CRN Exclusive: Whitman On Why Dropbox Hit The High-Price AWS Wall, HPE's Lower-Cost Hybrid Cloud, The Docker Partnership And Why IBM Watson Is Second Best

Whitman Front And Center

Hewlett Packard Enterprise CEO Meg Whitman spoke with CRN about Dropbox's decision to move some of its huge cloud storage business from Amazon Web Services to a scalable HPE cloud solution, the deal to put Docker on HPE servers and how HPE's Haven OnDemand stacks up against IBM Watson.

The conversation with Whitman came Wednesday at HPE's Discover conference in Las Vegas where she used her keynote address the prior day to some 10,000 attendees to shine the spotlight on the Dropbox and the Docker deals.

HPE took the lead on a Dropbox move to a lower-cost hybrid cloud model with an "open architecture approach and a custom server solution" featuring HPE Proliant and Cloudline service provider systems, all financed by HPE Financial Services, said Whitman.

Whitman also spoke about HPE's plan to put the Docker engine preinstalled on all HPE servers starting in the fourth quarter, HPE's Internet of Things battle against Cisco, and the HPE Smart Choice initiative aimed at bringing Dell-EMC partners into the HPE fold.

Is HPE's successful move to bring Dropbox from Amazon Web Services to an HPE-designed cloud offering an inflection point in the industry?

I think it is quite significant. I think the conventional wisdom was that everyone was going to move eventually to a public cloud, which is tough for big infrastructure vendors like us and difficult for partners.

What we see in Dropbox is potentially the beginning of a trend, which is once you get to a certain requirement, certain scale, certain compliance requirements, that actually being in the public cloud is not the answer to every question.

It was interesting to see Dropbox actually go backwards in some ways to a hybrid cloud. I like to say they went right to left.

Was it cost or control that led to that Dropbox decision?

I would say it was both. But I think it was primarily cost and then flexibility because of course when you are in the public cloud you get what Amazon gives you. You are not doing anything really on your own. You are just taking what is there. When Dropbox got to a certain scale it needed to have more control over the features and functionality that it had for its infrastructure.

How much lower is the cost to run on an HPE-designed cloud than on AWS?

It is cheaper [on AWS] up to a certain scale, and then once you get over a certain scale actually it becomes more expensive. And so each company has to find out where that flipping point is. Our data suggests that once you get over a couple of hundred thousand dollars a month at Amazon it is actually cheaper to do it yourself.

Now, they are going to continue to bring down their costs. We have to continue to bring down our costs. I think many companies are willing to pay a small premium for the control and the agility that you have when it is on-prem or in a hosted solution. But they are not willing to pay 20 times more or 10 times more or maybe even five times more. So we have got to make sure that we stay very competitive in terms of cost because people will pay a bit more but they don't want to pay a lot more. And this turned out to be a lower cost solution for [Dropbox CEO] Drew [Houston].

How important was the security you provided to Dropbox versus Amazon Web Services?

Security is the No. 1 issue at every company. [Microsoft Chief Information Security Officer] Bret Arsenault yesterday said this is a board [of directors] issue. Everyone is really worried about this. And while I think actually Amazon is quite secure, in many ways there is something about seeing it, feeling it, touching it and knowing exactly who is doing what to whom that gives people a sense of comfort.

It is security and it is also compliance. Every industry -- whether it is health care, banking, pharmaceuticals, even consumer packaged goods -- compliance is actually a big, big issue.

How did the deal with Dropbox come about?

I think [Dropbox founder and CEO] Drew [Houston] (pictured) had made a decision that he had to go to more of a hybrid IT infrastructure. So he called a number of partners, and we went up to see him and said, 'We can actually really help you do this.'

You heard me say yesterday that we helped architect his hybrid IT. So we worked very closely with the Dropbox engineers and came up with a hybrid IT infrastructure that would be cheaper, more flexible and frankly give them more control.

Do you think more customers will make the move off public clouds?

I think there will be more companies who actually move, if you will, from a full public cloud instantiation to hybrid IT. I think what we have learned is the future is actually hybrid. In the old days, people said they were going to move 98 percent of their applications to the public cloud. It is not happening. It is definitely not happening – at least in our lifetime. So I think we will see more companies [doing that].

What do companies have to do to get to hybrid cloud?

Every company has to start with their applications and decide where they want those applications or workloads to live. How much do you want in your own data center locked-down? What do you want in a private cloud or a hosted solution? Then we can help you and the partners can help their customers architect what is right for that particular customer.

But it has to start with an understanding of workloads and applications and what you want the performance to be, what your cost envelope is, and what your security and compliance issues are. It is different for every customer. Some customers have 10,000 applications, and some customers have already made that rationalization down to 2,500.

Some are living in three or four ERP systems that need to be collapsed. It is a journey, and I think partners, particularly those partners with a services practice, should actually run – not walk – to this opportunity. Everyone in the audience [here at Discover] needs a partner to help them figure it out.

How should partners look at the HPE agreement with Docker?

Every server will come with Docker bundled, and that is a real selling point for the channel partners because they can go to customers and say, 'listen, you get the great HPE servers plus Docker, and that will allow you to explore containers in your organization, to have your developers develop in containers and begin to learn how to use containers for flexibility and agility in your infrastructure. '

I think it is a real selling point for HPE servers and for the channel because it is something new and really interesting to talk about. This is a great opportunity for customers to experiment and learn a new way of writing apps.

How fast is Docker driving down costs for customers?

What containers do is allow you to write an application once and then allow you to move it. It is cheaper because many people envision the future of Docker as minimizing the importance of virtual machines. I thought [Docker CEO] Ben [Golub] (pictured) said it best yesterday when I asked him the question: Will this [make] virtualization obsolete? He said 'I'll take the Fifth,' but then he said 'Listen, this will be a hybrid environment. Virtual machines will be here for a long time.' But frankly, if you write your applications in containers you can run them on bare metal, and that saves a lot of money and improves speed and agility.'

How big a competitive advantage is HPE's commitment to open source versus VMware?

I feel very good about the decision we made four years ago to build our cloud offering on open source, which as you know is called OpenStack. The brilliance of open source is it is a community of developers.

At the beginning I was a little concerned because it does take adult supervision to sort of organize the open-source community. We are now one of the biggest contributors to open source and to Open Stack. We will continue to be a leader in that community.

But over the past couple of years you have seen that Open Stack distribution really mature and become much more robust. I am feeling great about the strategy because it will be cheaper for customers. It will have a pace of innovation that is going to be unmatched by any individual vendor.

I think partners and customers have got to think through what is their long-term view – do they want to invest in a proprietary stack or do they want to invest in Open Stack and ride the wave of innovation the community will deliver?

What's the channel opportunity around what you are doing with the Internet of Things?

We play really in two major markets, and so do channel partners. They may not know it yet. The first is the data center where we have played together for many, many years. There is lots of innovation in the data center whether it is private cloud or composable infrastructure, and there are pockets of growth in the data center. But the data center is under pressure. So what is the next big area? I would say that it is campus, branch and industrial IoT. I think it is a big opportunity for partners.

Compute is moving to the edge. You heard my story about the autonomous driving vehicle where the data center for that vehicle is in the trunk. That is a data center as compute and storage at the edge. And I think that is a big opportunity.

What advice do you have for partners looking to tackle the IoT opportunity with HPE?

My advice to partners is pick a vertical and begin to develop your expertise, develop the sales organization, develop the solutions whether it is manufacturing or automotive or the chemical industry or health care.

I don't think partners will be limited to that vertical, but I would advise them to start with one. Maybe to some degree it is driven by geography. A lot of our channel partners in Germany are going after automotive and manufacturing because that is the core of the German economy. If you are in one of these big centers with hospitals like New York or Boston or Atlanta or Birmingham, maybe you want to specialize in health care.

How do you compare the HPE IoT story to the Cisco story?

I think we come at it from very different perspectives. Cisco because they are a networking company thinks about all these connected devices and how we are going to build a network to connect them all. We think about it as compute and storage. So they are thinking they are going to build a big network. We are thinking how do we move that capability to compute all the way to the edge because you don't have the latency. If you are in a self-driving car, you don't have time to move that data back to a data center, process it and move it back because it is making literally split second decisions. Is that a tree or a person? Is that a car next to me or is that a brick wall? It just is a different point of view.

One of the things that we have talked about is what is in the core DNA of HPE? This compute with low power and low footprint at the edge is who we are. It is absolutely who we are. So I think this is a big opportunity for partners.

HPE Executive Vice President Software Robert Youngjohns challenged IBM Watson to go head-to-head against Haven OnDemand, HPE's machine learning platform. How does HPE's offering stack up against IBM Watson?

I think what Robert said is correct: our Haven OnDemand platform is very powerful, and actually we can do more than Watson. But Watson is very well-marketed. You have got to give IBM credit. They are an incredible marketing company, and maybe the delivery falls short of the marketing. But they are a great marketing company. We are the opposite. We are engineers.

Someone said to me the other day – 'If you could just market what you have, it would be fantastic.' This is part of the reason for splitting as well. When we were HP Inc. plus HPE, there would be these incredible things we had but we never had the chance to talk about them.

Splitting off our Enterprise Services business and merging it with CSC is going to put even more of a spotlight on our software and our enterprise group business, and I think it is going to help our innovation shine more brightly.

Are you seeing success with the Dell-EMC partner recruiting effort?

Yes, we are. We are running the playbook we ran with IBM when they took their server business and sold it to Lenovo. We intercepted a lot of those partners on their way to Lenovo. We are doing the exact same thing. We are bringing EMC partners into the fold. We are bringing Dell partners into the fold. And I think they like what they see.

It seems like the enthusiasm is enormous. We issued a lot of [Discover] invitations, and we were thrilled at the number of people who said, 'Yeah, let me come see what HPE has to offer.'

Why aren't more partners doing more with HPE software?

In part it comes back to part of the rationale for separating ES [Enterprise Services in the merger spin off with CSC]. Even after carving out HP Inc. we were still a $50 billion company with 150,000 employees around the globe with so many pockets of innovation.

By getting smaller, we are going to be able to highlight the things that can make a difference to partners. The message for the partner community around this spin-off is we now are even more enthusiastic about the partner community – if that is even possible – because we are pretty enthusiastic. We have got to partner even more aggressively with our partner community to deliver software, to deliver converged infrastructure, to deliver hyper-converged. We have no business now that doesn't go through partners and disties.

We are now a 100 percent channel-focused company.

What's HPE's plan for more disruptive deals, such as investing in companies like Mesosphere?

We are really about curating Silicon Valley for our partners and their customers. And that word 'curate' is super-important because if you are a CIO at a midsized company, there is a new security company every week being born in Silicon Valley. You are like, 'What am I supposed to do – integrate 20 new security companies? How do I know they scale? Who is going to service it? What if they are displaced by someone else?'

Our job is actually to make investments in these companies and then curate it and say, 'These are the three or four that we really recommend you put into a security solution.' I think partners can leverage our expertise. We have an advantage versus some other companies because we are in Silicon Valley. It is harder if you are in Armonk, New York. It is way harder if you are in Austin Texas.

What's the pace of innovation right now in the enterprise market?

We live in just an incredible renaissance of innovation that is happening for the enterprise. The first 10 years of the Internet was more about consumer innovation. The next 10 is going to be about enterprise innovation.

You didn't see the Chefs and the Puppets and the Dockers and Mesosphere five or six years ago. It was all about LinkedIn and Google and EBay and PayPal. Now you are seeing a disproportionate share of the venture money going into B2B enterprise solutions, and partners should be totally excited about that.