(upbeat jazz music) >> From our studios, in the heart of Silicon Valley, Palo Alto, California. This is a CUBEConversation. >> Hello everyone, welcome to this special CUBEConversation. I'm John Furrier in theCUBE Studios in Palo Alto, California. We're excited to have a great tech talk here with good friend Howie Xu, who's currently the Vice President of Machine Learning and AI at Zscaler. Formally an entrepreneur, which he sold his company Zscaler. Before that entrepreneur resident Greylock. Before that VMWare, a variety of other endeavors. Howie and I, we've known each other for a while. Great to have you come in and chat about-- >> Great to be here! >> The Zoom, Zscaler, these are the new breed modern era companies, SaaS business models. Really interesting and this is something that we were talking about on email and over text, is our topic. >> Yeah. >> Thanks for coming in. >> Great. >> So you've seen the waves at VMWare, you saw the rapid growth there. And now, you work for Zscaler which is experiencing rapid growth. You saw Zoom go public, and I just interviewed Michael Dell. We were commenting about that on text as well. He said these big markets that have big total addressable dollars associated with them are ripe for disruption. They used to have high barriers to entry in the old ways to look at it, but now with cloud and with SaaS, with data, there's different innovation speeds. This has become a big deal. Talk about your view on this. >> Well to me, when Zoom and then Zscaler founded, many years ago, no one believed that they would become this big, right? When Zoom founded, they were plenty of the conference, free even, software available out there. When Jay founded Zscaler people thought, "Well, there was enough security companies, security solutions." Clearly, they defied conventional wisdom and then they just fought on and they saw something that other people didn't see which is precisely what you were talking about. The SaaS is so different, right? The business model, the innovation speed, the data driven kind of the thing, it's so different. A lot of people say, "Hey what's the difference "between SaaS versus the convention? "Isn't that just moving that thing over to the cloud?" I actually used to think that way too, right? Isn't that just the virtual price, moving on to Amazon Cloud? After living and breathing in SaaS company and then also observing that in the VC industry as well. It's just totally different, day and night different. >> Well I wanted to get into this with you 'cause I think you bring some good perspective onto these insights and to the rocket success of say Zoom and Zscaler, but Zoom in particular, recent successful IPO. Among the recent class this past quarter. Zoom, Lyft, Uber. Zoom is standing out. They're getting profitable. This is video conferencing. You know in the old days if someone said, "Hey, I want to compete with video conferences." Well, the barriers are actually too high, but they took a very innovative approach. Cloud, data, simplicity, and the big 800 pound gorilla was the WebEx's of the world. Who was defined, divine for sharing slides, not so much pure video. (laughing) >> Yeah. >> They really innovated the focus, the speed of success. Unprecedented, in my opinion. I think this is a huge success of what the opportunities are for entrepreneurs. >> Yeah, I think on the surface, right? If you ask Eric he would tell you that, look the WebEx was designed for sharing slides, and then the Zoom was designed from ground up for video sharing, or the video conferencing, so it's very different and it requires different architecture. So that's very true. But I think there is a more fundamental to that. The more fundamental for that is, there are a few things. One is the product, the life cycle is very different. How do you approach the customer? The release cycle, the sort of the feedback loop, right? Much tighter feedback loop, much faster feedback loop between the customer and you. The release cost is much lower now as a SaaS product. So, innovation is just accelerated because it's SaaS, because it's a true SaaS. >> And this is a unique thing, you said before, SaaS isn't just lifting a on-premises workload and moving it to the cloud. It's a completely different mindset. Talk about this dynamic, because it affords new kinds of risk taking. You and I were talking about before we came on camera, share your insight on that. >> Well, you know, as kind of the traditional software you have a release cycle, you want it to have a release date, right? And then once the product is in customer hand, if you have a bug, if you have something, it's so costly to change it, right? But as a SaaS, the form factor, you can take a little bit more risk. You can even give that feature set to 10% of your audience. Not the entire set of the audience. You can do those kind of magic, so you can accelerate the innovation and as a shrink-wrapped software the traditional way. You have one shot, if that software is not good, then you are toast. >> So you can move quicker. You can push code, you don't have the on-premise dynamics. >> Yeah, the innovation and then risk taking are kind of correlated, right? Relatively more risk, the more you are willing to take risk, relatively you can take more innovation. So, that's the thing. >> Well, you and I were talking, and one of the key things that you have been talking about publicly, and amongst friends, is innovation speed. Everyone wants the innovation fever. "I got to win to innovate, digital transformation, rah rah." Easier said then done. Innovation speed is critical with cloud and SaaS, why? What's the formula there for innovation speed? >> Well, one thing we discussed, the release cycle. For a, not necessarily for Zoom and Zscaler, but you know for SaaS in general, its possible for you to have daily, weekly, monthly release. Traditional software, there is no way you can do that but that's just the release cycles of that. The other thing is, you can actually take a risk. You can say, "Hey I want you to try to raise 1% of the customer and then see how they are going to react to this." But in the traditional way you have product manager debating for six months, six years on whether or how to do things. Here, let's not debate, let's just see. >> Let's ship it. >> Right, ship it. >> And Reid Hoffman always says, "If he's not embarrassed by your first shipment then you're not doing it properly." Which begs the question, I want to get your thoughts on this because, again with VMware, you saw how early that worked and their transforming cloud is now here unlike when they started the company. What is the right way to do it? And what's the wrong way to do it? When you look at an entrepreneur or a friend, who's trying to get a business off the ground, SaaS business, when you look at what they're doing, and you look at their mechanisms and how they're organizing their team, their code. What jumps out at you as the wrong way, and what's the right way? >> Well, the, I think the coach is really it, right? You know, the kind of the coach of incremental success and the fast iteration is the culture for a SaaS company, right? For the traditional one, you cannot afford to do that, because once you make a small mistake, you are toast. So I think, you know, that the culture difference, you really want it to have faster iteration basically. >> And that also comes down to the team, the people, right? >> Yes. >> The people selection. >> Yes, if you are kind of used to the waterfall thing, it's pretty hard to adapt to this kind of the SaaS world. >> And what's your advice to entrepreneurs? Reset, because if you say speed is of the essence, resetting is probably something that's not hard to do, then. >> Well, I wouldn't say easy, but not easy-- >> I hate to use the word pivot, but you know, resetting means okay, stop, rebuild. >> I think one way to think about it is actually looking at it and how to build enterprise software, like the consumer sort of product way, right? If you think of Facebook or Google, the traditional Google, of course Google now has enterprise product, but the traditional sort of, the Google, Facebook, kind of the product, it's more for consumers to consume. I mean they are fast iterations. How often? What's the criteria to release a product? Enterprise product is getting towards there. You need that kind of the thing, so, if you don't know how to do it look at a Facebook, how Facebook, of course Facebook and YouTube pulled the other way around, they need to care more about the privacy, care about more stability. So I think you are seeing the the two sides of the world, the enterprise side and the consumer side. They are learning from each other. >> Well, I want to get to the enterprise talk track in a second, because I think you can give a lot of insight, so I want to stay on SaaS cloud native or cloud specifically, 'cause that's where SaaS really shines when you're really talking about cloud scale. Data, you're doing AI now, and you and I have both talked about data many times. >> Yes. >> You know I'm a data hardcore person. I love data. I think software and data, I wrote a blog post in 2007, that says data is the new developer kit. The word "developer kit" was used back then. You're now seeing where data is part of the developer's piece of their value creation. Highly addressable, available, usable, not stored in some silo unaddressable, high latency to get it. How important is the data for the SaaS piece? Because that's where to make these kind of changes you're talking about, you need the data, data's giving you insights, that's something that's near and dear to your heart. Explain your vision of the role of data. >> Yeah, I think, you touched up on it. If you want to make sense out of something, you need the data, right? And if it's not SaaS, I would go, maybe a more extreme way, but it's not clear to me the data's even useful to you 'cause you know the data may be for some large software company, they may have hundreds of thousands of customers out there, but the data is spread around. I mean how are you going to train a model with all the data spread around hundreds of thousands of locations? So the real, the correct, or the optimal way, is actually the SaaS model, you actually have the data with you and then you kind of leverage the data. So I would say this is actually another benefit of the SaaS, why SaaS is going to change the world or eat the world. It owns the data for real, right? The data may be not the private data, but it's actually could be a behavior data. How people are reacting to your features. From VMware days we wanted to know, is people even using this feature? How often people use this feature? You know people are always debating, "Hey what's the maximum policy we need to give this and that?" But in the SaaS world, no debate just look at it. We always say, "Don't listen to what customers are wanting you to do." But watch how they do things, so that you can sort of understand, what product you want to develop, right? Here you actually can really watch how customers using your product. Don't listen to them, if you listen to them you will give them a faster horse as we all knew. >> But what's important about the data discussion, because, a security person would say, "Hey if you put into one spot, I can hack it." But, it's not just people's names, it's other data. It's gesture data, it's usage data, so you're not talking about sign in data, it's data. >> It could be the behavior, it could be second order data. Do people use my product, that's my data. That's something I wanted to know, I'm not necessarily talking about peeking into people's email, no. It's actually the thing surrounding it. >> It's looking for the good things in the data. All right, let's talk about the customer alignment and customer expectations, you know customer user experience is driven by customer's expectations usually, right? As expectations change. And I think the Zoom thing jumped out at me, the Zoom IPO and their great success and were a customer as well, is that they really nailed the expectation of the user and cloud certainly helped them get that speed, but this is a key thing, if you could just deliver a great experience. >> Yeah. >> For those customers, you can actually win big part of the market. >> Yeah, if you Google, Eric. Eric doesn't speak to me as much, but if you Google Eric. >> We'll get him on theCUBE. >> What's sort of the jump? Hopefully I can help you to bring him here too. But what's going to be obvious if you Google search Eric he is sort of the notion of customer successes, my success. If customer is happy, I'm going to happy. So, my happiness hinges on the customer's happiness. So that's, kind of very important because only the SaaS model made that more natural. In traditional model, whether traditional on prime or we're not, you sort of celebrate when you have customer signing your PO and then you don't hear from the sales guy or three years, the sales guy may move on to another company, you don't know, right? But for the SaaS, it doesn't stop when sign the PO. You actually have to earn customers' happiness every single day. >> Adoption's critical. >> Yeah, customer success is important and then that's kind of the, so there is a huge alignment, very interesting alignment between customer's happiness, customer success, customer adoption of your product and you're sort of, the success, right? 'Cause you know, when I came to Zscaler, one of our first meeting is about, okay, we had a lot of customer interest us. They sign a PO. How to get them ramp up the actual first use, right? So, that kind of conversation doesn't happen in the traditional software company. You sign a PO. If the customer doesn't use your product for another 18 month which is actually quite normal, no one is going to jump up and say, "This is crazy!" Right? >> You know, we're going to do that on our Part Two, about the impact of the enterprise. But you made up a good point there, I want to just close out our last talk point is, the data driving the experience isn't like the old way of throw in, get the PO and celebrate. You got to, kind of, keep that going. The enterprise is changing and the enterprise has a tsunami of onboarding of new types of developers. In some cases they grow. We just had Cisco inside here on theCUBE this morning. They're turning network guys into programmers from CL command line prompt dudes to gals to coders. You're seeing developers now enter the enterprise to build the apps so there's now a digital transformation initiative for enterprises to be, I guess, SaaS-like. But it's hard. >> Yeah, I think that's, you know, this is part of the digital transformation. Every company, Fortune 500 or Fortune 2000 company need to do it, right? So, another interesting part is, when they do this on this journey of digitalization, you cannot possibly build all the infrastructure yourself. You will have to consume public cloud, you know sometimes private and hybrid cloud, and you are actually going to consume lots of the SaaS, right? Whether Zoom, the Zscaler, or the PagerDuty, I mean you are not going to be all those thing from scratch but you want it to have a very good, sort of the stack on top of it and how you going to take advantage of the SaaS, is a very interesting aspect. >> Well in Part Two of our chat, when we come back on our next discussion, I want to get into the enterprise. But to wrap up Part One here, innovation speed, leveraging data and the beautiful risk taking and benefits of SaaS. Large scale, fast, high value, target and developing an app or a venture. >> Yeah. >> What is your advice to entrepreneurs out there and/or someone who's doing a digital transformation? Where they want to leverage Saas, what's the playbook, what's the starting point, what's your advice? >> Well, there are a number of things. One, there are so many SaaS companies out there taking advantage of them, right? In the old days you have to hire email admins, you have to do this. Nowadays, all the SaaS, that's your kind of, you only need to worry about the business logic, you have some unique insight in the business and then just have, hire programmers to codify that and then the rest will magically happen because of the public cloud, because of the SaaS. So, be very mindful about the new environment you are in, that's number one. The second thing I want to say is, how do you look at AI technology? The older way is program something in a definitive way. I think there will be a limit for that. It has taken the software industry a long way to where we are. But, if you look at the next 20 years, I think a lot of the lift is going to be done by the AI Center. But it's not going to be easy to be done, you have to think about your data strategy, where are you going to have the massive, sustainable, unique, ideally even labeled data. If you don't have the labeled data, you have to have the strategy. How are you going to have some unique model with the data you have? So, the data strategy, right? So, essentially, how to take advantage of the cloud? How to take advantage of the data? And then on top of that you are going to do something that's solving an unmet um-- >> Customer problem. >> Customer problem. >> An acute landing spot in the market place. >> Unmet need. >> In a big market. >> In a big, well, in a big market. >> There it is. >> Even if there is already a mature solution I bet, since those mature solutions would not develop from that native cloud era, and the native AI era. You have plenty of opportunities. >> Howie, you and I are on the same page on this, I have been saying it truly believe we are living in an entrepreneurial era where, with your advice and what you just laid out, the better mousetrap can take down a big market. >> And, I'm hopeful that you will also disrupt the media business, you know we're-- >> Don't tell anyone! (laughing) We're still going to do that top secret of Silent Running. Howie, we're going to get Part Two. We're going to dig Deep into the enterprise, because the enterprise now has an opportunity in the first historic time in tech history, to use tools and technologies to completely reset and re-architect for this kind of capability. >> Absolutely. >> So, we'll hit that in Part Two. >> I'm super passionate about it too. >> Howie Xu, here inside theCUBE. Friend of theCUBE, legend in the industry. Great entrepreneur and technologist here, sharing CUBEConversation. I'm John Furrier, thanks for watching. (upbeat jazz music)