The Innovation Race: Reducing Risk and Navigating the AI Frontier for Future Success – Six Five On The Road

By Patrick Moorhead - June 17, 2024

On this episode of the Six Five On The Road, hosts Patrick Moorhead and Daniel Newman are joined by Pure Storage’s Maciej Kranz, GM, Enterprise, for a conversation on navigating the complexities and risks in the rapidly evolving AI landscape. With insights from Pure Storage’s recent survey, Maciej sheds light on how organizations are gearing up for AI-driven transformation while managing the inherent risks.

Their discussion covers:

  • The multifaceted nature of risks in today’s technology landscape as outlined in Pure Storage’s survey.
  • Insights from CIOs on the balance between innovation and risk management, highlighting the pressure to innovate amidst escalating challenges.
  • The urgency of AI initiatives for future growth, with a focus on the readiness of current infrastructures to support such advancements according to survey findings.

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Transcript

Patrick Moorhead: The Six Five is back. And we are talking about our favorite subject and that is AI. And, Dan, as we have talked many times here on The Six Five, and as we outlined in our summit, there’s really two edges to the AI discussion, right? There’s one that talks about this incredible opportunity for efficiency, improving connections with customers, and then there is navigating risk, right? There is risk with doing anything, and particularly when you’re looking at the amount of data, the type of data and the velocity of data, there is inherent risk there. So CIOs are having to balance that.

Daniel Newman: Yeah, there’s a lot going on, Pat, and I think we kind of vacillate between these two extremes of the efficiency, productivity gains that stand in front of us, the opportunity to really quickly and rapidly accelerate our business with the support of AI. And then there’s the other side of it’s the general concerns about it, safety, privacy, security, accessibility, quality, all the things, accuracy, that we’ve seen in the early innings, early as in we’ve been doing it 40 years, but let’s say the early innings of AI in the conscious of all people that’s taken place over two years. So yeah, I mean look, it’s really exciting and I think everything our data is saying is that any company that wants to be a serious company in the future has to figure out how to embrace this. But with balance, Pat, with risk in mind, it can’t just be go, go, go.

Patrick Moorhead: Exactly. And we’re on the cusp. We’re about ready to hit Pure Storage’s Accelerate conference in Las Vegas. And they surveyed their customers and potential customers, and they peeled the onion on the two elements of this opportunity. It’s my pleasure to introduce Maciej Kranz, who runs the enterprise business, Pure Storage. Maciej, welcome to The Six Five, first time here. It’s great to have you.

Maciej Kranz: Thank you for having me over.

Patrick Moorhead: Absolutely.

Daniel Newman: Yeah, it’s really good to have you. It’s been a while. It’s good to have you on the show. I don’t know that we’ve had a chance to chat since you came over to Pure Storage, but we’re excited, excited to see you at Accelerate next week. But I want to talk about this survey. I went through the findings, really interesting. We have a dedicated CIO practice. We spend a lot of time thinking about what’s on the minds of senior IT leaders. And Pat and I, you heard us in the preamble and we set this up all around kind of the other side, the risk side. And that was something that was really evident in the survey data. Risk is more prevalent than ever and it comes in many forms. I think you heard us kind of give our piece on that. Give us yours, what’s the thought behind that comment?

Maciej Kranz: Yeah, you’re absolutely right. And I think risk is something that I think we’ve been hearing from customers for the last couple of years. A big focus on and the number of risks that have been increasing, and it really came through very much in the survey. So just as a background, so we surveyed roughly 1500 CIO and sort of IT decision makers around the trends that you’ve outlined. How do you balance risks on one hand and then innovation of the AI on the other? And on the risk side, I think some of the themes were kind of expected. So obviously focusing on cyber, focusing on disparate systems, focusing on increasing technical debt, the risk of runaway costs of cloud and how you mitigate it. But what I actually found very interesting is that increasingly the IT organizations are also focusing on the risk of power usage, power cost, power consumption. So I guess the organizations are starting to be more sensitive to that topic as well.

Patrick Moorhead: Yeah. And power, especially in the AI discussion, and sometimes we just think about the accelerators that go in that, but it’s the storage, it’s the networking, it’s everything combined. And Dan and I get some really interesting factoids about energy use at data centers. And in the United States, there are some grids that literally have half a percent open for more power, and that half a percent needs to be shared between new people and people living, EVs and of course data centers. And it is interesting how that is raising there. So since I’ve been in this industry, and it’s been a long time, I guess, gosh, almost going on 35 years here.

Maciej Kranz: Me too, by the way.

Patrick Moorhead: There we go. There’s been this discussion, and this is not just in the CIO office, even in the LOB office, which is how much should we spend working on the day-to-day, and CIOs might call this firefighting. And then there’s this innovation budget. And over the years we’ve seen special budget. Sometimes the CEO has a special bag of money to go to do the cool new stuff. There were digital transformation budgets, that were, hey, we’re going to innovate having maybe a chief innovation officers. I’m curious what came in the context of that in your survey? What came out there?

Maciej Kranz: Yeah. And Pat, I think both you and I are dating ourselves, because I sort of remember-

Patrick Moorhead: I’m 35.

Maciej Kranz: And I guess all of us probably remember when we started industry before internet was invented. But I have to admit, there’s sort of a pressure, I would say existential pressure, that I think we’ve seen reflected in the survey, but also I’m sure you’re hearing from customers as well, we definitely do about, we don’t want to be relegated only to firefighting, only to dealing with the risks. We in IT organization want to be focusing on innovation and AI is sort of the linchpin of that. And if we don’t, AI is becoming such a big priority for enterprises that lines of business will be executing on these with us or without us.

And I think what we have seen is that it also is reflected in IT priorities and in budget priorities. So what the survey results conveyed is that over the next 12 months, we would see over 50% of IT budget spent more broadly speaking about and around AI and innovation type of initiatives, which is a huge, huge shift. And even more in terms of time and resources. So what clearly was articulated was that we are moving from sort of a high level board level discussions into operationalizing and implementing AI with clear ROI.

Patrick Moorhead: Yeah, it’s funny, there’ve been a few board type mandates. We had one when the web hit, which was what are we going to do with our business related that, and the board and the CEO are asking to do that. Then we had e-commerce, right? And then there was social, local, mobile, public cloud, and here we are with AI. But in the end, you’re right, somebody in the end has to actually get this stuff done. And you talk about firefighting versus innovating too. You have certain sets of people, you’re not going to keep people motivated in the organization either, if all they’re doing is firefighting and even keeping the lights on. And therefore it’s really a motivating factor for IT and the CIO office to drive those forward, because to attract the right employees, you have to have that balance of firefighting and innovating. And I guess out of the other side of my mouth, being a pragmatist, when something blows up, you have to take care of it.

Maciej Kranz: Absolutely right. And I think that you’ve mentioned all these transitions that we’ve been sort of lucky to be part of, right? And I also think that the AI focus is an opportunity for IT organizations to rethink, to sort of reinvent themselves. And I also think that a lot of work that is required to implement AI would also help sort of improve the capabilities and also the infrastructure actually to be ready to address some of the risks that we discussed as well.

Daniel Newman: Maciej, I think I’m going to lean into what you just said about infrastructure, but first I just want to say what we’re reiterating there matches our intelligence pretty well. The concerns are considerable, what organizations are facing in terms of both cyber risk, which sat at the top of your data, but also things like cost risk, governance risk in the business. Those are substantial as well. We look at this as the great reset. This whole AI, it’s resetting every business’s go to market, it’s resetting how they want to think about resources, and it’s of course resetting how they want to drive experiences.

And all the while it’s opening the doors for very productive organizations, we hear things like one person, billion dollar company. So companies are all thinking about how to do things completely differently. But the one thing that is absolutely evident is the runaway demand for infrastructure. If you look at the part of the market-

Patrick Moorhead: It’s cool again. Infrastructure is cool again, baby.

Daniel Newman: It’s cool.

Maciej Kranz: We knew this day would come, right?

Daniel Newman: It’s cool. And I mean if you look at where AI is making money, where the market’s making money, it’s infrastructure, it’s chips, it’s servers, it’s storage, it’s networking. This is where, but your data is saying something that I think is causing some of this is that companies are concerned, they’re afraid that their infrastructure is not good enough. They’re afraid that if they don’t buy more infrastructure, they’re going to fall behind. If they don’t buy more access, whether it’s consumption or owned. And basically they all feel because of AI, the intense demand on memory, on storage, on compute resources, the networking requirements that they’re going to actually outgrow their capacity. Talk about that risk. I mean, that seems pretty substantial.

Maciej Kranz: Yeah. And I think that what was remarkable in a survey that I think it was 98% of-

Patrick Moorhead: Exactly. It was the highest number you had at least in the infographic.

Maciej Kranz: Right. That 98% of respondents said that they don’t think their infrastructure is ready for AI, and for lots of reasons, focus on cloud before and their investments in some of the infrastructure, but also the requirements are different. And Daniel, you’ve outlined some of those. But I also find that there’s a silver lining in it, because as the organizations need to upgrade their infrastructure, they also need to rethink their architectures. And then a big move to Kubernetes is a good example of that to be ready for AI.

At the same time, this modernization of infrastructure will help with the risk side as well, because you will have a architecture and a stack and the infrastructure that is better prepared to address issues from cyber, unifying the silos, addressing technical debt and even addressing the power consumption requirements as well. So it’s kind of a win-win. And I think that’s where I think I’m actually quite optimistic that we can not only address AI, not only address risk, but also free up resources and capabilities in the IT organizations to start innovating, to start looking beyond the immediate and the next fire drill.

Patrick Moorhead: Yeah. So Maciej, just real quick, I think the innovation part of it is pretty clear how re-looking at your infrastructure can unlock that, whether it’s on the data side, whether it’s training inference, running the application. Can you talk a little bit about how it helps on the risk side related to AI?

Maciej Kranz: Yeah, because I think in some way, if you think about the infrastructure, many of the, especially the on-prem infrastructure was built 10, 15, 20 years ago, with these types of technologies from whether these are older architectures as well, as well as components, even starting in our world with hard drives that just keep spinning, right? And as we think about the new architectures, when you think about platform approach to infrastructure, we can integrate new capabilities, new components from, I would say, cyber to management, to kind of a various levels of responsiveness of infrastructure as well. So opportunity to jump from technologies that are 10, 15 years old into new architectures, new technologies that will allow us to be ready for the future.

Patrick Moorhead: Makes sense.

Daniel Newman: No question, Maciej, there is this wave of demand and it’s going to be coming for all the infrastructure that’s available. We’re seeing it with compute, but it’s going to flow through, as I said before, with network, with storage, connectivity, it’ll move out to the edge and then now onto devices. We’re seeing it, companies are investing, they’re pulling forward, and to your point, they’re mitigating risk by doing this. And of course in the end, we are going to see how quickly the applications deploy, how quickly productivity and efficiencies are gained. But what we’re seeing here is that CIOs recognize the challenge, see the opportunity, and are prepared to invest.

Now, hopefully the flat IT budgets that we keep running into start to flow into AI projects and the maintenance of existing infrastructure, which can’t be ignored in the interim, and of course provides a great opportunity for Pure Storage to continue to grow through innovative products and demand. I want to thank you so much for your time. I hope we’re going to spend some time together next week, when Patrick and I visit. When The Six Five is on site at Pure Storage Accelerate in Las Vegas. And want to just say, hey, we should have you back sometime soon. Great to see you, great to have you on the show.

Maciej Kranz: Thank you so much. Thank you both. Looking forward to seeing you in person.

Patrick Moorhead: Definitely.

Daniel Newman: All right, everybody, hit that subscribe button and join us for all of our episodes of The Six Five. Check out the show notes for more information about the Pure Storage CIO survey and this data. We look into AI and risk, and in that survey, you can learn a lot more and get a great idea of how your peers and your CIOs across the industries are leading their organizations. But for this episode, for Patrick Moorhead and myself, it’s time to say goodbye. See you all really soon.

Patrick Moorhead

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.