Tech Trends Uncovered: Cybersecurity Frontiers and Retail AI Innovations – Infrastructure Matters, Episode 27

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this webcast. The author does not hold any equity positions with any company mentioned in this webcast.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

Transcript:

Krista Macomber: Hello, and welcome to Episode 27 of Infrastructure Matters. Hard to believe we’re approaching 30 episodes already. My name is Krista Macomber with The Futurum Group, and I’m joined as always by my wonderful co-host, Steven Dickens, and Camberley Bates. Steven, Camberley, thanks so much for joining today. How are you doing?

Steven Dickens: We’re good.

Camberley Bates: Good, we’re warm.

Steven Dickens: The highlight of my week getting to talk to both of you. I genuinely mean that as well, that wasn’t me giving around.

Camberley Bates: Well, it is a Friday.

Krista Macomber: Yes.

Steven Dickens: It’s a Friday.

Camberley Bates: Yep. Maybe we should do this on hump day, on Wednesday, because since it brightens all of our days.

Krista Macomber: I know.

Camberley Bates: Anyway, keep on going, Krista.

Krista Macomber: A little bit of energy to get through the week, right? All right, absolutely. So I know we have a few announcements to dig into on the episode. I know we’re going to be touching on a few different factors spanning data management, some cyber security related discussion. And actually, believe it or not, some announcements coming out of tape, the tape storage market. So with that, Camberley, I know maybe to kick it off, you had the great opportunity this week to attend a meeting with the Mountain West Cybersecurity Task Force in Colorado. So why don’t you tell us a little bit about that and some of the new thoughts coming out of that meeting?

Camberley Bates: Well, first of all, what is it? This was started by the Social Security. People are going, “Why is the Social Security involved with cyber security?” That’s because Social Security were the original people that were hunting down the bank robbers in the 1800s. So they are all tied to the Treasury and the bank robbers and everything else so we all think of them as the Secret Service as being part of, did I say Social Security? I did do that, didn’t I? The Secret Service’s part, taking care of the president. But originally, and still, they’re taking care of our banks as well.

So this is a task force that was formed, I think a good 10 years ago by somebody in there, and they pulled together all the different localities of police as well as the FBI participates in it. We have university experts that are there, and we have also the vendors that are playing in there. And the idea of this group is to share lots of information about what is going on in the space and assist each other in terms of all the cyber security. So there was a couple of things that came out of there. We had a gentleman from the NCU-ISAO, which is the credit union organization that deals with security. Brian Hinze is a VP with there. He talked about specifically something called the adversary in the middle of phishing services. And what he was really highlighting there, one of the biggest things he was highlighting is how they’re breaking multifactor authentication.

Krista Macomber: Interesting.

Camberley Bates: Right. So they are breaking it and how they’re breaking it.

Steven Dickens: And that’s not scary at all.

Krista Macomber: Right?

Camberley Bates: Nope, not at all.

Steven Dickens: Geez.

Camberley Bates: Kind of like, “Yeah, whatever.” We irritated everybody with multifactor authentication, and there is something called multifactor authentication fatigue which is really screwing things up. But basically what it’s doing, they’re doing some redirects. So they’re sending something to you that has, maybe it’s a DocuSign, SAP, Concur, those kinds of things. I think I’ve gotten the DocuSign one that was efficient, and somewhere along the line there’s a click there, it’s a redirect to the guy in the middle who is grabbing information, and then he redirects you back. So you don’t know this just happened. And they’re grabbing the multifactor, which is a key that can be repeated, and they’re also grabbing emails, et cetera, and then sending it around. Great chart. It is probably a 20-minute talk about this, how it’s being done, but it’s a scary piece.

And when you roll that into the AI being applied to the email phishing and how absolutely, I mean it’s just skyrocketed stuff that’s here. It is a scary situation. So more to get dug into here, fascinating piece, and I would encourage people that are involved with security, there’s task force across the nation. I think there’s eight of them in different geos, and getting involved with them and staying active. They cover everything from child pornography and cyber crime, to the phishing and ransomware and everything else that goes on. So I will pass after that. There we go.

Steven Dickens: Scary world we live in.

Krista Macomber: It really is. And I think that’s particularly scary because just coming out of the data security market in general over the last, call it year, 18 months or so, those access controls have actually been a big focus. I know Camberley, you were alluding to this just because there’s been the recognition that we’re not going to be able to keep up with the attackers, especially considering, Camberley, I know you also mentioned AI and things like that. So it’s been, okay, how do we move beyond just the perimeter defenses, build up this zero trust approach and really decrease the possibility that the attackers are going to be able to get our information. So very scary for sure.

Camberley Bates: So one of the things that he talked about was something called a YubiKey, Y-U-B-I-K-E-Y. However, they’re very expensive, they’re 40 bucks a piece. So to do something like that across an organization, this gets me back to where we used to have the key, right? At one point in time we had these special keys that went into our computers, but there we go.

Krista Macomber: Time will tell, yep. I know another thing that we wanted to touch on this week was NRF. We were having some conversation backstage here so to speak, before we recorded. I know Camberley and Steven both had some commentary, so why don’t we dig into that for our next topic?

Steven Dickens: Yeah, the National Retail Federation has its Big Show as it calls it every year in the Javits Center in New York. Runs Sunday through Wednesday in the second or third week of January. I had the pleasure with Keith Kirkpatrick, another one of our analysts of going down to that show. Huge, huge tech vendor show focused on the retail sector. So a couple of research notes that Keith and I have authored. I think the interesting things for me were chatting to all the vendors.

You got the feeling that last year was a bit of a pause year. I think people were coming out of COVID, some of the trends were a little unsure. The macroeconomic environment was tough. So chatting to a bunch of the vendors, I spoke to the founder of Scandit, I spoke to the Google teams, I spoke to Oracle, spoke to a whole bunch of the different vendors and you got the impression that retail had a tough year. It’s still growth but not explosive. I think this year, a lot of people start to already see that the momentum’s coming back. The show was packed. I’ve been the last two or three years, been before, show was packed. So good to see some vibrancy. I think that obviously AI was everywhere from how consumers interact and find things with vector search and RAG and all of the other AI technologies, chatbots. So there was a huge focus there.

I think some of the interesting things for me spend some time with Google around their distributed cloud edge. So trying to get technology into the store without a big store footprint. Having worked retail when I was in college, these are big stores. If you’re going to put shelf edge technology, you’re going to put cameras, you’re going to put something like the Amazon just walk out type technology. Puts a huge footprint of just technology into these stores, and there’s nobody in the store who knows how to manage it because they’re all retail focused. So then you just get into cost, operational challenges. So I thought it was really fascinating what Google planning to do with this distributed cloud edge, so that you can really cut out the middleman and go directly from the device up to the cloud. I also got spent some time on the Lenovo booth. Again, they’ve worked with Google around this Chromebook type. Super small form factor designed for far edge type deployments. So you can run a whole smart shelf edge deployment, a camera set up. Technology on the storefront, it’s got a tiny, and this thing fits on the back of a monitor. It’s about the size of a power pack for your phone, but it’s actually a server running Chrome OS that then goes.

Camberley Bates: This is for running the video surveillance-

Steven Dickens: Yes, no, this would be-

Camberley Bates: Or is this for, because it seems, I know we’ve gotten really small with our technology, but you still have all the retail operations transaction stuff that’s going on.

Steven Dickens: So this was about the size of a big smartphone, and it was this type of size. Not much thicker, can be powered off power over ethernet. So like low power consumption, but it’s basically a micro server. You can run a number of cameras off this, you can run a smart shelf edge deployment, you can run your point of sale off it. So if you need a server close to the edge, you can run that off this type of device. 300 bucks with a Chrome OS on it. So huge compute power, ability to run AI down there in some of the AI stuff, obviously not, we’re not talking about NVIDIA GPUs in this thing, but the ability to run some sort of basic AI capability but on a tiny little form factor that’s tiny power draw so often.

Camberley Bates: It’s going to run inference engine. That little box is going to run the inference engine that we trained it on. I mean, one of the projects our Signal65 Labs is working on is an AI project that has to do with retail. And I can’t go into detail because we haven’t released the work yet, but the concept, what we’re doing, what they’re doing right now is they’re training to do image recognition on the shelf is what you’re talking about. Conceptually saying, okay, so if I can do that, I can grab that information, I can stock that order much more easily or order much more precisely about what I need for that particular shelf. And so we’re showing this training capability and look for it sometime in, I think February is when we’ll release all that information.

Steven Dickens: I also got the chance to have dinner with the Sony semiconductor team and they’re creating custom silicon. Obviously, Sony with their digital cameras have got the sensors. But what they’ve done is they’ve combined the sensor technology with a custom AI chip, so that you could do basic, one of the use cases where you can look at a shelf every hour and just be able to say, “Is that shelf full? Yes or no?” It’s not doing a complex large language model. We’re not doing running ChatGPT down there. What we’re doing is basically just got very simple AI to be able to go, is this?

We’ve trained it to know that it needs to look full. Is it full, yes or no? And then be able to ping that directly to the cloud. And so I think there’s some fascinating use cases for AI powered image sensing in retail because I mean, empty shelves mean people leave the store, and they maybe abandon their entire transaction so the impact can be huge. Not having that one thing you need, you’re like, “Oh, well, I need this. I’m not going to go buy these other 20 things. I’ll just go to the supermarket down the road because I absolutely have to have this one thing and they’re out of stock.” That’s real in retail.

Krista Macomber: That’s interesting. Yeah, that was going to be my question, Steven, was just any kind of, even innovative use cases for AI that you maybe heard either talking to vendors, what they’re seeing from customers or if you’ve got the chance to talk to any customers there? That’s really interesting.

Steven Dickens: One of the really interesting ones was returns. So as I say, I spent a whole bunch of time on the-

Camberley Bates: Huge issue.

Steven Dickens: Well, brick and mortar to retailers getting somebody into the store who’s maybe bought online is huge, it’s a battleground.

Camberley Bates: That’s me.

Steven Dickens: Yes, it’s me. I shop at Macy’s because of their returns policy and they’re fantastic. Apparently-

Camberley Bates: I was just there this week at Lululemon. In fact, I tried to order online and I did. I ordered the shorts online, I got them. I was trying to match something else I had, I didn’t know. And so I get them and they’re not the ones that I want, so I have to go back in there. I’m returning them, and the best thing I can do is go up to the gal and say, “Here’s the ones I have in my door. Can you tell me which ones these are?” And so she sat there right there and we ordered them right there in the store, which was fabulous.

Steven Dickens: It’s that type of experience. So on the Lenovo booth, they had a physical returns box, this big kiosk. And with a smart screen, you can basically just take your shorts. In your case, Camberley, you don’t need the packaging, you don’t need the return label, you just scan the barcode or the QR code. It creates you the label there and then you can put it boxless returns is what they called it. So you can put it straight into the, pull down the opening and put it straight in.

But what they’ve done, and what I found fascinating is about 20% of the time, people will go and shop in store would they return. By being able to put AI into that return process and be able to match that up with where you walked in the store before you came to the returns, and your previous purchase history. They can create you a coupon that says, “Hey, Camberley walked past shorts before she came to return shorts. She spent time online looking at shorts. Hey Camberley, we’d love to give you 25% off today if you buy shorts. It’s a one time coupon only available for today.” And what I’ve seen with based on its data is that they’re increasing it from 20% purchase rate to 46% purchase rate.

Camberley Bates: Wow.

Steven Dickens: And that’s huge.

Camberley Bates: That’s a conversion rate I would like to have.

Steven Dickens: So it makes it more frictionless from a returns perspective. You don’t have to get a box, you don’t have to get the return label, you just walk into the store and figure it out so that’s a great experience. And then if you get a coupon that is contextually rich that makes sense for you to buy, I thought it was fascinating and learn over that through its consulting organization got you from beginning to end. You can just walk in as a customer and say, “I want to buy that.” And they’ve got you everything from the physical kiosk right through the AI deployment, right through how you would implement it. It was fascinating for me.

Krista Macomber: I think that’s a great summary too. Very cool.

Steven Dickens: Yeah.

Krista Macomber: All right, so I think that touches on the couple of events that we participated in this week. And I know that there was a few other announcements. We’re here in the third week already in January, which is crazy. So we’re seeing some announcements start to pick up a little bit. And I know that there were some management changes actually involving Hitachi that we wanted to touch on. Camberley, I know you had some thoughts on that regarding Octavia.

Camberley Bates: Yeah. So this is the time of year that all the deck chairs get to move around.

Krista Macomber: Yep.

Camberley Bates: Who’s going where now? And we’re part of that too because we’ve had multiple people join our company recently, but this was an interesting one. Octavian Tanase was SVP of engineering at NetApp for 12 something plus years or whatever. He’s flipped over, he’s now, not flipped. He’s come over to Hitachi Vantara, previously known as Hitachi Data Systems or HDS long time ago. And he is going to be the chief product officer. As you probably know, a lot of their engineering is done over in Europe, in Japan rather. What’s interesting about this is that this last fall, and we did talk about this on the pod, is Hitachi changed direction to Hitachi Vantara. Many years ago, they had combined this group that was doing digital services work that was a lot of IoT, smart cities, smart utilities, et cetera, with what was known as Hitachi Data Systems. They had Pentaho over here, the Hitachi Data Systems here, bringing these two together to go after this market and hasn’t been outstandingly successful. So they’re splitting those groups.

In fact, from what I do perceive is that the Hitachi Data side, data infrastructure side was really the driver of the revenue and the margin that was coming out of them. So in recognizing of that, that group has now been established again as its entity. So we now have this entity that used to be HDS, it’s now Hitachi Vantara and the data side. Sheila Rohra is heading that up as a CEO. What’s interesting about Sheila is that she was also at NetApp. When she was at NetApp, she was working with George Kurian on transformation of the company. In fact, there’s a Harvard business case written about that in that we’re putting that into the research note that we’re writing a link to it if you want to go purchase it. And this was about, she was driving it with George in terms of transformation over there and it was quite a few years ago.

Then the other piece of it is what Octavian had done at NetApp was in leading the engineering, some of the major things that have come out of NetApp over the last five, eight years has been the first-class citizen at AWS, Azure and Google, and this other thing called BlueXP, which is data management across clouds on and off-prem. Hitachi, well-known, super good technology, way behind in terms of where we are going with the hybrid cloud, where we’re going with a lot of things. Even though the customers love their products, they have not been super advancing. And so this here between looking at where Sheila’s coming from, looking where Octavian is coming from, what they’re talking about, I’m going to expect to see them, and it will take a while to get out, start to build that data management function because I think they’ve got the wherewithal and the brain cells within the company, especially with where they were before to do what needs to be done to address this next world that we have in terms of the hybrid cloud, the AI, the data management, the systems and everything else so I think it’s a very powerful play, a powerful move. Very exciting for Octavia to take this on. I can understand why he’s done this because it’s a cool job I think.

Krista Macomber: For sure. And I think Camberley, the other parallel I draw there is that from the perspective of NetApp, the data management, I mean that’s always been closely tied to the storage play. They tend to go very hand-in-hand. And I think for Hitachi, if they’re going to try to build out these capabilities and build this credibility building from like you mentioned, that traction, that innovation they already have on the storage side is going to make sense. So it seems to me like both companies have that similarity there. And like you mentioned, Hitachi actually certainly can benefit from their perspective so that’s interesting to see.

Camberley Bates: And it continues to be talking about data management for a long time, but the data management now has two factors that have people very, of great interest. One is the cybersecurity piece, where are my kids? I need to know where are my kids? And somebody’s got their phone going. And the second one is the issues around managing data for the AI technology. So I think all timely with where the move is going.

Krista Macomber: Absolutely. All right, and I know that there was a couple other vendor side announcements. One actually coming out of Seagate more on the chip side.

Camberley Bates: Well, it is chip side. So I’m keeping on talking so you’re going to get bored listening to me. So Seagate announced something called Mosaic, which is their HAMR HDD technology. And so you’re going to going yawn, I’m going to yawn. So both of these next two are older technologies. I think that HAMR is the next generation of technology for hard drives. Lots of noise about HDD is going away, HDD is going away. Guys, the hyperscalers buy 80 to 90% of the hard drives that are out there. And they’re the ones that have been pounding on both with WGC and Seagate to get these technologies out because it’s the next generation that they’re going to.

Last summer, I did a podcast with Coz from Pure, we had a lot of discussion about how solid state’s going to wipe out hard drives. Some of that argument is about power and all that stuff and environmental considerations. There’s a big argument about which one is more sustainable in terms of the minerals and end of life, et cetera. But anyway, so here we are. Seagate’s launched it. We’re going to see another generation of this stuff come out, and it’s going to be absorbed by mostly the hyperscalers. The second announcement that came out, and again we’re talking about older technology is tape. Hammerspace who is in the data management business as well, global file systems announced tape integration. So basically, they have ability to see from beginning to end, and they’re doing this with a couple of vendors or several vendors because Grau Data, QStar, PoINT Software are providing the S3 gateway to be able to do this. So I can move now my data to tape. I can still see it in the file system, global file system that they offer and they bring to that visibility so I now have cloud, I have on-prem, I have any kind of systems that want and I have this long-term storage which is, tape is having a much like we used to say tape was going to be dead. We’ve said mainframe was going to be dead.

Krista Macomber: They’ve been dying for how many decades now?

Camberley Bates: Well, it’s here and it’s had a resurgence. The biggest battle right now for the tape is with the hyperscalers because that’s what’s used for Glacier and Blob and those sort of things. So there’s big battles up there and within that recognition it’s like, okay, so can we use this technology efficiently and effectively within the operations that we’re going to be in? So I think it’s here to stay, it’s not going away.

Steven Dickens: Yeah, for sure.

Camberley Bates: And we still use it on the mainframe.

Krista Macomber: Yep, absolutely.

Steven Dickens: Well, it’s interesting that just on that space, we’re starting to increasingly see people doing backup to the cloud. So a few vendors that we work with cover that as well.

Camberley Bates: Yeah, but that’s not what this, so tape is not being used for backup anymore. That’s gone.

Krista Macomber: Archive. It’s air gap, yep.

Camberley Bates: Air gap and archive is where it’s happening.

Krista Macomber: And that was what I was going to add. I know Camberley, you talked about the battle for tape being cloud deployments. And I know we’ve seen that there are many instances in customer accounts where they look at the cloud and for them that is not an air gap, and they still want that on-premises tape library, especially given all the ransomware attacks to be able to have that isolation.

Camberley Bates: And that wraps us right back to the Mountain West Cybersecurity Task Force.

Krista Macomber: Which it does. Perfect time-

Camberley Bates: That was really slick

Steven Dickens: Full circle.

Krista Macomber: And with that, I know we’re just about at time here unfortunately, but Camberley and Steven, it was a pleasure as always. Like we said, always a great way to kick off Friday and start wrapping the week. We want to thank everyone for listening. Please make sure to like and subscribe and all those good things to make sure that you don’t miss any episodes, and we look forward to chatting with you next week. Thanks so much.

Camberley Bates: Great.

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