IBM CEO Ginni Rometty Keynote at MWC 2014 (Transcript)

In her two years, two-plus years as CEO she has not been afraid to make big changes. She’s going to talk up here for a while and I’m going to speak with her on stage a little bit after that. But you know one of the things she and I are going to discuss is the challenges she faced and that any leader today faces running a giant global company because the pace of change is so spectacularly quick. And one of the things she’s done is unsentimentally to have sold off major parts of IBM, most recently the industry-standard server division which IBM sold to Lenovo. Very recently she’s also sold the point of sale terminal business and what the other one — I’m forgetting but she sold another big part of IBM as well. So maybe I can ask her that one when she gets up here. In any case, I hope she will join me out here now, Ginni Rometty and then I will rejoin you when she finishes her talk. Please come out Ginni.

Virginia Rometty – Chairman, President & CEO, IBM

Thank you, David.

David Kirkpatrick – Founder and CEO of Techonomy

What was that other part you sold?

Virginia Rometty – Chairman, President & CEO, IBM

Customer care.

David Kirkpatrick – Founder and CEO of Techonomy

Call centers.

Virginia Rometty – Chairman, President & CEO, IBM

That’s all right. Thank you, David. And look, thank you for everyone. Great to see you. It is great to be at this Mobile World Conference and I must tell you — wasn’t that long ago I was here for a client meeting. And they asked me to speak at dinner, though I didn’t realize I was after dinner, which meant I spoke at 10:30 at night. So I appreciate 6 p.m. I appreciate to see everyone here and I have to say there is one thing that strikes me about this conference, and David was asking it was either for CEO to attend this conference from IBM and I said yes.

And I said but you know in certain thing it was just mobile world – this is clearly an ecosystem conference. And that’s how I think of what this is, everybody I’ve seen here is from all parts of the ecosystem. And I thought about that in what I was going to talk to you about tonight and hopefully to leave you with something of value, because I think this is both an exciting time but it is a disruptive time for everyone in every industry. And so well I went through the hall and talked to many of you, you’ve had a lot of discussion from the consumer side of mobility.

So let me in just 20 minutes tee up for you and have a discussion about the enterprise. And what I want to talk about is the key shifts that are changing the technology industry, — reshaping the technology industry and then the impact they have both on my company, our industry but on global business. And then I want to turn it around and let me take a mobile lens and then share with you some of the things we’ve learned from all the mobility work we’ve done.

It’s 6,000 mobile engagements, we’ve had partnerships with 40 of the wireless carriers around the world. We spent decades to build what I hope you think is a very good mobile-first portfolio after years of development, 12 acquisitions, hundreds of patents, a million downloads, we’ve learned some lessons.

But let me start and I’d like to start with this idea about what are the three trends that are reshaping the technology industry.

So for those of you that like to remember things in short whites, let me give you kind of the Cliff Notes version first.

Three words: data, cloud and engagement.

Data, I think of it as the world’s next natural resource. Cloud, simply put, any process or IT delivered as a service. And the word engagement, because I think it has forever changed how we engage but understand people at an individual level.

So let me take each one, couple comments about what I see clients looking for, many of you serve clients, many of you are clients we serve which I appreciate. But what have we learned, what do they want and what’s going to happen?

But let me first start with data – new national resource. There isn’t a discussion in every discussion I had today that isn’t got data at the center of it whether it’s society, whether it’s business, whether it’s technology. And I’m going to assert that we will look back on this time 21st century and we will look at data as a natural resource that power the 21st century just like if you think back in time electricity was to the 18, if you take back or 19, you take a look at hydrocarbons to the 20^th you will reflect back on data in that same way to the 21st century.

And many people had statistics, I tell you there is one that always sticks out in my mind when it comes to data: creation 2.5 billion gigabytes per day and 80% of all the world’s data ever known to man has been created in the last two years.

Now every client I know believes strong — you can see it in their reactions, three out of four are piloting Big Data projects or have then in production. More interesting to me, 1 out of 3 are constantly looking at how do you monetize data to create a new business, one in three already, which leads me to what I think is a phrase I will repeat. We look forward and data will be the basis of competitive advantage for every company in every industry. Basis of competitive advantage to distinguish the winners and the losers. And this is why I can speak from my own company.

In the last several years, we have invested over $24 billion in this area, 30 acquisitions, 30,000 engagements and wrapped up last year with the big data analytics business of $16 billion. But what I think is more interest to you is so what does determine the winners and losers and what do they do?

And so I want to share two things and they’re going to sound a little technology but everybody can say I’m a data business. All of us would say that.

So what is it that’s going to distinguish the future? Two criteria: one is and I say this to every CEO I visit – go push. How often are you using multiple types of information and pushing the edge on predictive analytics? Then you’ll know whether you have a competitive advantage.

Types are easy, all the information you have in your company rows and columns, structure, unstructured everything tweets, blogs, videos, pictures you name it. But the big question is this kind of analytics and what our research and all our work shows best practices and I am going to share with you some pretty stunning results out of it. You’ll do three things: at a base you use analytics that describe a business. The next level is you predict and the third level is you are prescriptive.

And I think one of my best analogies that make it simple is you think of the GPS. You get a map, point A to B, you see a route; that’s a description. Okay, now I’m going to be predictive. You take this route and it’s going to be 20 minutes. And now I am going to be prescriptive. While I drive as you all know, we all have the ability now, the route changes dynamically real time. That’s prescriptive as I’m going. That’s the world that you’re going to apply to every part of your business whether it’s risk management, whether it’s pricing, whether it’s hiring, whether it’s determination of skills, that’s what will make a difference.

And then the second, the guys that are really seeing the difference they exploit time value of data. That means battles won and lost in microseconds, right? And as I said the results are striking, so take this away. Those two things, range of analytics, types, multiple sources of data, real time use of it, those companies are two-and-a-half times more likely to offer new services, twice as likely to make their products smart adding intelligence to them, and twice as likely to do things real time.

So this is an underlying shift that is going to forever change the basis of competitive advantage for every company.

Second shift. Cloud. Now everybody in here — how many of you are experts in cloud? Okay, I don’t believe that answer actually. I hope a lot more of you are, okay.

Now the point, cloud as I said simple definition – any IT process or business service offered as a service. Properly understood, properly done, this is going to be a game-changer in a big deal. By 2016, a quarter of the apps in the world would be in the cloud. 80% of software developed right now is built for the cloud. But I want you to think about something and what share with every again – with every client, I think about for my own business, what appears as a technology choice, it’s not. You’re making business model choices. And that’s how to think about it and this is where it becomes a competitive advantage.

And I think clients will ask and answer three questions which on the surface look like a technology choice, underneath it is absolutely a business model choice they are making.

The first one sounds technology, so what kind of cloud architecture? The answer – you will end up building hybrid clouds. Now why do I say that? Every company on one hand you’re going to build your own –people talk about private clouds, many of you participate in the buildout of those. They will also then go us public clouds. No problem, everyone – we’ve got public clouds, others have public clouds. You’ll do it for speed typically in what people call systems of engagement.

But what’s happening now is you will integrate those two worlds. You will see what happened in the 1990s happen again now as it did with the Internet. Think about this. In the internet days, what did people do first? Put things up and they browse. But then over time series transactions and they connect it to pricing fulfillment, marketing all that other information people already had to get more value out of it.

And the analysts say 50% of all companies will be hybrid in just 2017. So point 1.

Point 2, the last question how do I manage data? And the answer is going to be you will manage it is if it’s on premise. Visibility, audit ability, control security are going to be the most important issues ever answered. Data management will be the most critical thing people decide with a cloud and as many – we’re sitting here in Europe, there are 100 countries that have data protection, whether or not you agree is a different story but 100 countries with data protection laws that’ll have an influence, cost to move data, security for data, this is why some of you saw we invested in another 1.2 billion in January to take 25 cloud data centers to 40 around the world.

And then the third thing people will say is can I use this to reinvent and drive innovation? Aye sir cloud, absolutely. In fact, we’ll not only do that, many of you will participate out — participate in the build-out of something called an API economy. Everything exposed as a service, anything you offer today you’re going to expose it in pieces as a service that could be pulled together, not program scripted together. And this is why you see 75% of companies already either planning or using some form of Software as a Service but it’s going to move forward from there. This is why we ourselves invested $7 billion in cloud so far to remake enterprise IT for the era of cloud, in last year a business over 4 billion already.

Now I said there’s a third shift. So keep in mind, data, cloud, the third line is that word engagement. And when I think of engagement, those of you in the mobile conference near and dear to your heart, changing how an individual understood but I’d ask you to think about a new culture that’s emerging, that is not defined by age. It is people empowered by knowledge, enriched by a network and they expect value in return for the information that you give them. I find it very interesting 50% of all purchases, they’re influenced by digital research. More interesting in just the last year, the number of people willing to give up their GPS location where they’re at has doubled in just one year.

So what I see the enterprise focused on is 3 things. One is speed. I mean any of you that ever contact via social networking, contact the company, you expect a response. Survey says in five minutes if not immediately.

Personalization, next thing, 80% will trade personal information, if you give them something of value in return, but something I hope David and I hope can talk more about it, is security and trust. They’re focused on it, a trillion of online retail, additional online retail hangs in the balance based on this point if people can become comfortable with how companies control their personal information. And this is why another area, so many of you but we are focused on social mobile underpinned by security, in the enterprise-level, this is going to – and I’m going to come back and talk about this.

So three big trends: data, cloud, engagement. Now if you pull them together, I said it’s disruptive. Now take a mobile lens on it and let me wrap up by talking about when you take mobile and put it this way I’m going to be bold to say I think 3 column implications, conclusions, predictions whatever you’d like about the mobile world from an enterprise point of view.

First one, mobile will hang in the balance of being secure, or say differently, mobile will be about secure transactions. Security will be a gating factor there. And when I use the word transaction, I think about healthcare transaction, a purchase transaction, a supply chain transaction. I think of human to machine, machine to machine, all different combinations that are out there. And those things will all integrate with data and systems across the world and hence they will have to be enterprise-class.

And everybody you interface with in a mobile first-world, as you guys well now their expectations change. And in fact, mobile is an extension of a person. In fact, I use the word people curate their life that way. It means you and I have quite a responsibility, trusted, available, secure. I was thinking of this before I came out, I was reviewing some work we just did for the Ministry of Rail in China and redoing their mobile systems for ticketing. And you know we just finished Chinese New Year. It is the largest human migration that happens in a short period of time, 200 million people moving, about 10 million a day secure, very sophisticated transactions done. That’s because it’s an extension of life. That’s what happens.

Second thing I would tell you about mobile cloud together, they will redefine software development as we know it. Redefine software development as we know it. You hear the mantra, cloud first, mobile first. It’s certainly the mantra in all my development divisions. Cloud extends an enterprise, it integrates, it’s part of, but this is going to be more than just mobile apps. I think many of you would agree with me the world is becoming software defined.

So I invite you, we made a big announcement but this isn’t open announcement, there will be more of this. We made a big announcement on Monday and it is to take all the developers of the world. There are 18 million developers in the world it, IT developers – 18 million to the world of cloud and mobile. An open platform as a service that gives them the services to connect the world of mobile into all the existing data and applications that are already out there. That is to me going to be a future. It’s going to completely reshape, as I said these composable services and everyone will participate in this, not just one type of application developer.

And then I am going to mention my third sort of prediction here.

I also think mobile for all of us that run companies, it’ll put a premium on the word culture and on the word analytics. Why do I say that? Many of you come from a world of [dabox]. So you build things, test them, they’re in production round, round real time, iterative, back and forth. That style is going to move into how we run our companies. When people engage you mobile-first, they expect you, actually any part of your company, sales, product development, HR, rapid response. And that means the front office of everybody’s company at a minimum starts to change, and I like to use this analogy sort of X-ray on your company becomes – it becomes pretty obvious what you can and can’t do. Everybody sees through it, and you have to be authentic to what you are. That’s culture.

And the other thing it has put a premium on is analytics again. So I could beat that drum. It is the only way that you will meet expectations. If you run a company – it’s the only way whether it’s next best action, a consumer or power grid or personalization, you will only be able to do it with analytics.

So now pull all that together, like I said mobile, mobile will be all about secure transactions. Mobile will redefine software development and in fact, it’ll put a premium on culture and analytics. And I think you have a profoundly different world that David and I are going to about.

And I am going to end by having a little bit of fun here. I would like to make a offer to you, even personally to you and in the world of mobile, as I said, this is an ecosystem conference. There’s wonderful opportunity, mobile is no doubt a catalyst, but there will also be challenges. And just that Big Data is a challenge in itself, the 2.5 billion gigabytes today is a challenge. You can’t program enough to make sense of all that data, all the time real time, every day.

So you’re going to have a new era of computing come out. You’ve heard some of us and so allow me a little bit of a commercial on to this talk about this – the third era – cognitive. Cognitive meaning first era of computing where machines accounted things. Second, programming, everything I’ve seen in this conference is programmed. Third era are things that learn, you teach and they learn.

You engage completely different, it’s collaborative with the systems and two years ago, we announced one of the first – it was Jeopardy. It was every Watson that played on Jeopardy, if any of you saw it. Watson played the game, Americans, many others broadcast around the world, it’s a game show. And Watson went ahead and beat some of the world champions in this game. Wow, since then what we’ve been doing — I’m going to show you a little bit of a clip, and I’m going to get to what I’d like to have some fun with.

Since that time, Watson has been in training for medicine, financial services, retail and travel. And when I say in training, it has been absorbing all the known knowledge to mankind in these areas, it does work in natural language, thinks that way, trained by specialists in medicine, clinical case studies, and rather than sort of describe this, I think it’s something you better to see. So I’m going to show you just a two-minute clip on this and then let me come back with what I’d like to offer you.

[Video Presentation]

So what will you do? What we’d like to do – what I have done with it since then. In fact, just beginning of January, we launched the whole division in IBM on Watson and its commercialization. We progressed quite a long way. Another billion dollars into it, couple thousand more people, so we are moving ahead aggressively. But this is a new era and we elected to take a different route with this. So everyone else has a number of their devices and all other different approaches as we walk through the hallway here.

This is a service but we’re opening it up to an ecosystem. And so an ecosystem of content providers, software developers, clients, you name it to build businesses on top of Watson. So we’re going to take it one step further as part of our participation here and offer the Watson mobile developer challenge.

So over the next three months, you can do it at Watson.com, log on, we’re going to pick three winning teams. We will do the seed funding for their businesses, Watson, they get access to all of Watson, Watson’s expertise, also the use of IBM interactive, it is the number one rated interactive design studio in the world, and then to help – we will help commercialize, help go to market for these companies.

So we hope somebody — this is it — this is, you’re going to build many businesses off of this. So I’d like have some fun, have you challenge the world on the art of what is possible.

So with that, let me thank you, and David and I are going to have a great conversation. Let me bring him back out here. David? Thank you, sir.

David Kirkpatrick – Founder and CEO of Techonomy

Thanks, Ginni.

Please sit down over there.

So the idea with this challenge is that Watson can be the back end of revolutionary mobile apps. Right? What kind of thing you think might be possible with that sort of architecture?

Virginia Rometty: We first – when we just unveiled this idea of an ecosystem, we’ve already got thousands of applicants now already. But we’re going to do a special one here on the mobile developer side. So carve out and put three all the way through the life cycle. They cover reinventing travel, concierge services, health and well-being, wonderful applications I have already seen prototype for retail. So when all of us, when you go online to buy something, would you rather not — in fact, North Face was doing some great work on this prototyping to take live, where you just interact with natural language and say have a vacation plan to Patagonia in January, tell me what I need to bring. And obviously Watson’s going back through, it’s got to know where Patagonia is, what’s the weather, what’s it doing, etc, etc, and I thought one of the greatest best illustrations I then saw what happened, it came up with all these certain backpacks etc, what you might need and one of them has ABS sign. And I said, what is ABS? So I’d use a conventional search tool to do what is ABS and I got back 750 million entries on anti-lock braking systems. That is not what this is, okay.

If you’re going into Patagonia, this is about avalanche system. And so it knew the difference. I mean it came up with a definition of these avalanche sort of – I can’t remember the whole thing but it did for avalanche. So I expect retail, reinvention of travel, we have seen so many different ideas, and that’s the purpose. We want the world to run, education, reinventing education. We’re doing work — actually we’ve got a group started in Africa on this, on making the connections on why children don’t learn, very obscure regions, there’s well that’s poisoned in a certain area that’s impacting the kids that are drinking it and they’ve got some attention-deficit syndrome going into school. People are going to come all different ways.

David Kirkpatrick: So these apps could be for-profit, non-profit…

Virginia Rometty: Doesn’t matter to us.

David Kirkpatrick: And the ideas that Watson is effectively becoming a platform for more and more outside parties to basically take advantage of as part of their own application architecture, to have a cognitive back end?

Virginia Rometty: That’s right. Think of it as a corpus of information that it’s learned from in a subject matter area. And we’ve got clients now. Banks as an example, completely looking to reinvent their front end, an insurance company completely looking at how to use this to help their advocates in their call centers, pick out telcos. What is the right plan for someone to be on? What is the right data plan?

David Kirkpatrick: All the things you’re mentioning now are great examples of the kind of radical reinvention of most businesses that you are effectively implying up there when you’re saying it really is about your business model. I think that’s a excellent way to talk about the cloud, mobile, social, big data, analytics, all that stuff that is the core of the massive simultaneous transformations the industry’s going through. I mean this is a big part of what we attack on, you talk about too. I mean how — where do you see the best successes, what industries get that the best and what industries do you think get it the least?

Virginia Rometty: I think, and this is — David and I were talking about this before. This idea that these three shifts, they’re not 3 isolated shifts. And this is what makes this is a really unique point in time. Data, cloud, engagement, they’re all at once, and because any of them –

David Kirkpatrick: Would be serious to business leaders?

Virginia Rometty: That’s right, for our industry but then the impact is on every industry. And you use the word business model which I will use, because a disruption to a business model is one of the most significant competitive advantages or disadvantages, depending what side of the fence we’re on with that. And so my view is it is full game for any industry, you certainly see particularly because I think the area about data and analytics is such a fundamental platform in all cases. You see some of the most aggressive is in this industry here, you see it with the carriers, or telco or wired communications provider whichever way you would like to look at it, you see it with banking. I mean how many clients I now see starting to put in place even chief data officers reporting to the CEO. These are not technical positions. So I see it in financial services, I see it in telco but honestly I do see it across the board and this thing about monetizing your information, don’t think of that as just taking personal information trying to find a way to sell it. It is about trying to go into new businesses because of it and that is a very different thing.

David Kirkpatrick: But do you worry that most business leaders still don’t get the scope of the changes and the pace that they are transforming everything, it often occurs to me that an awful lot of companies are not getting with the program and risking cannibalization by start-ups that are popping up all over the place that are just smarter?

Virginia Rometty: Yeah, I think that that point of speed is a real point that it is absolutely – if you try to compare today to the past, today is moving at a much — speed of change is much faster. And so you should not be sort of dissuaded by that. Meaning, and that is all the more reason to push forward with these things and thin of them as – as for every conversation I have, I leave – I do big dinner table with a number of CEOs and it is on this point and about how to use this as competitive differentiation for other businesses and the speed at which what to practically do about it because you run a business today and you reinvent it for the future at the same time in many cases.

David Kirkpatrick: Yeah, so it means I guess you’re talking to CEOs are getting it more than they used to – you’re not selling to the CIO and in some cases where you would have talked to the tech people you’ve got to talk to the business leaders in a company that’s a given I assume.

Virginia Rometty: I think probably everybody in this audience I can see lots of folks, we would all experience the same thing. This brings technology to the forefront of every industry, every profession. Every profession, so I think they’re different – David and I were briefly talking about education, I just — it makes me think of this. One of the most important things for any country, any company it’s going to be the type of education needed for the future. This dream about, thinking about a culture, data analytics, this is not just for mathematicians and it’s not just for operation engineers. It is going to be a thread through every profession, every degree you get and you’re going to hire that way.

Today many companies say why hired 100 data scientists or something, this has got to be systemic and what your skills are. We have been working, we probably got a thousand universities on a program around data and analytics, that is broad, not just for my days, as you were so nice to point out how many years ago that was, David, about my – but this whole point it was about you’ve got to have that as a silver thread through everything that you do. You can’t count on just hiring engineers.

David Kirkpatrick: It’s almost like you’re trying to make IBM a role model because you are making big changes in the company. You have sold a number of major businesses. I think just here at Mobile World Congress you announced acquiring of Cloudant.

Virginia Rometty: Yes, we did.

David Kirkpatrick: You all recently bought another big cloud service company. You said in your talk, you’re going to have 40 data centers around the world which is really a huge number. You’ve announced a $1 billion investment here in the BlueMix platform as a service business. So you’re making very rapid changes in your own business.

Virginia Rometty: They’re [lustre tip] of the speed required.

David Kirkpatrick: Right, do you think of IBM a little bit as having to show its customers just how much — you have to remake — you’re one of the biggest companies in the world. But maybe it’s not a choice, it isn’t the choice, that’s the interpretation I would have to take away from you. But in effect, you are showing what other customers need to do, right?

Virginia Rometty: Yeah, I would — this to me and I know many people in this audience obviously work for a company that maybe had a history of some period of time that it may be not just born yesterday. And as I say any company has to go through transition. We’re 102 years old. So what we’d started out doing time clocks, meat slicers, cheese slicers is not what we do today, and you go through these transitions. I said to be any age of course you go through transition and move to these new areas. And I think that applies to everybody that is out there.

David Kirkpatrick: And you mentioned the mobile industry. Do you think the mobile industry really is changing as quickly as it could be changing in the face of all these threats in these transformations? I mean, the WhatsApp acquisition of Facebook just brings to the fore how you know so-called over-the-top thing as come along worth a huge amount of money, theoretically that could have been developed by carrier, but it wasn’t because they’ve had that SMS revenue, they didn’t want to give up. People are going to have to be as I use the word unsentimental, more than they have. I mean how do you feel of really concretely about how the mobile industry has been doing?

Virginia Rometty: I think there are lots of great examples of people who moved very fast and this industry has been — this is not a new thing for this industry. There’s been a lot of change in this industry and related industries for quite a period of time actually. I mean you can look at a short snapshot but this whole industry, and actually a better way to think of it as an ecosystem, because there are so many – it’s evidenced by how many people are from different parts of that ecosystem that are at this conference. It has been under change a long time. I think it is moving along very fast but I also think there is also a bit of the — there will be many benefits some of the current people have as they put new models in, combine with old models. So you’re going to see a lot of this creativity and innovation come as those worlds integrate as well.

David Kirkpatrick: You mentioned security, more than mentioned that, you emphasized how central it is through all this and I think no one could disagree with that. But again looking at the pace of change and looking at the extraordinary security challenges that so many businesses are facing today, do you worry that security technology and security capabilities are not moving as quickly as mobile and these other trends are advancing?

Virginia Rometty: Yeah, the analogy I think about for security that I think is helpful, there are two approaches you can take. And you will use both actually. But one approach is you think about, you put an alarm on your house and when the alarm goes off you go tend to whatever somebody broke in, they did something, you got to do something about it. The other way to look at it is think of the human body and all of us have germs inside of the human body. And what do you have? You have antibodies that go after them, and then when they become resistant, other ones form. I believe at the end of the day because of the rapid pace you just talked about in security, the answer to security is going to be analytics. Period.

You will have to be constantly doing some form of analytics and assume there are bad things in all different places that you will find them and find them early. And that that would be all those kinds of analytics looking at data, looking at abnormalities, and as I call it looking for footprints in the sand long before anything happens.

David Kirkpatrick: And those analytics themselves will be cloud services I presume.

Virginia Rometty: They will be – they will absolutely be cloud services.

David Kirkpatrick: But you will operate among others?

Virginia Rometty: We and others will operate. We just had an announcement actually yesterday here as part of this with one of our big partners that we work with. Ourselves and AT&T made an announcement to take in a cloud all of the network analytics they have, all of what we have, we look at 20 billion security incidents a day, put it together and do a lot of analytics around it for clients. And so I think this is really — it’s both an opportunity for everyone and it’s an approach that we will be taking, to not just this but it’d be risk in lots of areas, if you will take this approach.

David Kirkpatrick: You mentioned China in your talk and how do you – you spend a lot of time there I know. IBM is truly global, has operations in China. How would you characterize the rate at which business in China understands the kinds of changes you’re talking about compared to the rest of the world, Europe and the United States in particularly?

Virginia Rometty: Well, I think this is an interesting opportunity for a lot of countries around the world that don’t have the same infrastructure that had been built in both, whether it’s the U.S. or Europe at different points in time. And I think they’ve got an opportunity, it’s maybe a bit of a paraphrase word, but to leapfrog in some ways. And you see a great rapid pace of change in China with between social and mobile computing. And even just in the last six months, a great rapid pace with cloud, mobile, social.

David Kirkpatrick: You think a more rapid pace than say in the United States?

Virginia Rometty: No, than in its previous — than its previous, so rapid pace of change but it is a chance — as I just said this is our business model to do new things. This is why I think in Africa as well, and not just because Africa had a mobile infrastructure to begin, it will be you know — there’s that saying motherhood is the — necessity is the motherhood of invention. And that is going to be true. It led us to — we put the 12^th IBM research lab. This is true, true research. And so there are 11, one continent didn’t have it, it was Africa. Last year we opened up at Nairobi. There’s a reason we put the lab in Nairobi. The problems that we are all working on in the world, they are getting too big. You cannot bring the problem to research, you have to bring research to the problem. And that is and as a result of it you are going to leapfrog and come up with good enough solutions in all of these countries that don’t have previous infrastructure like that. So I think you’re going to get great-great innovation particularly in areas like health care and other coming out of this.

David Kirkpatrick: It’s interesting when Zuckerberg was sitting in that same chair the other day he was talking about one of the things they do with new employees at Facebook is sending them to the developing world to experience what Facebook use is like in those places, so you can’t really describe it, you can’t understand if you don’t go there.

Yeah, you have been to Africa four times since becoming CEO –

Virginia Rometty: Four times this year.

David Kirkpatrick: Four times this year –

Virginia Rometty: Last 12 months.

David Kirkpatrick: So just talk a little bit more about Africa as a opportunity. You see it as one of the great opportunities.

Virginia Rometty: Look I think it’s one of these lessons — I was always taught steward for the long run. So I believe this next decade is going to be the decade that you see many different countries in Africa progresses opportunity for many of us. Many of you are there in different pieces, mobile certainly is. But the mistake people make Africa is not one thing obviously, it is 54 countries with very different political regimes in place, different positions of maturity and the like. But particularly central sub-Saharan Africa, this will be two steps forward, one step back but it is still advancing forward. And there’s enough stability in different places that this will proceed over this next decade.

David Kirkpatrick: You were recently in Nigeria and Morocco by the way.

Virginia Rometty: I was in both this time Nigeria and Morocco but whether it’s been Kenya or Ghana or all that different Egypt where we’ve been, we have a big business there already. But I believe we’re now in 24 countries across Africa, of the 54 and 24 this next decade, I mean I would urge people this is the decade that this is going to begin to take it forward and it will be because of, of course the demographics that are available, it’ll be of course infrastructure that’s there. It will be stability that begins to form in many different places through political change that is there. And you are going to get the chance to reinvent businesses. So I am quite excited about the kinds of different projects and what we’re working on there, and it’s going to stay with it. And it’s why we brought Watson to Africa as well. And in this case it’s going to work on cervical cancer to start and education as I mentioned. But we made a couple other announcements, we put up innovation centers and then as well we offered all of our Software as a Service free to all universities. This is — they can grow the next generation workforce.

David Kirkpatrick: So some of this is really state-of-the-art, Watson apps is in cognitive computing, the machine to machine – all these stuffs would come out of those places as much as anywhere. So it’s not just that they’re going to start like growing, they’re actually going to come in at the state-of-the-art in many instances, and you’re giving the universities special capabilities. So you would expect a lot of this cutting-edge suite of transformative tools to be applied right off the bat in economies like Nigeria and Morocco.

Virginia Rometty: I saw a great thing that the team worked on out of Kenya which if any you’ve ever worked on and many of you have, traffic mobilization, traffic management, traffic congestion sort of projects and in many, if it was London, if it was Brisbane, if it was St. Paulo, these are big infrastructure projects. There they had 9 cameras — 9 low grade cable CCTV kind of cameras out in in Kenya in Nairobi. And the team said we’re not going to put a whole infrastructure in here. But I bet we can predict where these cars are going to go just with that data, just with what we have, that’s it. And between what they know from cell phones is obviously positioning and it’s a great example of what the art of possible is.

David Kirkpatrick: What do you think in all this IBM can most uniquely do that nobody else could do?

Virginia Rometty: I would position and underscore this point of remaking enterprise IT for this era. So our understanding of data, analytics we were – boy, if you go back in our history, just about every major invention, I am humble and proud to say, came out of IBM labs when it comes to data and analytics. And so these three — big three bets, we’ve placed three big bets around the world of data and analytics, around the world of cloud, and when I sing engagement, it is enterprise social mobile underscored by security. And it’s understanding it from the enterprise perspective in how to do those things. I think this is what we uniquely bring.

David Kirkpatrick: And in the course of doing that, you’re going to be much more of a software and services company and much less of a hardware company. You’re already – not nearly as much of a hardware company as people think, right? What’s it, what’s the percentage of hardware revenue?

Virginia Rometty: Right. Our hardware revenues are 10% to 15% of the company. But it’s already our services and software business – the software business is one of the largest in the world as well as our services business. But hardware will still play an important part and this will be an incredibly important part of our portfolio, our mainframe, our power series they are built for data in the cloud, and data analytics, because again I’m back to these huge amounts on what you’re going to have to do and the security aspects, those are things that are built for that world so – because stuff still has to run on something somewhere.

David Kirkpatrick: Look just quickly on Watson, I mean when I think of Watson because especially in the days even of the Jeopardy thing, it was sort of a box, right, that took a whole roomful of – but really it’s a set of software services.

Virginia Rometty: It’s a cloud offering.

David Kirkpatrick: And it will exist in all those 40 data centers, essentially you can make it available anywhere, it’s just a cloud offering, it’s not a computer, right?

Virginia Rometty: It’s a service offering.

David Kirkpatrick: It’s a set of cognitive capabilities. No, I wanted you to talk about that — I love that word because I hadn’t heard until you used, what is a cog?

Virginia Rometty: Well, I think about, you think about composable services. So you ask Watson to calculate something, it’s a cog, it brings back an answer. So you call different parts of it and you create an application of it. That’s what people are going to end up doing. So you are going to use it to do a cog, you can have all these little — you can think of them as apps but that will be cognitive.

David Kirkpatrick: So instead of apps, it will have cogs.

Virginia Rometty: And we’re just the beginning, errors will play out over the years. They will play out over the years and like I said I’ve seen a couple thousand of these applicants of what their ideas are.

David Kirkpatrick: Well I think this idea of machines that learn is extremely exciting.

Virginia Rometty: This has been in the works for decades. This isn’t as if it was — many of you would say I understand artificial intelligence as an example, one thing. So even Watson is the combination of so many disciplines in sciences between natural processing language and understanding it, parallel algorithms, the amount of ability to do this in a cost-effective way, because it is not a search engine and it’s not a lookup, it’s not a table lookup. It actually makes conclusions, draws confidence, has evidence.

David Kirkpatrick: And longer it exists the better it’s going to be, so in 10 years –

Virginia Rometty: Well, research is working on giving its sight so that it reads.

David Kirkpatrick: Google is trying something similar, even Apple with Siri has a very simple version of a cognitive device. So you got kind of battle going with Google there. But it’s a very healthy battle of the world.

Virginia Rometty: Very different.

David Kirkpatrick: So we got to wrap but thanks so much for being here and to talk about it and to make your great presentation.

Virginia Rometty: Thank you to the audience and for all of you that are our clients, just one more time thank you for the business that you do with IBM.

David Kirkpatrick: First time any IBM CEO who has ever been at Mobile World Congress.

Virginia Rometty: And I’ve enjoyed it. Yes, thank you.

 

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