Playtika Bets on Big Data Analytics to Deliver Captivating Social Gaming Experiences

Transcript of a discussion on how Playtika uses data science and a unique architectural approach to conquer big data hurdles around volume, velocity, and variety of data.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Dana Gardner: Hello, and welcome to the next edition of the Voice of the Customer podcast series. I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator for this ongoing discussion on IT innovation and how it’s making an impact on people’s lives.

Gardner

Our next big-data case study discussion explores how social gaming company Playtika uses big-data analytics to deliver captivating user experiences and engagement.

We'll learn how feedback from user action streams can be analyzed in bulk rapidly to improve the features and attractions of online games and so help Playtika react well in an agile market.

To learn more about leveraging big data in the social casino industry, we're pleased to welcome Jack Gudenkauf, Vice President of Big Data at Playtika in Santa Monica, California. Welcome, Jack.

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Jack Gudenkauf: Thank you. It’s great to be here.

Gardner: Tell us about Playtika. I understand that you're part of Caesars Interactive Entertainment and that you have a number of online games. What are you all about?

Gudenkauf: We have a few free-to-play social casino games. In fact, we're the industry leader. We have maybe 10 games at this point. World Series of Poker, which you've probably heard about, Slotomania, House of Fun, Bingo Blitz, a number of studios combined.

Gudenkauf

Worldwide, we're about 1,000 employees. As I say, we're the industry leader in this space at this moment. And it's a very challenging space, as you might imagine, just within gaming itself. The amount of data is huge, especially across all of these games. Collecting information about how the users play the game and what they like about the game, is really a completely data-driven experience.

If we release a new feature, we get feedback. Of course, it’s social gaming as well. If we find out that they don't like the feature, we have to rev the game pretty quickly. It's not like the old days, where you go away for a year or so, and come out with something that you hope people like -- Halo, or something like that. It's more about the users driving the experience and what they enjoy.

So we'll try something with some content or something else and see if they like this feature or functionality. If the data comes back immediately that, as they do the slot spin and they have a new version of the game and they're clearly not playing, we literally change the game.

In fact, in the Bingo Blitz game, we will revise the game as often as once a week, if you can imagine that. So we have to be pretty agile. The data completely drives the user experience as well. Do they like this, do they not like this, shall we make this game change?

Data-driven environment

It’s a complete data-driven environment. That's what brought me there. I came from Twitter, where we used very big data, as you might imagine, with Hewlett Packard Enterprise (HPE) Vertica and Hadoop and such, but it was more about volume there. Here it’s about variety, velocity, and changing game events across all of our studios.

You can imagine the amount of data that we have to crunch through, do analytics on, and then get user feedback. The whole intention is to get feedback sooner so that we can change the game as rapidly as possible, so that users are happy with the game.

So it’s completely user-driven as far as kind of the experience and what they enjoy, which is fun and makes it challenging as well.

Gardner: So being a data scientist in this particular organization gives you a pretty important place at a major table. It's not something to think about at the end of the month when we run some reports. This is essential and integral to the success of the company?

Gudenkauf: Of course, we do analyze the data for daily, monthly, and general key performance indicators (KPIs), daily active users or monthly active users, those types of things. But you're absolutely right. With the game events themselves, we need to process the data as quickly as possible and do the analysis. So analytics is a huge part of our processing.

With the user experience and what they enjoy and the free to play, in particular, the demand is pretty high.

We actually have a game economy as well, which is kind of fascinating. If you think of it in terms of the US economy, you can only have so much money in the economy without having inflation and deflation. Imagine if I won all the money and nobody else could have money to play with. It’s kind of game over for us, because they can’t play the game anymore. So we have to manage that quite well.

Of course, with the user experience and what they enjoy and the free to play, in particular, the demand is pretty high. It’s like with apps that you pay for. The 99-cent apps are the ones that people think the most about.

When somebody is spending a dollar, it's very important to them. You want the experience to be a great experience for them. So the data-driven aspects of that and doing the analysis and analytics of it, and feeding that back to the game is extremely important to us. The velocity and the variety of games and different features that we have and processing that as fast as possible is quite a challenge.

Gardner: Now, games like poker, slots, or bingo, these are games that have been around for decades, if not hundreds of years, and they've had a new life online in the past 15 years, which is the Dark Ages of online gaming. What's new and different about games now, even though the game is essentially quite familiar to people? What's new and different about a social casino game?

Social aspect

Gudenkauf: I've thought about that quite a bit. A lot of it has to do with the social aspect. Now, you can play bingo, not just with your friends at the local club, but you can play with people around the world.

You can share items and gifts, and if you are running low on money, maybe you can borrow some from your friends. And you can chat with them. The social aspect just opened up all kinds of avenues.

In our case, with our games in the studios, because they're familiar, they stand the test of time. Take something like a bingo or slots, as opposed to some new game that people don't really understand. They may like it. They may only like it for a while. It’s like playing Scrabble or Monopoly with your family. It's a game that's just very familiar and something you enjoy playing.

But, with the online and the social aspect of it, I explain it to other people as imagine Carmen Sandiego meets bingo. You can have experiences where you're playing bingo, you go on this journey to Egypt, and you're collecting items and exploring Egypt, trying to get to another thing. We can take it to places that you wouldn't normally take a traditional kind of board game and in a more social aspect.

So you extract that data as usual and then you transform it. You reshape it and change it around a little bit to put it in a format to get it into a data warehouse like Vertica.

Gardner: So this really appeals to what's conceived of as entertainment in multiple ways for an individual. Again, as you established, the analysis and feedback loops are really important.

I understand why doing great data analysis is so important to this particular use case. Tell us a little bit about how you pull that off. What sort of data architecture do you have? What sort of requirements do you have? What are the biggest problems you have to overcome to achieve your goals?

Gudenkauf: If you think about the traditional way of consuming data and getting it into a reporting system, you have an extract. You're going to bring in data from somewhere, and of course, in our case it’s from mobile devices, the web, from playing on Facebook. You have information about how much money did you spend, and user behavior. Did they like it?

So you extract that data as usual, and then you transform it. You reshape it and change it around a little bit to put it in a format to get it into a data warehouse like Vertica.

Once you get it into HPE Vertica, you have the extract, transform, and the load (ETL), the traditional model. You load it into Vertica and then you do your analysis there, where you can do SQL, JOINs, and analytics over it.

A new industry term that I'm coining is what we call Parallelized Streaming Transformation Loader (PSTL) instead of ETL. This is about ingesting data as fast as possible, processing it, and making analytics available through the entire data pipeline, instead of just in the data warehouse.

Real-time streaming

Imagine, instead of the extract, we're taking real-time streaming data. We're reading, in our case, off a Kafka queue. Kafka is very robust and has been used by LinkedIn and Twitter. So it’s pretty substantial and scalable.

We read the messages in parallel as they're streaming in from all the game studios, certain amounts of data here and there, depending on how much we do with the particular studio. With Bingo Blitz, in our case, we consume a lot more user behavior than say some of the other studios.

But we ingest all the data. We need to get it in in real-time streaming. So we read it in in parallel. That’s the parallel part and the streaming part. But then we take it from the streaming, and instead of extracting, it's being fed into us.

Then we do parallel transformations in Spark and our Hadoop cluster. Think of it as  bringing in a bunch of JSON event data, we are putting it into an in-memory table that’s distributed in Spark.

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Then, we do parallel transformations, meaning we can restructure the data, we can do transforms from uppercase, lowercase, whatever we need to do. But it's done in parallel across the cluster as well. Where, traditionally, there's a single monolithic app that was running, we could run independent to the extract of the load.

We have so much data that we need to also do the transformations in parallel. We do that in what are called Resilient Distributed Datasets (RDDs). It’s kind of a mouthful, but think of it as just a bunch of slices of data across a bunch of computers and your nodes, and then doing transforms on that in parallel. Then, something that has been a dream of mine is how to get all that data in parallel at the same time into HPE Vertica.

HPE Vertica does a great job of doing massive parallel processing (MPP) and all that means is running the query and pulling data off of different nodes in the cluster. Then, maybe you're grouping by this and you are summing this and doing an average.

But, to date they hadn't had something that I tried to do when I was at Twitter, but managed to pull off now, which is to load the data in parallel. While the data is in memory in Spark and distributed datasets, we use the Vertica Hash function that will tell us exactly where the data will land when we write it to a Vertica node.

We can say, User A, if I were to write this to Vertica, I know that it’s going to go on this machine. User B will go to the next machine. It just distributes the load, but we, a priori, hash the data into buckets, so that we know, when we actually write the data, that it goes to this node. Then, Vertica doesn’t have to move it. Usually you write it to one node and it says, "No, you really belong over here," and so it asks you to move it and shuffle, like a traditional MapReduce.

Working with Vertica

So we created something in conjunction with the Vertica developers. We announced it. That part of it is kind of a TCP server aspect that we extend in the Copy command that exist in Vertica itself. We literally go from streaming in parallel, reading into in-memory data structures, do the transformations, and then write it directly from memory into our Vertica data warehouse.

That allows us to get the data in as fast as possible from streaming right to the right. We don’t have to hit a disk along the way and we can do analytics in Vertica sooner. We can also do analytics in Hadoop clusters for older data and do machine learning on that. We can do all kinds of things based on historical user behavior.

If we're doing a sale or something like that, how well is it resonating compared to the past. What we're doing is pushing the envelope to push the analytics as close as we can up to the actual game itself.

As I said, traditionally, you do the analytics, get the feedback, change the game, release it in a week, etc. We're going to try to push that all the way up to be as near real time as we can. Basically, the PSTL pipeline, allows us to do that, do analytics, and tighten that loop down so that we can get the user behavior to the user as fast as possible.

Once you have it in as fast as you can, reshaping it while it’s in memory, which of course is faster, and taking advantage of doing the parallel transformations at the same time, and in the parallel loading as well, it’s just a way more optimized solution.

Gardner: It’s intriguing. It sounds as if you're able, with a common architecture, to do multiple types of analysis readily but without having to reshuffle the deck chairs each time. Is that fair?

Gudenkauf: That's exactly right. That’s the beauty of this model and why I'm putting up more prescriptive guidance around it. It changes the paradigm of the traditional way of processing data.

We announced some benchmarking. Last year at the HPE Big Data Conference, Facebook stole the show with 36 terabytes an hour on 270 machines. With our model, you could do it with about 80 machines. So it scales very well. Some people say, "We're not Twitter or Facebook scale, but the speed at which we want to consume the data and make it available for analytics is extremely important to us."

The less busy the machines are, the more you can do with them. So does it need to scale like that? No, we are not processing as much data, but the volume, velocity, and variety is a big deal for us. We do need to process the volume, and we do have a lot of events. The volume is not insignificant. We're talking about billions of events, mind you. We're not on the sheer scale of say Twitter or Facebook, but the solution will work for both, in both scenarios.

Gardner: So, Jack, with this capability analysis as close to real-time with the volume and the variety that you are able to accomplish, while this is a great opportunity for you to react in a gaming environment. you're also pushing the envelope on what analysis and reaction can happen to almost any human behaviors at scale. In this case, it happens to be gaming, but there are probably other applications for this. Have you thought about that or are there other places you can take it within an interactive entertainment environment?

All kinds of solutions

Gudenkauf: I can imagine all kinds of solutions for it. In fact, I've had a number of people come up to me and say, "We're doing this Chicago Stock Exchange, and we have a massive amount of streaming-in data. This is a perfect solution for that."

I've had other people come in to talk to me about other aspects and other games as well that are not social casino genre, but they have the same problem. So it's the traditional problem of how to ingest data, massage it, load it, and then have analytics through that entire process. It’s applicable really in any scenario. That’s one of the reasons I'm so excited about the PSTL model, because it just scales extremely well along the way.

Gardner: Let’s relate this back to this particular application, which is higher entertaining games that react, and maybe even start pushing envelope into anticipating what people will want in a game. What’s the next step for making these types of games engaging? I'm even starting to toy with the concept of artificial intelligence (AI), where people wouldn’t know that it’s a game. They might not even know the difference between the game and other social participants. Are we getting anywhere close to that?

Looking at historical data and doing machine learning, we can make better determinations of games and game behavior.

Gudenkauf: You're thinking extremely clearly on the spectrum in analytics in general. Before, it was just general reporting in the feedback loop, but you're absolutely right. As you can see, it’s enabled through our model of prescriptive analytics. Looking at historical data and doing machine learning, we can make better determinations of games and game behavior that will drive the game based on historical knowledge or incoming data that’s more predictive analytics.

Then, as you say, maybe even into the future, beyond predictive and prescriptive analytics, we can almost change as rapidly as possible. We know the user behavior before the user knows the behavior. That will be a great world, and I'm sure we would be extremely successful to get to that final spectrum. But just doing the prescriptive analytics alone, so that the user is happy with the game, and we can get that back to them as quickly as possible, that’s big in and of itself.

Gardner: So maybe a new game some day will be pass the Turing Test, you against our analysis capabilities?

Gudenkauf: Yeah, that would be pretty cool. Maybe eventually it will tie into the whole virtual reality. It’s kind of happening based on the information behaviors immediately. That will be neat.

Gardner: Very exciting world coming our way, right? We're only scratching the surface. I guess I have run out of questions because my mind is reeling at some of these possibilities.

One last area though. For a platform like HPE Vertica, what would you like to see them do intrinsic to the product? We have the announcement recently about the next version of Vertica, but what might be on your list, a wish-list if you will, for what should be in the product to allow this sort of thing to happen even more readily?

Influencing the product

Gudenkauf: That’s one of the reasons we go to conferences. It’s one of the few conferences where you can get to the actual developers or professional services and influence the product itself.

One of the reasons why I like to be on the leading edge or bleeding edge is so that we can affect product development and what they are working on. I've been fortunate enough to be able to work with developers and people internal to HPE Vertica for quite a while now. I just love the product and I want to see it be successful. With the adoption and their more openness of  working with open source like Spark and MapReduce, the whole ecosystem works well together, as opposed to opposing each other, which I think is what most people think. It’s a very collaborative, cooperative environment especially through our pipeline.

I really like the fact that when I talk about things like Kafka and the PSTL, and that Spark is a core part of our architecture, now we're having conversation, and lots of them, to help Vertica and influence them to invest more in Spark and the interaction between Vertica data warehouse, Spark, and that eco-system from Kafka.

One of the reasons why I like to be on the leading edge or bleeding edge is so that we can affect product development and what they are working on.

From the part of the work that we did with Vertica over the last year with reading streaming data from Kafka into Spark, of course, and then into Vertica, they said that  reading real-time streaming data from Kafka directly into HPE Vertica will be a great add-on  and they announced it. Ben Vandiver and developers announced it.

I really want to be in a place, and this affords us to be in that place, to influence where they are going, because it benefits all of us and the entire community. It's being able to give them prescriptive guidance as well from the customer perspective, because this is what we're doing in the real world, of course. They want to make us happy, and we will make them happy.

Our investments have been in things like Kafka streaming and Spark and how does Spark SQL work with Vertica and VSQL. They don’t necessarily have to compete. There is a world for both. So coexisting, influencing that, and having them be receptive to it is amazing. A lot of companies aren’t very receptive to taking the feedback from us as consumers and baking that into offerings.

One of the things in our model to load the data as fast as possible in parallel is that we pre-hash the data. If you just take user IDs, for instance, and you hash on those IDs, so that you can put this user on this node, and this one on this one and this one, is an even distribution of data, that wasn’t exposed in Vertica. I've been asking for it since the Twitter days for years.

So we wrote our own version of it. I managed to have the Vertica developers, which is a rare and a great opportunity, review what we had done. They said, "Yes, that’s spot on. That’s exactly the implementation." I said, "You know what would be even better. I've been asking for this for years and I know you have lots of other customers. Why don’t you just make it available for everybody to use. Then, I don’t have to use mine and everybody else can benefit from it as well.

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They announced in 2015 that they're going to make it available. So being able to influence things like that just helped the whole ecosystem.

Gardner: Excellent. I'm afraid we'll have to leave it there. We've been exploring how Playtika uses big data analytics deliver captivating social game experiences and engagement for their end users, but we've also seen that they have a tremendous amount of data science going on and an architectural approach to conquer some of these hurdles around volume, velocity, and variety that I think probably are applicable in many other cutting-edge applications.

So a big thank to our guest. We've been here with Jack Gudenkauf, Vice President of Big Data at Playtika in Santa Monica, California. Thanks so much, Jack.

Gudenkauf: Thank you. It was a pleasure.

Gardner: And a big thank you to our audience as well for joining us for this big data innovation case study discussion.

I'm Dana Gardner; Principal Analyst at Interarbor Solutions, your host for this ongoing series of HPE-sponsored Voice of the Customer discussions. Thanks again for listening, and come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Transcript of a discussion on how Playtika uses data science and a unique architectural approach to conquer big data hurdles around volume, velocity, and variety of data. Copyright Interarbor Solutions, LLC, 2005-2016. All rights reserved.

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How Spain’s Mobile Experience Leverages HPE Location Services to Enrich the Museum Experience

Transcript of a discussion on how indoor user experience in museum venues can be greatly improved with precise location tracking technology.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Dana Gardner: Hello, and welcome to the next edition of the Hewlett Packard Enterprise (HPE) Voice of the Customer interview series. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator for this ongoing discussion on IT transformation and innovation and how that's making an impact on people's lives.

Our next use case discussion focuses on an organization in Madrid, Spain called Mobile Experience. We're about to learn how they precisely track the location of individuals using mobile devices inside of large organizations, like a museum, and then apply that to an enriched mobile user experience.

To learn how precise positioning in a store or resort – anywhere with WiFi – leads to fascinating new mobile business apps development and interactive user experience benefits, please join me in welcoming Alvaro Garcia-Hoz, Founder and General Manager of Mobile Experience in Madrid. Welcome, Alvaro.

Alvaro Garcia-Hoz: Hi. Thank you.

Up Your Mobile-App Ante
With Location Awareness

Gardner: Tell us about Mobile Experience and how you have been able to work with a Wi-Fi provider like HPE Aruba to provide this really unique and interesting location experience within a large building or campus.

Garcia Hoz: We started working for museums and we saw that there were a lot of mobile applications for museums -- but none of them were really helping the visitors during their visits. So, we decided to make an application for museumgoers, so visitors would  have a much better experience.

Garcia-Hoz

We designed this application without thinking about all the technology available at the moment. When we made the design, we discovered that one feature that we needed was an indoor-location system. So, we did deep research to try and find a way to have this location capability work properly … and we found two suppliers.

The first one had a Wi-Fi location system, and two years ago, when we started working with them, we implemented their Wi-Fi indoor-location system in the museum and it was working, but it was not working the way we were expecting. The user experience was not good enough. But then, we found HPE Aruba Beacons. They sent us a packet of beacons, and we deployed them in the museum.

We quickly discovered that the system was working really, really well, with very good accuracy. We made the deployment in less than a couple of days across the whole museum -- that is about 150 beacons. It really works, and the user experience changed totally.

Then, we called HPE Aruba and we said, “Okay guys, come to the museum to see how this is working because you're going to really be amazed.” And when they came to the museum they said, “Wow.”

After the 18 months that we had been working together, we decided to make a presentation for the media and other partners. From that moment on, we began receiving requests for proposals for other industries like retail, hospitality, and healthcare. There are hundreds of applications.

Gardner: How were the museums able to enhance the experience of their visitors through the technology?

Three points

Garcia-Hoz: For me there are three very basic points. The first one is that they can prepare guided tours for those visitors, depending on their specific needs. Normally, when people visit a museum, after a couple of hours, they're done and they leave the museum without knowing if they've viewed all of the exhibits. They don’t know if they missed any pieces of art or pieces of information that are important and relevant to them.

What we give the museum is the ability to prepare those guided tours depending on the amount of time a visitor wants to spend at the museum. So if you go, for instance, to the British Museum, given that we are in London, and you decide to spend two hours, the application will show you the works that the museum thinks that you cannot miss if you want to be there for two hours.

The application will guide you through the museum like an indoor GPS, while you're walking within the museum, and they will guide you through the 20 works you have to see in that museum, and then give you all the information for those exhibits.

Up Your Mobile-App Ante
With Location Awareness

The second point is that it's different information for different types of visitors. For example, since we come from Madrid, when you are visiting the Real Madrid Museum, it’s different if you are 60 years old or if you are 20 years old, because the information you want to see is very different. With this application, we give the museum the opportunity to deliver highly personalized information.

With this application, we give the museum the opportunity to deliver highly personalized information.

Gardner: Personalization is so important now that everyone is carrying a smartphone. It really changes how you can have an experience within a shopping mall, for example. Or, if you want to start providing commerce based on demographic information, you could have something on sale for one person but maybe not for another, because it wouldn't be appropriate for them. In healthcare, if you're in a hospital, a large campus, it’s very easy to get lost. There are lots of different ways that this can be used.

What are the next steps? Where do you, Aruba, and HPE go in order to create a developer following for more applications and more ability to take advantage of this very precise location capability within almost any building?

Garcia-Hoz: Aruba and HPE are helping us a lot and they're spreading the word. This technology is so new, and we're visiting very important customers. But when we start talking to them, and we are talking about Aruba Beacons, and how they can get all this information from users, we're exploring what can be done and what can’t be done.

Gardner: Where can you go to get more information on this technology?

More information

Garcia-Hoz: You can go to my website, mobileXperience.es. There, we have a lot of information about different features that can be delivered for mobile users.

Gardner: And how about developers? Are they able to use the Aruba SDK or APIs? How would the developers start to take advantage of this as a service?

Garcia-Hoz: There are two different ways of doing this. They can go directly to the Aruba SDK to have that for them and build on that, and also they can come to us -- if you already have your venue up you can use your API so you can get all these features together.

We made the deployment in less than a couple of days across the whole museum -- that is about 150 beacons. It really works, and the user experience changed totally.

Gardner: We'll have to leave it there. We have been learning about how internal use of Wi-Fi networks with HPE Aruba Beacons allows for a whole new type of user experience and personalization level in such venues as museums, resorts, healthcare, and retail.

So a big thank you to our guest, Alvaro Garcia-Hoz, Founder and General Director at Mobile Experience, based in Madrid. Thank you so much, Alvaro.

Garcia-Hoz: My pleasure. Thank you very much.

Up Your Mobile-App Ante
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Gardner: And a big thank you as well to our audience for joining us for this Hewlett Packard Enterprise Voice of the Customer interview.

I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this ongoing series of HPE-sponsored discussions. Thanks again for listening, and come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Transcript of a discussion on how indoor user experience in museum venues can be greatly improved with precise location tracking. Copyright Interarbor Solutions, LLC, 2005-2016. All rights reserved.

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Business Unusual: How the Dell-EMC Merger Sends Shockwaves Across the Global Storage Market

Transcript of a discussion on the customer impact from the expected merger of two IT industry giants with very different corporate cultures.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you're listening to BriefingsDirect.

Gardner

Today, we present a sponsored podcast discussion on the impacts to the global storage market, now that the $67 billion Dell-EMC merger deal appears imminent. The proposed merger, which also includes EMC’s majority control of VMware, has been controversial from the start.

A massive and complex financing apparatus, largely built on private equity debt, undergirds the deal, with privately held Dell taking over the publicly traded EMC and VMware federation. This largest IT vendor deal ever is expected to close sometime between now and October 2016.

While EMC CEO and Chairman Joe Tucci has assured the storage and IT infrastructure market that the mega deal means business as usual, many observers, including analysts from Gartner, take a different view.

We're now joined by two storage industry experts to explore how consumers of storage infrastructure can best prepare for the expected storage shockwaves from the Dell takeover of EMC and VMware.

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To help us sort through the unknown unknowns of such an unprecedented business merger in IT, please join me in welcoming Jorge Maestre, Competitive Strategist, Global Storage at Hewlett Packard Enterprise (HPE). Welcome, Jorge.

Jorge Maestre: Thank you, Dana. How are you?

Gardner: I'm well. We're also here with Craig Rice, Business Architect at Integris Solutions Group. Welcome, Craig.

Craig Rice: Good morning, Dana. Good morning, Jorge.

Gardner: Jorge, let’s start with you. Even before this Dell acquisition of EMC was announced back in October, the storage market has been undergoing significant transformation. So, before we delve into the impacts of the deal itself, let’s set some context here. What have been the major trends impacting the global storage business, and why did they prompt such an unprecedented merger in the first place?

Flash storage

Maestre: That’s a good question. Obviously, we start with flash storage. With flash as a focal point of primary storage in the data center, the technologies have evolved. Well, in the case of flash, we're not talking about an evolution; we're actually talking about a revolution. It has completely trumped what you have with spinning-disk media storage.

Maestre

You saw a lot of different opportunities for a lot of different vendors to jump in here and be the first with flash. EMC didn’t have a head start technically. That hurts, when you have vendors like Pure Storage, or ourselves at HPE obviously, or some of these other names like SolidFire and Kaminario.

And as companies are consolidating their primary storage into these flash footprints, which can be hyper-dense now, what we found is that other [infrastructure] technologies have emerged. These technologies and these trends have been here for a while, but now … they are very complementary to primary storage. You now have use cases in your data center where you can take advantage of things like hyper-converged or software-defined, or even just reinvest in file.

Now, you're looking at a data center that needs to have a completed picture. For all of EMC’s bravado, for all of their product set, for all of their ability to sell, the completed picture from them isn’t something that necessarily has always looked pretty.

We saw the result, which is the constant revenue decline. I think they're in consecutive quarters of revenue decline, and in some cases, they've taken a pretty bad hit. They've lost the midrange. The number-one product in the midrange is the HPE 3PAR. They lost that segment, and that was their staple.

They've seen VMAX revenue decline by almost 50 percent or more in the last few years, and so it has painted this picture of this huge conglomerate, monolithic company, maybe losing its way. The merger was at the right time.

Gardner: So, we have technology changes. There are economics issues, but it’s interesting, Craig, in the storage market there is more and more demand for storage. People have more and more data in more and more formats and they want to use it more strategically. How is it that we have, on one hand, growth and demand for storage, but poor economic yields, as Jorge has pointed out, from EMC’s traditional business?

Rice: I disagree a little bit with Jorge. I think flash is a contributing component here, but the catalyst that’s causing the greatest amount of disruption is shareholder value. Let’s take a look at what’s transpired over the past year.

Rice

We have an activist investor [Elliott Management] that’s been bullying EMC for quite some time to divest themselves from VMware. VMware is a catalyst that adds value to their storage array. We look at other organizations such as NetApp and how they had to acquire SolidFire.

We have companies such as Pure, an upstart that’s done maybe $200 million in sales and an innovating leader.

When you look at this, the whole challenge, the true disruption in storage, in the IT market then stems from shareholder value. What uniqueness do any of these mergers and acquisitions bring to the end-user customer? How does a technology change, or an innovation of flash, drive value not to IT, but to the lines of business? That’s what we've been seeing here at Integris.

Business motivations

Gardner: So clearly, there are business motivations from EMC and Dell that might not necessarily be the same motivations that their customers are facing, but this deal seems imminent. It seems like we are going to go ahead with this unprecedented amount, largely funded through private equity.

Joe Tucci tells everyone it’s business as usual, don’t be worried, but we saw in a recent research report from Gartner: Dell's Acquisition of EMC Will Impact Storage Customers, 10 March 2016, that this will impact customers of both vendors, no question. They suggested it could take two or four years for the storage market to settle out and for more clarity to come to that.

So, what are some of the biggest risks, as you see it, Jorge, for the storage architects and buyers at this time, with this deal in the works?

Maestre: I totally agree with Craig. He brought up a good point about the financials, which I didn’t necessarily dive into, and I think that if you take both of our points together, you get the picture.

I don’t necessarily agree that the storage market is going to be in some type of state of confusion. EMC’s business customers, their business partners, might be in a state of confusion, but I think storage is pretty solid in general. When you think about the other vendors and what they're doing and what their numbers look like -- whether it's technical value or financial value -- I think the other storage vendors are there.

That said, to your question, what we have to take a look at is what EMC is telling people and what other people who are doing investigations on their own are finding, and we're seeing that those data contradict one another.

What we have to take a look at is what EMC is telling people and what other people who are doing investigations on their own are finding, and we're seeing that those data contradict one another.

There have been CRN articles, there have been Register articles that talk about what EMC is telling everyone, "This is going to be great. This is going to go well. The two companies combine. They're going to be $80 billion. We're $80 billion with a revenue, blah, blah, blah, blah." The reality is that’s not going to be the case. Both companies are seeing revenues continue to decline.

As they merge, probably there's not going to be any overlap. Just take a look at the storage portfolio. You're not going to see a lot of overlap there. EMC is going to announce a new product [in May 2016] that everyone is expecting to jump into that entry-level space. So, they're probably going to even create a displacement for Dell Compellent.

And, of course, Dell is telling people, "No matter what happens, we'll still support Compellent for five years." That’s pretty much saying, "This product is dead." Most people agree that that’s going to happen.

From a product set perspective you're not going to see too much craziness. You're going to have the same EMC salespeople selling the same stuff. They're going to be selling servers too now, which could be a good thing or a bad thing, depending on where you come from.

But what we're not seeing, and what we're not going to see, is any type of growth. There is no way there's going to be any growth. They're talking about cutting $2 billion worth of expenses just to pay for this $67 billion deal. That’s a huge number. Cutting your expenses that much in order to show an increase in revenue, assuming you don’t lose any customers, or lose any executives, as this merger becomes complete, is just a huge risk.

Not going to happen

It’s not even a risk; it’s an uncertainty. There's no way it’s going to happen. I think there is a CRN article that talks about this. In order for them to actually show revenue growth, they have to see a seven percent improvement on top of the $74 billion that would combine the two companies together. That’s where they would be today.

That’s crazy -- seven percent on top of that and from two companies whose revenues continue to decline? How is this merger all of a sudden going to stop the revenue decline, turn it around, and bring it up seven percent? We could talk about financials all day, but you have to have a compelling product set for that. They don’t have it. I just don’t see it.

Rice: Dana, I'd like to emphasize one thing that Jorge said. I have some unique insight. We are a partner that used to be exclusively EMC. We've seen the writing on the wall. We've been working with HPE and transitioning over. We have a lot of good friends that have worked at EMC for 10, 12, 15 years, and in that highly competitive sales force environment of EMC, that’s a lifetime. These key leadership positions from district managers, area managers, and engineers are leaving the company in droves.

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Why are they leaving if this is such a good deal and things are going forward? I have customers asking, "What happened to Bob Smith? He has been our rep or our district manager for 10, 12 years, why did he leave and go there?" I think that just puts credence on Jorge.

Gardner: We certainly have very big and different cultures here, where EMC has always been focused on enterprise, large companies, with an aggressive sales force, a very involved sales force. Dell, on the other hand, focused more on the mid-tier, and largely a self-service culture, where people are encouraged to buy things at a commodity level.

So what does that mean for enterprises? Are they going to see the Dell culture come to the EMC market or will the EMC market go to the Dell tier? How do you see these cultures melding, particularly in sales, that inflection point between the customer and the vendor? Jorge?

Maestre: Here’s the thing. This gets a little frustrating because we're dealing with the greatest sales spin marketing company of all time. EMC is the Michael Jordan of sales spin, marketing, and everything else. Maybe not so much in product delivery and all that other stuff, but the reality is that these guys know how to talk the game.

This gets a little frustrating because we're dealing with the greatest sales spin marketing company of all time. EMC is the Michael Jordan of sales spin, marketing, and everything else.

It’s like everyone went to the Don King school of selling. They can just promote, promote, promote all day. They do a good job of being Don King-like, every single one of them. For those who don’t remember, Don King was a huge boxing promoter in the ‘80s; Google him.

So, they are all that and they are good at that. For me, it’s very frustrating, because there is nothing there. We take a look at the revenues, the product sets, and there's just nothing here. You're looking at two completely different product sets. There's nothing compelling about it.

Now take that a step further. Why are people so interested in this? Why is everyone in love with this merger? The reality is because people love EMC. It’s the badge, it’s the sales badge, it’s the resources, and it’s the fact that they make you feel good. They come to your house. They make you hot cocoa. They tuck you in at night. That’s what they do. That’s how you sell. They're great at it. Nobody does it better than them. They literally set a bar of selling that no other vendor has even attempted to approach. You have to tip your hat.

Gardner: How will that change, Jorge?

It takes resources

Maestre: Well, that’s just it. It takes resources. That’s the point. That takes resources. You have to invest in that. You have to put a lot of money behind that. You have to create a huge support infrastructure. Take a look at how each company invests in their R and D, just to put it in perspective. Dell’s numbers, public numbers are somewhere in the area of 10 percent. EMC’s numbers are somewhere in the area of 25 percent; it might be a little bit more than that.

Think about their resources. EMC is a resource-heavy company. Dell is a very lean company. They're very much an assembly-line company. Let’s push it out here, and we'll make our revenue through volume, and don’t worry about the margins. That’s what they've shown. It’s almost contradictory cultures, contradictory selling styles, and now you have to put them together.

There's an ESG report that targets EMC customers and asks how they feel about this? Seventy five percent of the people who responded to that said, "We're fine; nothing is going to change." That’s crazy.

There's no way Dell just raised $45 billion. It’s not like they went to the bank and asked for a $45 billion mortgage. They actually raised $45 billion in private equity.

If you go to their target customer base, the people who are EMC loyals, what do you expect them to say? That’s like going to a kid and asking him if he is unhappy about his parents. Of course you're going to get comfort level. The kid is going to say, “Yes, I love my parents, what are you talking about?” It’s the same thing.

That’s what ESG did and they published this report. What it’s actually telling you is that 25 percent of those people are concerned. Twenty five percent is a big number for people who are EMC loyals. That’s a huge number, and we have to consider that.

At the end of the day, when this is all completed, those 25 percent are right to be nervous about this. There's no way Dell just raised $45 billion. It’s not like they went to the bank and asked for a $45 billion mortgage. They actually raised $45 billion in private equity.

That means they don’t even get to say how the money gets spent. I'm sure they had to show game plans and show how these are going to work to get the money. So, of course they had a plan. And of course the private equity investors were no problem. They bought into the plan when they gave the money, but they still have to have return on that.

And that means you're not going to be resource-heavy the way EMC is today. You're not going to invest in your business the way EMC does today. You have no choice; you have to recoup it. So if we see the data, it’s already there. Dell has told people they have to cut expenses by $2 billion a year. How can you be resource-rich, resource-heavy, the way EMC is today and cut $2 billion in expenses? You just can’t. You can’t have it both ways. It’s one or the other; there's no way around this. There are a lot of EMC customers out there who are due for a major wake-up call.

Gardner: Craig, Jorge said the halcyon days of EMC sales is coming to an end, that they won’t be spending the money to have that sales force. Is that what you're seeing, and what’s wrong with going to the Dell model of a straightforward information-based, order-it-online approach to storage?

Assembly-line model

Rice: We're seeing that. Like I mentioned earlier, Dana, there are a lot of people who have been long-term tenured, the soul of EMC, and they're leaving the organization. There's nothing wrong with going to the streamlined assembly-line model. I hope they do it and I hope they do it successfully, because what that means for a partner like myself that's focusing on HPE is that they're taking value out of the equation.

Their buyers are going to come to Dell-EMC and they're going to buy solely on price. Going to Jorge’s point, in raising $45 billion in private equity, you have to do an awful lot of volume to pay back those types of people.

When you start to add value and you understand the customers’ business like we do and other HPE partners do, because of the portfolio which HPE has, it’s going to become a very clear night-and-day difference of who is going to be able to provide a business the ability and technology in the partnership to grow from 10 percent of their market share to 20 percent to 30 percent. I don’t know many businesses that just want the low price and don’t want value and don’t want a partner to help them grow their business. The Dell-EMC model is not that.

Gardner: Doesn’t this come at an interesting time as people are looking at storage more through a hybrid, where they're using flash, they're using different arrays, they're investing in SAN, there’s this ability to do more with storage across more transformation areas of their business -- but at the same time, we're expecting Dell to go more to a commodity’s approach. Isn’t that contradictory to where the market is headed, where you need to do more intelligent, thoughtful, strategic approaches to storage? And Craig, correct me if I am wrong, but it seems that Dell is taking a risk by not having a more sophisticated approach to sales if that’s what they need to do.

They're not just taking a risk. They're betting the whole company. They're putting everything in on black.

Rice: Oh, 100 percent. They're not just taking a risk. They're betting the whole company. They're putting everything in on black. That would be concerning to me if I were a customer looking at that. They're going to be so debt heavy, so focused on storage without innovation on compute. Storage is just not alone; you have all these applications, all these business processes that need to rely on compute.

What type of innovation are they going to do? Let’s make that even a little bit cloudier. You're not going to do any innovation, but yet you sell a lot of servers because you're a volume-based business, but yet I have a partnership with a competitor. So I have competition with Cisco that's also self-compute.

Now, how can the two of you offer something you need, how can they bring out a product like Apollo or Moonshot? You need to do more than just innovate on storage; you need to innovate across whole IT spectrum.

I don’t see them doing that because they're going to be so debt-heavy, so laden, that they have to trim all these costs and expenses, and by the way, they have to do an awful lot of volume. If you're doing volume, you can make the best little widget, whatever that widget is, but how do you bring out that next product line, how do you impact the market, how do you change the industry, how do you bring out something like what HPE is doing with composable infrastructure? Where is that innovation in the Dell model?

Gardner: Clearly, this is not business as usual in the new sales force. So how can organizations that might be heavily EMC-orientated, or for smaller-sized organizations that are using a lot of Dell, protect themselves? They can hope for the best, they can hope that things don’t change for them, but what assurance can you put in place so that no matter what happens with Dell and EMC, you can, as an enterprise, still continue to do your business as usual?

Stay or move

Maestre: That’s a good question. For the Dell customers, the product set is easy to stay in or move to something else. If you choose to stay with the new Dell-EMC, there are a million ways to graduate from Dell into EMC’s portfolio, and of course, there are a million ways to get off of Dell’s portfolio easily altogether. So those customers are relatively safe. I think it’s relatively low risk.

The challenge … is not going to be technical, but it’s certainly going to be relationship-wise, and I don’t mean to disparage Dell. If it comes across disparaging, let me apologize up front for it, but Dell isn’t necessarily known for being a relationship company. I don’t know that relationships are all that important, but you may have business processes in place, you may have contracts in place, things like you get in things at a certain dollar-per-gig or at a certain price point. There is some risk to that, but that happens in business every day anyway. So, very little risk.

Let’s flip it over to the harder question, which are EMC shops. Forget that I work for HPE or anybody else. EMC products may work, but there's no question that it takes a lot longer to get those things set up and in place than other vendors’ products.

So, you’ve now not just made a financial investment but you have a significant time investment, a significant training investment. That’s a lot trickier. If you're not happy with this new combined Dell-EMC entity, if you're not happy with the direction, if you're not happy with the products that you are going to get going forward, you have a long road ahead of you. You're going to have to talk to some vendors and you're going to have to figure out how to migrate off. You have to figure out what your direction is. I would give those customers the same advice I give any customer.

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What’s your plan? What does your world look like in three years, in two years, in one year, whatever it is? Tell me what Utopia looks like, give me that, and then we'll figure out how to make the technology fit that. I don’t think those customers should be making concessions for the technology or the technology vendor or the technology vendor story. They should be making those vendors either deliver, or move on to a vendor who can. Those are the conversations they have to start having.

In a way, this is an opportunity. EMC customers who invested in a lot of infrastructure can now look around and say, "Maybe this is an opportunity for me to shrink my infrastructure, to take advantage of the fact that it’s a buyer’s market in storage, take advantage of flash, take advantage of all these different things, and see what I can do to restart my infrastructure and get me closer to what my dream vision of my data center would look like."

It could be a long and winding road. You may want partner companies. Partners are critical. The one thing that everyone has in common is Dell. HPE, IBM, no matter who you're talking to, they're all talking about partners and how important partners are. This is the best time in the world to lean on those partners and say, "Guys, help me navigate through this."

The challenge is finding an impartial or unbiased partner. Everybody works with one specific vendor, and in that way, they're just an expansion of the vendor, but there are a lot of good ones out there. This is the best time to lean on those guys if for nothing else, then just to get their consultative advice.

Gardner: Craig, anything to offer on that?

Great for partners

Rice: Jorge put it very eloquently. This is great for partners. This is where we can add the value on behalf of OEMs and ourselves. And to Jorge’s point, we do that for our customers. Two years ago, we were exclusively EMC. We made a business decision to transition.

We have relationships with our partners such that we just can’t leave them high and dry. So, what we're advising them is what we call our "sneak peek assessment." Let’s take a look at what your business needs are going to be over the next two to three years. We want to establish a five-year roadmap, and then let’s do something very simple. Let’s go on an Executive Briefing Center visit with Dell and EMC and see what the roadmap is.

In the same regard, we need to look at your business, because our first concern isn’t the OEM. Sorry guys, but it’s that relationship, that personal and business relationship that we, the partner, have with the customer. Then, we'll also say, "Let’s look at who else can offer that. Let’s look at HPE, and let’s see how their technology and product offerings, along with our services, best helps that customer and their business needs grow year after year." That unbiased advice, those business and tactical decisions, are the key for any customer that has concerns about this.

Let’s look at it differently. Dell and EMC are going to do a great job with this merger and acquisition. The question is, at the end of this, will they be able to provide significant enough value to their customers for their customers to wait. Those customers need to ask, "Can I put my business on pause, can I put it on hold, for the next two to three years, while these two companies work through all that?"

Social media has created an endless stream of data that’s going to be written all the time. IoT exacerbates that. Change is always going to be here.

Look at some of the recent acquisitions or spin-offs that Dell has done. They just spun off their Perot Systems. They were anticipating getting $5 billion for it, but they sold it off to NTT for $3 billion, that’s 30 percent less. If that’s a precursor of what’s to come then a business has to think, "Can I afford to wait?"

Gardner: What's the time frame here, Jorge? Craig mentioned two or three years for Dell and EMC to provide a unified pipeline and roadmap for strategic planning and thinking. Are there vendors like HPE who can offer them that vision now? Is the next two to three years that important in business and IT transformation?

It seems to me that we're at a point where business agility means getting new systems in place to accommodate things like user experience, the expectations, big data, and Internet of Things (IoT). These are driving change very rapidly. Waiting two or three years seems  to me a very long time for making strategic decisions.

Maestre: Let’s put that in perspective. The only concept in this industry is change. Things are always going to get better. Social media has created an endless stream of data that’s going to be written all the time. IoT exacerbates that. Change is always going to be here.

Every vendor is always going to be changing in some way, shape, or form, always going to be evolving. They have to. Otherwise, they're going to be left behind. Craig brought up a good point earlier about NetApp and what happened at NetApp. Now, they are buying SolidFire, and that’s like their fifth or sixth different attempt at getting into the flash market.

So, you're certainly looking at a world where you can't be just constant. Either you stay in front of it or you're going to get left behind. The issue for EMC customers for the next two or three years is not so much the roadmap, the combined product set. Everybody agrees that there is very little overlap. No one wants to disrespect Dell here, but the reality is that there is very little in the storage world that Dell has that isn’t going to be replaced by EMC, and EMC doesn’t sell servers.

Real questions

Sure, there are some questions around VCE and Vblock, but is that going to be their investment? Why would you continue to partner with Cisco Unified Computing System (UCS) when you have servers already? Those are real questions, and that’s probably one of the points that Craig made so well before.

But the reality is that that’s not where you are going to feel the pain in the next two or three years. Where you're going to feel the pain over the next two or three years is in that thing that made EMC special, the fact that they make you feel good about your purchase and the fact that they support you, and they deliver what they say.

Here’s the thing that no one ever thinks about with EMC. EMC walks in there and asks you, what’s your application, what do you need, what are you looking for, and how do we solve it? They bring you 50 billion experts who come in and talk about your needs and tell you that they're going to give you a solution that solves that problem. Everybody got EMC because they gave you that good feeling.

No one ever stops to consider the fact that other vendors could do the same thing in about 10,000 fewer steps. EMC gives you what they said they were going to give you and they deliver. There's no question about it, but all the steps that go into that, that’s where you're going to feel the pain. For the next two or three years, you have to combine support companies, and that’s a problem. You have to change your business model, which is going to impact the support companies, and that’s a problem.

Even if everything worked out in the way that Joe Tucci said it would, there would still be a lot of change, there would still have to be some concessions.

Your service is based on the people who are going to leave, the point that Craig made earlier, but not just the people who are going to leave, but what process is going to survive. You have to be a blind fool to go into this thinking that nothing is going to change; that’s ridiculous. Of course, something is going to change. Even if everything worked out in the way that Joe Tucci said it would, there would still be a lot of change, there would still have to be some concessions. So there is no question about that things are going to change.

So the one thing that made EMC great, in making all of those steps to give you what they promised, feels painless and makes you feel good. All of that is where you're going to feel the pain for the next two or three years. Craig nailed it. It’s going to take about two or three years for them to sort all that out. That’s where the problem lies and that’s where this is going to impact customers. That’s why now is a good time to maybe start thinking about going elsewhere or looking at other direction.

Gardner: We're coming up toward the end of our time. Let’s get a couple of concrete, practical recommendations in place. If you want to hit your best, if you want to diversify, you had some unknown unknowns about Dell and EMC, even if things go 100 percent on track as they profess, it’s going to roil your organization to some degree. How do you get assurance of reducing your risk as a consumer of storage? Let’s start with you, Craig.

Rice: The best thing there is to make competition a key component. I've read a couple of reviews from a couple well-known organizations that say get it in writing. I worked at EMC for a while, I worked at HPE for a while over the past decade. Prior to this change, a lot of salespeople would always do that get-it-in-writing thing. “Mr. Customer, I guarantee this.” When they leave, what good is that guarantee? They're a publicly traded company. You can’t commit that in writing. Will Dell and EMC do that going forward? I don’t know.

The best way to keep them honest is to find a partner, such as Integris -- there are many other good partners as well. Evaluate some competing technologies. Competition will always keep each other honest. That’s the simplest, most efficient, and least impactful way that a prospective customer can determine it. Do I want to go with Dell-EMC? Do I want to go with HPE? Do I want to go with anyone else? Bring competition in with a partner so they can equally evaluate what they had to offer.

Gardner: Jorge, last word, your recommendations on how to reduce your risk as a consumer of storage for the next several years.

Reducing risk

Maestre: The best way is to buy HPE; no more risk. That’s what HPE stands for, Helping People Everywhere.

Aside from that, the best way to reduce your risk is simple. Craig just made a huge point. Find partners you can work with that are good. Integris is a good one, and there are others, but find partners who are out there who can take care of you and have your best interests at heart, whose interests aren’t aligned with another vendor’s interests.

It’s great that they resell a vendor’s product, but the best partners have expertise across multiple vendors, and that’s what you want to look for. That’s important.

The other thing is to have a plan, make a plan. One thing I know about HPE in terms of the enterprise is that we absolutely make the best product. I don’t have to give you a commercial to buy my stuff. I know that we have the best product, and you'll wind up here eventually.

Consider your perfect data center, think it through, write it down, and then start talking to people, and the people who can fit your vision those are the guys you want to talk to.  Don’t worry about what somebody else is saying, what somebody else is marketing, what somebody else is highlighting. The people who ask you to make concessions to fit their product set are probably the guys you want to walk away from. That’s the best way to reduce risk -- just essentially invest in yourself.

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Gardner: I'm afraid we'll have to leave it there. We've been discussing the impacts to the global storage market now that the $67 billion Dell-EMC merger deal appears imminent. And we've seen how the mega-deal means that in the next few years, almost certainly, will not be business as usual for EMC and Dell users, and that they're going to have to make some adjustments -- or at least anticipate a different culture -- across their storage and IT infrastructure markets.

So please join me now in thanking our guests, Jorge Maestre, Competitive Strategist, Global Storage at Hewlett Packard Enterprise, and Craig Rice, Business Architect at Integris Solutions Group.

And a big thank you as well to our audience for joining us for this Hewlett Packard Enterprise-sponsored Storage Market Transformation discussion. I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this ongoing series of business transformation discussions. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Transcript of a discussion on the customer impact from the expected merger of two IT industry giants with very different corporate cultures. Copyright Interarbor Solutions, LLC, 2005-2016. All rights reserved.

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