Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Alvin Krishna joins us,
Speaker 1: it is a joy to have you on our network,
Speaker 1: Ovin and look, speed is the name of the game.
Speaker 1: This deale has completed swiftly. And indeed Confluent is all
Speaker 1: about speed and data analysis. How is that important in
Speaker 1: this age of AI?
Speaker 2: Yeah, so, Karlin, it's great to be here with you
Speaker 2: and on Bloomberg. So just look at what Confluence does.
Speaker 2: Moving data in real time so that it gets available
Speaker 2: both for the enterprise for analytics, but more importantly for
Speaker 2: AI agents and doing that in a way that is
Speaker 2: the most capable product in the world. Is why it
Speaker 2: is so exciting to get it done. And your point
Speaker 2: on speed, I think the regulatory environment is definitely friendlier
Speaker 2: where we got this done in just under four months,
Speaker 2: whereas it used to take a lot longer a few
Speaker 2: years back.
Speaker 1: If regulatory environment is friendlier, should we be doing more
Speaker 1: of it? Should there be more m and a particularly
Speaker 1: with some beaten up overall valuations of software companies At
Speaker 1: the moment.
Speaker 3: I'll just say, what's the space, Oh, what's this space?
Speaker 1: Okay, but where would you want to add on in
Speaker 1: this moment? I mean what would make sense to be
Speaker 1: adding to your portfolio.
Speaker 2: So we are very focused hybrid cloud and AI and
Speaker 2: the intersection. So if you look at Confluent, some of
Speaker 2: the data is in cloud, some of the data as
Speaker 2: in SaaS property, some of the data is on premise.
Speaker 2: An AI agent needs to get hold of it wherever.
Speaker 2: So that's the hybrid piece combined with the AI piece.
Speaker 2: Our speet spot is going to be hybrid cloud, AI
Speaker 2: automation are the areas where we are very very focused
Speaker 2: on M and A activities as well as organic development.
Speaker 2: If you look at what we have done around are
Speaker 2: what's the next product products, what we've done around mainframe modernization.
Speaker 2: These are all things that we have built organically, but
Speaker 2: then we supplement it with targeted ACQUA positions where the
Speaker 2: multiple makes sense, where it fits our strategy, and where
Speaker 2: we can normally increase the growth rate of the target property,
Speaker 2: which we certainly hope to do in the Confluent case.
Speaker 1: Let's talk about what's at X a little bit. Let's
Speaker 1: well more at partnerships, because of course that's what was
Speaker 1: announced A little bit more of a deeper partnership within
Speaker 1: video yesterday helped your stop. We're seeing expanding collaboration. Again,
Speaker 1: this is about faster data analysis, but cheaper, more more effective.
Speaker 1: How does that help you seal more deals?
Speaker 2: So in that one, actually the work we're doing together
Speaker 2: with Nvidia was a five times speed up, so five times,
Speaker 2: not five percent, not a little amount, but five times.
Speaker 2: So there we began to leverage the Nvidia GPUs together
Speaker 2: with some of their CUDF or software, combining you with
Speaker 2: our WHATSONEX to our data. And the example we used
Speaker 2: was our client Nesle, where together we managed to get
Speaker 2: that speed up across their massive amounts of data. And
Speaker 2: that really is important case combining some of the technologies
Speaker 2: we work on also an open source with the Presta
Speaker 2: Presto data engine Nvidia and the example at Nesle. But
Speaker 2: then we're very excited we're going to do more work
Speaker 2: on that and then take it into the market and
Speaker 2: take it out to hundreds of clients.
Speaker 3: From there, you're offering these tools.
Speaker 1: We're also helping companies like Nesle just embed AI make
Speaker 1: sure they're using in the most effective manner possible. When
Speaker 1: your consultants go in, how much does a Nesle want
Speaker 1: to use your offerings? But those of anthropic of open AI,
Speaker 1: of others. How much do you see that as a
Speaker 1: competitive force or a competitive threat.
Speaker 2: Look, our goal has always been that we want to
Speaker 2: help our clients integrate the best capabilities from where they come.
Speaker 2: And the word integration comes in here because to some
Speaker 2: extent be a model agnostic. We believe that our clients
Speaker 2: are going to use the frontier models from all three
Speaker 2: or four of the main providers, They're going to use
Speaker 2: open source models, and they're also going to use models
Speaker 2: from us, though we tend to make much smaller models
Speaker 2: helping them really get value. And I really believe twenty
Speaker 2: twenty six is the year when enterprises are going to
Speaker 2: be focused and obsessive on ROI or what they're doing
Speaker 2: on AI. And so if you take Nestley, how do
Speaker 2: you take cost out of procurement? How do you take
Speaker 2: costs out of HR, the finance function, procurement, all of
Speaker 2: these things? And that's where our consultants and our technologies
Speaker 2: come together to help them do that, using both technologies
Speaker 2: from IBM, but also in the case of Nestlayer, from
Speaker 2: many other of the partners and the software vendors that
Speaker 2: they use.
Speaker 1: So do you think the investor base and just more
Speaker 1: broadly your customers as well, see that AI is in a.
Speaker 3: Double edged sword forew.
Speaker 1: But actually that competitive threat that sunk the shares so
Speaker 1: much on the twenty third was a misunderstanding of what
Speaker 1: anthrobert could do with COBYL.
Speaker 3: I'm going to be much more straightforward.
Speaker 2: I believe that the investors and parts of the media
Speaker 2: misunderstood what that blog said and did. I actually am
Speaker 2: convinced AI is the tailwind for us. It's not a
Speaker 2: mixed half headwind half tail win. AI is a tailwind
Speaker 2: for us in terms of how our technology will get adopted.
Speaker 3: In terms of what we do with our clients.
Speaker 2: And by the way, we had put our tools to
Speaker 2: convert and modernize scoball two and a half years ago,
Speaker 2: so there was no new news in that blog. But
Speaker 2: they certainly can get a lot of.
Speaker 1: Attention you talk, though, what also gets attention is being
Speaker 1: able to become more productive take costs out of the
Speaker 1: business using AI. A lot of people see that as
Speaker 1: the costs of people. We're seeing Block remove forty percent
Speaker 1: of their employee base. You hear about tire headline after
Speaker 1: headline is that what's going to happen to the labor force?
Speaker 3: Haven't so I'll take ourselves.
Speaker 2: We have been very public that we have taken four
Speaker 2: and a half billion dollars out of the enterprise with
Speaker 2: the mixture of AI and automation. That's a hard number.
Speaker 2: Now over three billion of that got reinvested into the
Speaker 2: business in more R and D, in more sales, in
Speaker 2: more marketing, in more delivery, in more what we would
Speaker 2: call client engineering, where clients love the fact that our
Speaker 2: engine can work with them to help them solve problems.
Speaker 2: So there is reshaping of the workforce, but there isn't
Speaker 2: a net decrease. And to put our money where our
Speaker 2: mouth is, we will do two to three times as
Speaker 2: much entry level meaning college hires this year as we
Speaker 2: did last year.
Speaker 3: Wow.
Speaker 1: So you're still seeing that demand for that level of
Speaker 1: technical prowess coming straight out of University of in But
Speaker 1: I mean you have said in the past, look you
Speaker 1: see job displacement, your term and phrase of five to
Speaker 1: ten percent. Is that done now at IBM?
Speaker 3: Do you think?
Speaker 2: I think that we are probably halfway down that total
Speaker 2: journey and I still stick to my total numbers in
Speaker 2: that range, and I think we're halfway through that journey.
Speaker 2: But our total employment has remained roughly stable, So to
Speaker 2: the point that I make about how there will be
Speaker 2: more opportunities, but you've got to be willing to obscale
Speaker 2: yourself and recrail yourself.
Speaker 1: What's not stable is the geopolitical environment of in How
Speaker 1: is that affecting you? How is that affecting the consulting
Speaker 1: part of the business in particular.
Speaker 2: Look, let's acknowledge there's a lot of pain and disruption
Speaker 2: that's going on in the Middle East right now. I
Speaker 2: think we should feel a lot of sympathy for our people.
Speaker 3: We have thousands of employees in that region.
Speaker 2: The vast majority I think are reasonably stable and are
Speaker 2: getting their work done. There are about twenty percent of
Speaker 2: the people in the Middle East who are disrupted, who
Speaker 2: are not able to get to their clients, who are
Speaker 2: not able to get the work done.
Speaker 3: I think within a quarter is going to.
Speaker 2: Be very, very minor, because most of this work is
Speaker 2: much more long cycle than short cycle, as in days
Speaker 2: or weeks. If this goes on for many more months,
Speaker 2: then I do think that we will take a slight headwind.
Speaker 2: But in the end of the day, our consulting business
Speaker 2: in the Middle East is only a few single digit
Speaker 2: percentages of our total business, So it won't impact IBM's
Speaker 2: top line and bottom line, but it is going to
Speaker 2: be impactful to some of our people and some of
Speaker 2: our clients who are.
Speaker 3: In the region.
Speaker 1: Thanks for that new once and I'm interested just on
Speaker 1: the nuance of total sales growth in consulting. Will that
Speaker 1: come back to growth do you think in the near term?
Speaker 2: I think when I was talking in January and also
Speaker 2: in October, I felt that the second half of this
Speaker 2: year will be a lot better on consulting growth. Then
Speaker 2: right now we kind of said that we could see
Speaker 2: it inflection coming, where the first half of last year
Speaker 2: was negative, the second half of the year turned kind
Speaker 2: of flatish. I think that you'll see continued improvement in
Speaker 2: that inflection to maybe slight growth in the first part
Speaker 2: of the year, but true growth, I think is still
Speaker 2: out in the second half of the year.
Speaker 1: True growth, true excitement about quantum always seems to be
Speaker 1: in the second half of the decade or the millennium.
Speaker 1: But you really are putting your money where your mouth
Speaker 1: is when it comes to quantum computing becoming you know,
Speaker 1: really tangibly useful by the end of the decade. You
Speaker 1: want to have a fault tolerant quantum supercomputer by twenty
Speaker 1: twenty nine. How on track are we there? How on
Speaker 1: track are we to integrate in quantum within the day Center.
Speaker 2: So in all three of your questions, Caroline, I think
Speaker 2: we are completely on track with what p had said.
Speaker 2: We said that we're going to have better cubits, better
Speaker 2: quantum processes, and our processor at the end of last
Speaker 2: year is now being used. Whether it's for medical work
Speaker 2: at Cleveland Clinic, whether it's for bond pricing at HSBC.
Speaker 2: Those are real use cases that are coming out. We
Speaker 2: expect to see error correction between this year and next
Speaker 2: year demonstrated and out.
Speaker 3: There, so that'll be another big plus.
Speaker 2: We're investing very heavily in how we bring together our
Speaker 2: normal computers and quantum computers. We put out a roadmap
Speaker 2: for quantum centric supercomputing that has gotten a lot of
Speaker 2: attention or partnerships with academia, with institutions.
Speaker 3: I'm so excited.
Speaker 2: About what we're doing in Illinois, but also at RPI
Speaker 2: with MIT, and in other places we have done work
Speaker 2: with the National Labs. This is all tells us how
Speaker 2: tangible it is, and you can feel it. People are
Speaker 2: not realizing this is not science fiction. This is not
Speaker 2: engineering to get through the next two or three years.
Speaker 1: I think I can feel your energy today. Congratulations on
Speaker 1: the completion the Confluent deal and we are staying tuned
Speaker 1: from any more m and a come back on when
Speaker 1: it happens IBM, CEO OF and Christna is great speaking
Speaker 1: with you.