WEBVTT - IBM CEO Talks Confluent Acquisition and AI Impact

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Alvin Krishna joins us,

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<v Speaker 1>it is a joy to have you on our network,

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<v Speaker 1>Ovin and look, speed is the name of the game.

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<v Speaker 1>This deale has completed swiftly. And indeed Confluent is all

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<v Speaker 1>about speed and data analysis. How is that important in

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<v Speaker 1>this age of AI?

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<v Speaker 2>Yeah, so, Karlin, it's great to be here with you

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<v Speaker 2>and on Bloomberg. So just look at what Confluence does.

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<v Speaker 2>Moving data in real time so that it gets available

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<v Speaker 2>both for the enterprise for analytics, but more importantly for

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<v Speaker 2>AI agents and doing that in a way that is

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<v Speaker 2>the most capable product in the world. Is why it

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<v Speaker 2>is so exciting to get it done. And your point

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<v Speaker 2>on speed, I think the regulatory environment is definitely friendlier

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<v Speaker 2>where we got this done in just under four months,

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<v Speaker 2>whereas it used to take a lot longer a few

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<v Speaker 2>years back.

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<v Speaker 1>If regulatory environment is friendlier, should we be doing more

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<v Speaker 1>of it? Should there be more m and a particularly

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<v Speaker 1>with some beaten up overall valuations of software companies At

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<v Speaker 1>the moment.

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<v Speaker 3>I'll just say, what's the space, Oh, what's this space?

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<v Speaker 1>Okay, but where would you want to add on in

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<v Speaker 1>this moment? I mean what would make sense to be

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<v Speaker 1>adding to your portfolio.

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<v Speaker 2>So we are very focused hybrid cloud and AI and

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<v Speaker 2>the intersection. So if you look at Confluent, some of

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<v Speaker 2>the data is in cloud, some of the data as

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<v Speaker 2>in SaaS property, some of the data is on premise.

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<v Speaker 2>An AI agent needs to get hold of it wherever.

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<v Speaker 2>So that's the hybrid piece combined with the AI piece.

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<v Speaker 2>Our speet spot is going to be hybrid cloud, AI

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<v Speaker 2>automation are the areas where we are very very focused

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<v Speaker 2>on M and A activities as well as organic development.

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<v Speaker 2>If you look at what we have done around are

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<v Speaker 2>what's the next product products, what we've done around mainframe modernization.

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<v Speaker 2>These are all things that we have built organically, but

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<v Speaker 2>then we supplement it with targeted ACQUA positions where the

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<v Speaker 2>multiple makes sense, where it fits our strategy, and where

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<v Speaker 2>we can normally increase the growth rate of the target property,

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<v Speaker 2>which we certainly hope to do in the Confluent case.

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<v Speaker 1>Let's talk about what's at X a little bit. Let's

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<v Speaker 1>well more at partnerships, because of course that's what was

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<v Speaker 1>announced A little bit more of a deeper partnership within

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<v Speaker 1>video yesterday helped your stop. We're seeing expanding collaboration. Again,

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<v Speaker 1>this is about faster data analysis, but cheaper, more more effective.

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<v Speaker 1>How does that help you seal more deals?

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<v Speaker 2>So in that one, actually the work we're doing together

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<v Speaker 2>with Nvidia was a five times speed up, so five times,

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<v Speaker 2>not five percent, not a little amount, but five times.

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<v Speaker 2>So there we began to leverage the Nvidia GPUs together

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<v Speaker 2>with some of their CUDF or software, combining you with

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<v Speaker 2>our WHATSONEX to our data. And the example we used

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<v Speaker 2>was our client Nesle, where together we managed to get

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<v Speaker 2>that speed up across their massive amounts of data. And

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<v Speaker 2>that really is important case combining some of the technologies

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<v Speaker 2>we work on also an open source with the Presta

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<v Speaker 2>Presto data engine Nvidia and the example at Nesle. But

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<v Speaker 2>then we're very excited we're going to do more work

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<v Speaker 2>on that and then take it into the market and

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<v Speaker 2>take it out to hundreds of clients.

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<v Speaker 3>From there, you're offering these tools.

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<v Speaker 1>We're also helping companies like Nesle just embed AI make

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<v Speaker 1>sure they're using in the most effective manner possible. When

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<v Speaker 1>your consultants go in, how much does a Nesle want

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<v Speaker 1>to use your offerings? But those of anthropic of open AI,

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<v Speaker 1>of others. How much do you see that as a

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<v Speaker 1>competitive force or a competitive threat.

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<v Speaker 2>Look, our goal has always been that we want to

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<v Speaker 2>help our clients integrate the best capabilities from where they come.

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<v Speaker 2>And the word integration comes in here because to some

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<v Speaker 2>extent be a model agnostic. We believe that our clients

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<v Speaker 2>are going to use the frontier models from all three

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<v Speaker 2>or four of the main providers, They're going to use

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<v Speaker 2>open source models, and they're also going to use models

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<v Speaker 2>from us, though we tend to make much smaller models

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<v Speaker 2>helping them really get value. And I really believe twenty

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<v Speaker 2>twenty six is the year when enterprises are going to

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<v Speaker 2>be focused and obsessive on ROI or what they're doing

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<v Speaker 2>on AI. And so if you take Nestley, how do

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<v Speaker 2>you take cost out of procurement? How do you take

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<v Speaker 2>costs out of HR, the finance function, procurement, all of

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<v Speaker 2>these things? And that's where our consultants and our technologies

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<v Speaker 2>come together to help them do that, using both technologies

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<v Speaker 2>from IBM, but also in the case of Nestlayer, from

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<v Speaker 2>many other of the partners and the software vendors that

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<v Speaker 2>they use.

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<v Speaker 1>So do you think the investor base and just more

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<v Speaker 1>broadly your customers as well, see that AI is in a.

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<v Speaker 3>Double edged sword forew.

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<v Speaker 1>But actually that competitive threat that sunk the shares so

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<v Speaker 1>much on the twenty third was a misunderstanding of what

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<v Speaker 1>anthrobert could do with COBYL.

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<v Speaker 3>I'm going to be much more straightforward.

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<v Speaker 2>I believe that the investors and parts of the media

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<v Speaker 2>misunderstood what that blog said and did. I actually am

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<v Speaker 2>convinced AI is the tailwind for us. It's not a

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<v Speaker 2>mixed half headwind half tail win. AI is a tailwind

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<v Speaker 2>for us in terms of how our technology will get adopted.

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<v Speaker 3>In terms of what we do with our clients.

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<v Speaker 2>And by the way, we had put our tools to

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<v Speaker 2>convert and modernize scoball two and a half years ago,

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<v Speaker 2>so there was no new news in that blog. But

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<v Speaker 2>they certainly can get a lot of.

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<v Speaker 1>Attention you talk, though, what also gets attention is being

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<v Speaker 1>able to become more productive take costs out of the

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<v Speaker 1>business using AI. A lot of people see that as

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<v Speaker 1>the costs of people. We're seeing Block remove forty percent

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<v Speaker 1>of their employee base. You hear about tire headline after

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<v Speaker 1>headline is that what's going to happen to the labor force?

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<v Speaker 3>Haven't so I'll take ourselves.

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<v Speaker 2>We have been very public that we have taken four

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<v Speaker 2>and a half billion dollars out of the enterprise with

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<v Speaker 2>the mixture of AI and automation. That's a hard number.

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<v Speaker 2>Now over three billion of that got reinvested into the

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<v Speaker 2>business in more R and D, in more sales, in

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<v Speaker 2>more marketing, in more delivery, in more what we would

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<v Speaker 2>call client engineering, where clients love the fact that our

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<v Speaker 2>engine can work with them to help them solve problems.

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<v Speaker 2>So there is reshaping of the workforce, but there isn't

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<v Speaker 2>a net decrease. And to put our money where our

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<v Speaker 2>mouth is, we will do two to three times as

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<v Speaker 2>much entry level meaning college hires this year as we

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<v Speaker 2>did last year.

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<v Speaker 3>Wow.

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<v Speaker 1>So you're still seeing that demand for that level of

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<v Speaker 1>technical prowess coming straight out of University of in But

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<v Speaker 1>I mean you have said in the past, look you

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<v Speaker 1>see job displacement, your term and phrase of five to

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<v Speaker 1>ten percent. Is that done now at IBM?

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<v Speaker 3>Do you think?

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<v Speaker 2>I think that we are probably halfway down that total

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<v Speaker 2>journey and I still stick to my total numbers in

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<v Speaker 2>that range, and I think we're halfway through that journey.

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<v Speaker 2>But our total employment has remained roughly stable, So to

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<v Speaker 2>the point that I make about how there will be

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<v Speaker 2>more opportunities, but you've got to be willing to obscale

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<v Speaker 2>yourself and recrail yourself.

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<v Speaker 1>What's not stable is the geopolitical environment of in How

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<v Speaker 1>is that affecting you? How is that affecting the consulting

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<v Speaker 1>part of the business in particular.

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<v Speaker 2>Look, let's acknowledge there's a lot of pain and disruption

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<v Speaker 2>that's going on in the Middle East right now. I

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<v Speaker 2>think we should feel a lot of sympathy for our people.

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<v Speaker 3>We have thousands of employees in that region.

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<v Speaker 2>The vast majority I think are reasonably stable and are

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<v Speaker 2>getting their work done. There are about twenty percent of

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<v Speaker 2>the people in the Middle East who are disrupted, who

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<v Speaker 2>are not able to get to their clients, who are

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<v Speaker 2>not able to get the work done.

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<v Speaker 3>I think within a quarter is going to.

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<v Speaker 2>Be very, very minor, because most of this work is

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<v Speaker 2>much more long cycle than short cycle, as in days

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<v Speaker 2>or weeks. If this goes on for many more months,

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<v Speaker 2>then I do think that we will take a slight headwind.

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<v Speaker 2>But in the end of the day, our consulting business

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<v Speaker 2>in the Middle East is only a few single digit

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<v Speaker 2>percentages of our total business, So it won't impact IBM's

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<v Speaker 2>top line and bottom line, but it is going to

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<v Speaker 2>be impactful to some of our people and some of

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<v Speaker 2>our clients who are.

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<v Speaker 3>In the region.

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<v Speaker 1>Thanks for that new once and I'm interested just on

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<v Speaker 1>the nuance of total sales growth in consulting. Will that

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<v Speaker 1>come back to growth do you think in the near term?

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<v Speaker 2>I think when I was talking in January and also

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<v Speaker 2>in October, I felt that the second half of this

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<v Speaker 2>year will be a lot better on consulting growth. Then

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<v Speaker 2>right now we kind of said that we could see

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<v Speaker 2>it inflection coming, where the first half of last year

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<v Speaker 2>was negative, the second half of the year turned kind

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<v Speaker 2>of flatish. I think that you'll see continued improvement in

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<v Speaker 2>that inflection to maybe slight growth in the first part

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<v Speaker 2>of the year, but true growth, I think is still

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<v Speaker 2>out in the second half of the year.

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<v Speaker 1>True growth, true excitement about quantum always seems to be

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<v Speaker 1>in the second half of the decade or the millennium.

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<v Speaker 1>But you really are putting your money where your mouth

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<v Speaker 1>is when it comes to quantum computing becoming you know,

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<v Speaker 1>really tangibly useful by the end of the decade. You

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<v Speaker 1>want to have a fault tolerant quantum supercomputer by twenty

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<v Speaker 1>twenty nine. How on track are we there? How on

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<v Speaker 1>track are we to integrate in quantum within the day Center.

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<v Speaker 2>So in all three of your questions, Caroline, I think

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<v Speaker 2>we are completely on track with what p had said.

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<v Speaker 2>We said that we're going to have better cubits, better

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<v Speaker 2>quantum processes, and our processor at the end of last

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<v Speaker 2>year is now being used. Whether it's for medical work

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<v Speaker 2>at Cleveland Clinic, whether it's for bond pricing at HSBC.

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<v Speaker 2>Those are real use cases that are coming out. We

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<v Speaker 2>expect to see error correction between this year and next

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<v Speaker 2>year demonstrated and out.

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<v Speaker 3>There, so that'll be another big plus.

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<v Speaker 2>We're investing very heavily in how we bring together our

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<v Speaker 2>normal computers and quantum computers. We put out a roadmap

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<v Speaker 2>for quantum centric supercomputing that has gotten a lot of

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<v Speaker 2>attention or partnerships with academia, with institutions.

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<v Speaker 3>I'm so excited.

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<v Speaker 2>About what we're doing in Illinois, but also at RPI

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<v Speaker 2>with MIT, and in other places we have done work

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<v Speaker 2>with the National Labs. This is all tells us how

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<v Speaker 2>tangible it is, and you can feel it. People are

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<v Speaker 2>not realizing this is not science fiction. This is not

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<v Speaker 2>engineering to get through the next two or three years.

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<v Speaker 1>I think I can feel your energy today. Congratulations on

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<v Speaker 1>the completion the Confluent deal and we are staying tuned

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<v Speaker 1>from any more m and a come back on when

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<v Speaker 1>it happens IBM, CEO OF and Christna is great speaking

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<v Speaker 1>with you.