's about the management of that data to optimize our customer's business and how we can deliver that with effective cost. So Cleversafe was mentioned in the keynote, in context to LeBlanc's reference to the digital transit of Ustream, the video stuff. Interesting how he plugged in Cleversafe. How does that relate? I mean, honestly, I know it's a recent acquisition. Is it just the object storage and unstructured data? Why is Cleversafe plugged into that kind of portfolio of those four companies he mentioned around the world? As you know, as when you develop that type of technology, you end up with incredible amounts of data. And an object store is designed to handle exabytes of capacity and exabytes of information. It doesn't necessarily have to be fast. For example, video surveillance data and all kinds of other data. It may be hot for a while. And one of the values of Cleversafe, for example, is that our spectrum scale product, which is our scale out network attached storage, actually will automatically tier to Cleversafe. We're in a public beta right now. Our spectrum protect product we've also talked about is gonna support Cleversafe either as a source, so you could back it up. But more importantly is a target. So you could take gobs of data and back it up into a Cleversafe repository. When you've got oceans of data and people are generating exabytes and exabytes of data, what you can get with Cleversafe on-premises or in a cloud configuration allows you to handle this extensive data growth cost-effectively and in an easy to manage and configure way. So talk about VMware relationship with storage. Obviously they're in an announcement today with IBM. EMC recently had an announcement with VMware and VxRail. Right. And the big debate was obviously as hybrid cloud was depositioning, using their software stack to be a glue into the hybrid cloud journey. But one of the comments that we made note of that we captured on the crowd chat was from Keith Townsend, one of our members of our community. He wrote, it took Netflix seven years to move to the public cloud, meaning everything all flashed. They had one of the first all flash implementations that Amazon ever rolled out. What does that mean for the average VMware customer? In this case, IBM customer from a product perspective. So you got your relationship to VMware. You have this notion of hybrid cloud. Right. It took Netflix seven years there in the cutting edge. What does that mean for the average customer? This whole notion of using software and storage, plugging it into hybrid cloud. If it took them seven years, what was it, 70 years for an average company? Well, you got to remember that that started a while ago. And the move to the hybrid cloud has just accelerated dramatically. So our spectrum scale product, our spectrum accelerate product, our spectrum protect product, all are designed for hybrid cloud configurations right this minute. They're easy to deploy. They're easy to use. They're all available in software. They're also available with other cloud providers. Spectrum protect has close to 100 different MSPs and CSPs who provide backup and archive services with award-winning spectrum protect. So our spectrum family is designed that way. It's different than it was seven years ago. Yes. Today's much accelerated. Easy to deploy. It's easy to use. You have a wide choice of MSPs and CSPs to use, whether it's software or other providers in the industry. And our software defined storage supports all of that vendor base regardless of whether it's IBM software or other cloud providers as well. Well, and you could argue too, Netflix did it at a time when it was early days. Right, it was new. So they were the pioneer. They were the pioneer. They were dropping down trees, hacking, you know. Right, they're the ones with the arrows in the back. Push-racking. Right? Chaos monkeys everywhere. So, so. Can I jump in here? Yeah, go ahead. All right. Sorry, John. I want to talk about the state of the industry. All right, there's a lot of interesting stuff going on. You've been in the business for decades. You understand sort of the trends. You've seen a lot of the ebb and the flow. How would you describe where we're at right now? Seems like an uncertain time. So, storage is incredibly tumultuous right now. One of the good things about storage is constantly filled with innovation. As you know, from my past, I've done seven startups. Thank God five have been acquired so I can wear a Hawaiian shirt. They're expensive these days, these Hawaiian shirts. So, every five, six years, you have a wave of startups in the storage business. That's not common in most other segments of the IT market space, but in storage it is. So, you have a constant wave of startups. That happens on a normal basis, and we're in one of those phases right now. At the same time, you have massive change in the tier one vendor base. EMC and Dell are merging. HP splits into two. Network appliance, which had been an incredibly great company its past, has now missed their numbers, almost eight quarters in a row, and just last week announced they're laying off 1,500 people. So, the world is changing dramatically. Also, the applications, workloads, and use cases are changing dramatically. So, you've gone to a cognitive era. You don't have serial management of data. You now have parallel management of data. You don't want databases that react, or let's say a data warehouse that takes 30 hours to run a report. You want the report to run in one. So, if you will, real-time cognitive data availability and ability to analyze that data. And that is dramatically changing what startups are out, how successful they'll be, how the tier one vendors are reacting. For example, one of the great things about IBM is we're focused on Flash, which is the fastest growing storage systems market, and software defined, which was one of the fastest growing storage software markets. And we're leaders in both market spaces. So, when you open up the envelope of what's inside storage, it's a slow growth market, three to 4% per year is all it's growing. But certain segments are growing rapidly, and IBM focuses on those rapid growth segments. Now, about the cloud piece, right? So, you might be guys talking about Cleversafe before, I thought that was a cloud acquisition, which it was in part, right? But it's also something that falls into the storage portfolio. Right, and that's because Cleversafe can be configured in a number of different ways. On-premises only, cloud only, or hybrid configuration, we can have an on-premises, Cleversafe configuration talking to a cloud-based configuration. So again, part of IBM's strategy is to make sure that from a storage perspective, all of our software defined infrastructure and what we acquired with Cleversafe are designed for hybrid cloud configurations or private cloud configurations or public. Again, our spectrum family is used by hundreds of public cloud service providers to deliver a backup service, for example, as spectrum protect. So, the reason my question was, there's very clearly an effect on that. You talked about 3% or whatever the latest numbers are. It's flat. The market's basically flat. It is flat. But the cloud market, of course, is growing like that from a smaller base, but it's clearly having an impact on demand. Is that a fair statement? Yeah, I think what's happening when you look at it from a storage perspective, where you're really having the biggest impact on cloud is in the lower end, in the entry space. Yes, the capacity is growing exponentially, but whether it's the department level of a giant global Fortune 500, whether it's Herzog's Barn Grill or a mid-sized company, when they need a small array, audit times are going to a public cloud configuration. So that low end of the market is shrinking. At the same time, when you do software defined, if you're one of the tier one vendors, the storage could come from off-the-shelf hard drives. So the values in the software, but that also delivers a revenue hit to the vendor base. And lastly, when you think about how would you get incredible performance five or six years ago? You would have bought an array that was five to $8 million. Best case, if not closer to 10. You'd be lucky if you could get 200,000 IOPS. Maybe you could get five milliseconds latency. Today at an average sale price of $300,000, we can deliver over a million IOPS and sub-100 microsecond latency. So you don't need to buy your big iron at five, eight, 10 million, you can do it with something for $300,000. He pukes the bottleneck, John. Yeah, I mean, this is back to our keynote. Brian Kroll from Apple is on stage, another great company leaders in delivering great value. But he made a comment I want to get your reaction to because I know it's a phone analogy, but I want to bring it to storage. If the values in the software and all flashes, the bet you guys are making and the numbers are impressive in terms of performance, in terms of IOPS throughput and cost per megabyte, he said, you got to get closer to the hardware. To write your native apps, and he's referring to the iPhone software app using Swift and Xcode to the hardware. So in storage look different. How does the software piece take advantage of the hardware? And is that built in? Is it optional for the customer? Because we're seeing this notion of, okay, take advantage of the hardware. So how do you reconcile with the customer? We've done some really strong things there. So let's take, for example, our Spectrum Virtualize software. Spectrum Virtualize allows enterprise class data services across heterogeneous storage environments. Ours are competitors and anything that's white box, over 300 arrays. We have taken the Spectrum Virtualize platform and integrated it into our V9000 flash systems, all flash array, into our mid-tier store-wise V7000, and our mid-tier store-wise V5000, which we just launched last week, three new configurations. We also have the Sandvolume controller. But what we've done is integrate that Spectrum Virtualize software, which provides a virtual backend of all storage, not just our own, provides a single way to replicate, a single way to snapshot, transparent block migration on the fly, and integrate that right into flash systems and store-wise. That's terrific to get advantage of the hardware. And it, software comes with it. Exactly. It's built into the system, takes advantage. As a coder, infrastructure as code, like an Apple programmer building a native after the iPhone, what does that developer doing with you guys? Is it through that software layer, or how are they programming? It could be through either. I mean, the key thing when you look from a DevOps perspective, they want to quickly be able to provision storage, okay? And with things like all the Spectrum family and with the GUIs we've implemented into our store-wise, our XIV, and all of our storage products, it's very easy to deploy storage. You can do it in minutes. So whether the DevOps guy does it with the DevOps guy calls the storage guy, the bottom line is they can get the storage up and running in a virtual environment, in a containerized environment, in a matter of minutes. And from a DevOps perspective, that's what they want. So we're able to meet the needs of the DevOps guy, but also the traditional storage vendor as well. So I want to get one last question for me, for the kind of run out of time, Dave might have one more, but I want to get your take on this because it's really been an interesting industry chess game with VCE and VMware and EMC doing the hyper-converged X-Force, they're calling it this hyper-converged without Cisco. So Cisco's no longer, you mentioned, you have a partnership with Cisco. So VCE and VX Rails was talked about last week. What's going on with VCE? Is it still going to be around? Do you see it taking multiple forms? Is the increased breadth of solutions going to be multi-vendor? What's your take on? So you have a relationship with Cisco, how does that, what do customers deal? What does a customer do? Cause they're like, okay, who do I? So I think there's a couple of things that customers need to look at. First of all, there's going to be a transformation. VCE, as it was originally constructed, a partnership with Cisco, EMC and VMware will not exist after the acquisition. This is my theory. What will happen is, just thinking about Cisco is no longer involved. So what will happen is those Cisco servers will be transitioned out and Dell servers will be transitioned in. That's exactly what's going to happen. So Cisco is aware of this and Cisco has been engaging with other partners. Like I mentioned, the VersaStack had the best first year of any converged infrastructure in the history within its first year. Why? Well, in the middle of last year, what happened? Dell and EMC and announced a merger. So a lot of the business partners, a lot of the end users, there's cause for concern. And EMC has already taken Cisco out of a number of configurations. And there's a number of things for an end user to think about. One, look at the development budgets. What was the EMC development budget? What's the Dell development budget? Substantially lower. EMC did an outstanding job of acquiring startups. With the debt load that's been written about publicly, not just in the storage press, but really in the financial press, will they able to afford to buy a bunch of cool startups like EMC used to do in the old days? Hard to say. And EMC, like I did- Well, the startups, Data Domain was a great acquisition for EMC. Iceland, same thing. Will they be able to continue to do that? And like IBM, EMC has a pretty good reputation for support and service. That's not really the reputation of the guys in Austin. They're reputations, cost effective, rapid delivery. Not necessarily the best support and service. In the enterprise side, people are looking for that enterprise class support and service. So those are the questions that a customer needs to ask at the end user level or a channel partner needs to ask of, as this merger goes forward, how's it going to impact the roadmap for the future, the development expense, my support capability. Those are things that have different models in those two companies. So it'd be interesting to see how it pans out. Unfortunately, we're out of time because we could do a whole cube segment just on that. Eric, thanks for coming by. I'll give you the last word. What does the digital transformation for the customer of IBM, the buyer, when they talk to you in the elevator and they say, hey, what's the storage angle on this digital transfer? Where does storage fit into my digital transformation? What's the bumper sticker? What's the value proposition? Well, the key thing, digital transformation is a different sort of data. It's been data for years and years and years. Data has to sit on storage. The better the storage is, you're better at the digital environment is, the faster it is, things like flash systems or our spectrum scale for cognitive, the better that data is going to be. So the digital era is powered by storage underneath. It's like the foundation of a home. Good foundation, great home. Good foundation, great digital data. Great foundation, the cube day one is here, more foundational coverage tomorrow. The cube conversation will continue tomorrow, day two. We had more interviews today, but tomorrow, a lot of big names, the biggest names in tech, the most powerful people here at IBM Interconnect. It's the cube. We'll be right back with more coverage here on day one. Wrap up after the short break.