(upbeat dance music) >> Live from Barcelona, Spain, it's the Cube. Covering Cisco Live! Europe. Brought to you by Cisco and it's ecosystem partners. >> Hello everyone, welcome back to the Cubes live coverage day two of three days of wall to wall coverage here in Europe, in Barcelona, Spain for Cisco Live! 2019. I'm John Ferrier with Dave Vellante, Stu Miniman hosting a great load of interviews this week here for Cisco Live! Guys, kicking off day two. Day one was all the big announcements. Cisco putting in all the announcements really setting it in and the messaging coming together. The product portfolios filling out. Clearly, Cisco is adopting a path to the cloud. Taking their data centered business, securing that, bringing that data center into the cloud, kind of hybrid, Multicloud. Big message around Multicloud and then under the hood, data center. Traffic patterns are changing, it's not a rip and replace, it's an extension to the environment. Cisco's intent based networking plus cloud plus cloud center management. Lot of stuff. We did discuss that yesterday. But I want to get your take. Is Cisco's positioning viable and what does it mean vis a vis the competition because Cisco is a blue chip tech player. Certainly have zillions of customers. Very relevant. This is a huge impact, how they position themselves, Stu. >> So John, you remember a few years ago we were saying "Hyper scale clouds, the public cloud providers are going to take over the world" and boy, Cisco's in trouble because if a third or half of the market all the sudden evaporates from them, those enterprise buyers of switches and routers and everything else like that, Cisco is doomed. Well, you know, we listened to the keynote yesterday and Cisco's talking about all of their solutions anywhere and when you go through the ecosystem of public cloud, hybrid cloud, multicloud. Say does Cisco have a play there? And the answer is absolutely. It's not just the AppD acquisition, which has software and AWS but SD Wan is going to be a critical component to get from my data centers to the public clouds. Cisco has software and solutions and consulting to help customers in all of these environments so we always know that there's partnerships and there's competition. There's a lot of players out there but it was good to see them talking a lot about what they are doing with Kubernetes, with Amazon because you can't talk about cloud, either public cloud or multicloud without first talking about Amazon. Last year, we were a little critical, John, and said "Okay, Google's great but Google's number three or four." So, you got to be there with Amazon, you got to be there with Microsoft, and ServiceField. We've already interviewed a couple of service providers, always been a strength for Cisco to be in there and so good positioning. We talked yesterday a bunch about the bridge to possible and where to go but the more I think about that, anywhere is what Cisco's branded everything and that's when you talk Multicloud. Multicloud really a whole bunch of clouds and a whole bunch of things and therefore, I need a player that's going to help give me coverage in all of these environments and Cisco is making a strong case to be that. >> And Dave so Stu's right. A couple years ago, we were critical of Cisco and I think rightfully so. I think the whole industry looked at them as not in the middle of the fairway and certainly the recovery shot for Cisco is really strong because a lot's changed. Go back a few years. They didn't have a good ecosystem for developers. They didn't have a good open source position. They kind of were, do I go up the stack or not but they had the core networking so a lot of people were saying, "Hey, if Cisco doesn't make a move, they're doomed." We were one of them so a lot's changed. You're seeing the adoption of microservices, containers, APIs, the growth of DevNet that Susie Wee has initiated. It's clear proof, in my opinion. Then you got the data center guys saying, "Hey, we can take networking and take this and enable cloud." So Cisco, making good moves, put themselves in pole position for growth. >> Well I think the first point is, if you roll back 10 years ago, it was not just Cisco we were critical of, it was clear to us that cloud was where all the growth was and if you didn't have a public cloud, you were going to be in trouble unless you developed a cloud strategy. So, certainly Cisco, Dell EMC, now you know Dell MC, Vmware, none of them really owned a public cloud strategy and five years ago, they had to figure it out. Well, they figured out that actually managing Multiclouds is a great opportunity and so Cisco's got a viable strategy. Networks between clouds are going to flatten, they're going to need management. It's specifically, as it relates to Cisco and maybe their competition, they have to position themselves as our Multicloud management system is higher performance, and more secure than the competition. That's what they have to sell their customers on and the second piece of that is they get a transition from selling ports to selling software. And they're making that transition so, I like their strategy by the way, I also like Vmware's strategy. They capitulated to AWS, and now they're tight with AWS. IBM went out and paid two billion dollars for software so they've got a cloud strategy. Oracle's got a cloud strategy, Microsoft's got a great cloud strategy so if you go through and tick off-- >> They have clouds so let's just understand something. There is clouds and then cloud strategies so Amazon. >> The $34 billion that IBM is paying for Red Hat is giving them a Multicloud strategy more than just saying we have a bunch of data centers and bare metal. >> So they play in both, right? And maybe not so much in the public cloud, I would argue that their public cloud has failed to meet their expectations like IBM. And that's why they had to pay $34 billion for Red Hat. I would say just the opposite about Microsoft, their public cloud strategy has been an enormous success and they're very well positioned for Multicloud. >> Okay so let's just put it on the table. So, Cisco looks at the public cloud as partners, not competitors so Amazon, Assure, Google aren't competing with Cisco. Are they or are they partnering? Well, understanding competition is all about understanding who has a cloud so I would say Cisco's strategy to partner just like SAP did, just like everyone else and Dell did, that's the competitive, not cloud so, or maybe. This is the question; are the public clouds competitive to Cisco? >> They're frienemies, John. >> Oh no, the answer is yes, there is no question about it. They're growing at 20, 30, 40% a year. Cisco and IBM, HP they're growing at much lower, single digits. >> So John, we know if Amazon, if there is a profitable space that they can offer, a competitive service, they will. Security, you said, Cisco's got a great position security both what they've had for a long time and they've done acquisitions like Duo more recently and we've seen lots of pieces of the public cloud ecosystem that Cisco's bought over the last few years. Clicker was one that we've spent some time talking about but absolutely, Amazon goes after some of those pieces so they're going to partner. Cisco's got, the last I checked, at least three dozen products on the AWS marketplace but they can live there but there will be competition. >> Cisco's got some huge assets in this game, they got 800,000 plus customers, they are 60% of the networking market so they own the install base. It's really the only market you can think of that's a major market where the dominant player still owns 60% of the market and they've never been able to. >> Cisco for networking and Vmware for the hypervisor are very similar in that case and both have now had a similar strategy as to how their going to multicloud. >> Well, that's the most interesting competitive dynamic, in my view, is Vmware and it's acquisition of Nicira and obviously Cisco. Cisco's not going to take this lying down, they've got ACI and they claim number one. They didn't say whose data that was. I was looking and squinting for that is that IDC that got their four star. >> Well lets talk about growth because you know how I always complain about market researches aren't on the mark in terms of the reality of where the market is. So, you've mentioned growth. So, are we, if we're early in cloud growth, that's where the growth is, what is the cloud adoption going to look like over the next 10 to 20 years? Is it going to look more like public cloud or is it going to look more like on premises evolving to cloud operations and if the growth of cloud operations is all things, wide area network, image and SV wan, then there's more growth coming. So, if that's the case, is Cisco going to be able to capture that growth for the future? >> Well, in terms of growth, I think AWS is on it's way to being a $100 billion revenue company. And that's pretty impressive given where they are today, I mean they're going to triple in revenue so that's where the growth is. Cisco's already participating in a huge tam. What they've got to do is hold on to that business and identify new opportunities where they can manage multicloud instances and compete effectively with Vmware who's coming at it from the hypervisor and now, as I said yesterday, try to do to networks and storage what it did for systems and then IBM, Red Hat coming at it really from the applications perspective and with a services view. Microsoft, with a foot in both camps. You got Oracle in it's little niche. It's just a really interesting. >> Well, you've got an installed base that's moving into the cloud. You got net new companies that are going to be started. Might have on prem gone full cloud, this is the question that everyone's going to ask. I think Cisco can take their existing base with moving packets from point A to B and storing and making data more intelligence. Moving data around is a big networking phenomenon. >> Here's the question; Andy Jassy would say, "We believe there are going to be far fewer data centers in the future," that most data is going to live in the public cloud. The likes of Mike Liddle, Charlie Robbins, et cetera, I think they see the world as a hybrid world. That there's going to be more data that's in a hybrid, on prem plus cloud then is going to be in the public. >> I love Andy Jassy but I'll just say, first of all and I'm saying this biased on his perspective and I think he's right at one level. Why wouldn't Amazon see people moving data centers to the cloud? I get that. I say that it's going to be in the networks. That's where the action will be. Where are the networks, are the networks in the cloud, are the networks on premise, are the networks on a phone, IOT? So, you see IOT and Edge coming together, if it's all one network, then you're going to have the values going to be in the network, not necessarily the clouds per say or in shared value. >> You talk about Edge computing and IOT, Cisco's got Meraki which is going strong. SD Wan is a critical component in this multicloud piece. They're really posed to drive this next generation of 5G, not something we've dug into a lot yet but it is finally coming really soon here and Cisco has a lot of those pieces to be able to hit the next wave. >> It always comes back to the data, in my opinion, and the leverage point for data are sass. If you own the applications business or you're doing well there, you're in a good position. All the data's running over Cisco networks so that puts them in a really good position and as we know the likes of AWS and Microsoft, Alibaba, et cetera. They are trying to get as much data into their cloud as possible. >> And what I loved yesterday in the keynote is data was actually one of the central components that they talked about which the Cisco I know of 10 or 20 years ago, that was just bits that ran over our pipes. So they understand the value of data and their drive into that market. >> Well, we've been saying on the Cube now for nine years. Data's at the center of the value proposition. Data at the center, value proposition, this is actually happening. We see a lot of growth in cloud. Dave, good commentary. Stu, well done. We're going to have Sasha Gupta, all the leaders coming on the Cube here from Cisco. We'll breakdown and we're going to ask them the tough questions. Stay with us for day two coverage here in the Cube. Live in Barcelona, I'm John Ferrier, Stu Miniman, Dave Vellante breaking down all the action. We'll be right back with more after this short break. (light techno music)

(instrumental music) >> Hi everybody, this is Dave Velante. Welcome to the special wikibon community event. VMware, VMworld 2018, strong momentum but still choppy waters. How can you say that Dave? How can you say strong momentum but still choppy waters? The data center is on fire. We just came back from VMworld 2018, the eco system is exploding, revenues are up, profits are up, all looks good. Well we agree in general, but theCUBE was there. We had two sets. We interviewed over 100 guests. 75 segments on theCUBE and right now what we want to do in this special community event is share with you our community and hear from you what you thought of the event, what we thought of the event and let's collaborate and come up with some conclusions. So, what were the key points made on theCUBE by Michael Dell, Pat Kellsinger, Ray Ofarell, Andy Bechtelshtein and number of other folks, customers, practitioners, technologists and eco system partners on theCUBE? What did they say and what does it mean for users? AWS and VMware, a big theme on theCUBE last week was is the AWS VMware partnership a one way trip to the Hotel Cloudifornia or is it a boon for the data center? What about AWS with RDS, the data base, on prim, what does that mean? How effective will that be? What does it say about AWS's strategy and what does it mean for VMware and the eco system? What's VMware's play at the edge? What about containers? Containers are supposedly going to kill VMware or hurt VMware's momentum. What does the community think about that? And what about Dell's new capital structure? Dell is going public again. It's taking an 11 billion dollar dividend out of VMware's 13 billion dollars of cash. Is that the best use of VMware's cash? And is VMware constrained in terms of it's RND going forward? We're going to address these and other items with the following format. We're going to show you now highlights from VMworld 2018 from theCUBE and then we're going to come back in the crowd chat and discuss. So thanks for watching everybody. Take a look at these video clips and these statements from senior leaders and then we'll go into the crowd chat. >> Welcome back to theCUBE, I'm Lisa Martin with Dave Velante, John Furrier, Stu Miniman at the end of day two of our continuing coverage guys of VMworld 2018, huge event. 25,000 plus people here. 100,000 plus expected to be engaging with the on demand, the live experiences, our biggest show, right. 94 interviews in the next three days, two of them down. >> And evolving over the years. I mean at VMworld's core, it is a technical conference. Right, so I would say that the base of the volume of the program is still catered towards a real hands on, technical practitioner and middle management but we are seeing more business executives come. They want to know what their teams are exploring. They want to understand vision and I think VMware you know, value proposition to enterprises is growing and therefore, it's starting to be more of a business conversation. So that is a segment of the audience that is growing. >> A few questions, I think first of all the Amazon news is already on VMware on premises is earth shattering news at many levels. One, Amazon's never done it before. Two, I think people are starting to understand this downstream a little bit later. But it's going to have a significant impact on the opportunities in multi cloud. So, I think Amazon's relationship with VMware is very deep at the level of technology and stay cold is at the top of both companies. Andy Jaci and Pat Gelsinger are both in this to win it together. It's obvious and anyone who says otherwise really isn't really informed. They're deep in the technical side, they have management at the top approving this, they're going to market together in the field. There is a legit synergy and they're going to win the long game. Gelsinger's making the big bet and remember, three years ago Pat Gelsinger was the gun. What's his role going to be? People were nervous about their cloud. Look it, VMware boxed the cloud and they're kicking ass right now with cloud. So they made the right moves. They steered the ship away from the rocks, they're out in the clear sailing. Love their strategy, Keno with Gelsinger was very specifically around the generational shift around VMware and the industry. He went through the bridging and I love the cleverness of the story telling, bridging tech trends of VMware ethos. He talked about the history, servers ESX, BYOD workspace, network NSX, cloud migration, that was their kind of initial private cloud, but right now its multi cloud and profit and people doing tech for good. So I think Gelsinger's laying down the generational shift that Vmware's going for and their making the huge bet on AWS, so it makes the question. What about Asher, what about Google? Is VMware going to be a one cloud game? Are they going to bridge to other clouds? That's going to be a very interesting tell sign 'cause the relationship on stage with Andy Jaci in fact Gelsinger is pretty significant. I think it's going to be a hard thing to go in to other clouds and say, I want to dig you too. >> Last year Pat said that networking has the potential to be the next decade bigger than what virtualization was for the wave and we are seeing good movement. I think I said it on our intro this morning but when Asira was acquired, the promise that we as a networking industry felt that they could be that inter weaving kind of glue for multi cloud and it kind of got hidden for a few years while they built that intersect, they made it really enterprise ready. They did really well with adoption. But now that vision is kind of back in full and that is what VMware can ride. Not to just be virtualization. V spheres great, they'll drive that for awhile, but the networking and security pieces is why VMware has the right to sit at the table in this multi cloud discussion. Now it was funny, I interviewed Keith Townsen and he said VMware, you know, he's now a VMware employee, VMware is the best position to help customers do that transformation. I said, hey Keith, I hear ya, but Microsoft and Amazon and a whole bunch of other management people might kind of step up and say, we've got a right to be at the table too. >> Of course all the legacy guys are trying to figure out, okay, their cloud strategies. But now all the major cloud guys are betting on Prim. We saw Google next, the on Prim strategy was certainly Assure with Assure Stack. Oracle has bets in cloud and with cloud customers got bets for On Prem. Now AWS throws its Admuring. James Kobielus, you sat in the analyst sessions all day. What did you learn? What were your big take aways? What do we need to know? >> Well first of all it's clear that AWS partnership VMware's all in with them. Look at the past year since they announced the customer adoption, partner enablement. They share variety and depth of the integrations that these partners have put together including today. It's pretty serious in terms of VMware's investment in that relationship, deepening that to the point where, there are no splashy Google partnership announcements or IBM or anybody else. It's clear that they're really, they're each others hybrid cloud partner par excolons. I don't think either of them, or I don't think the VMware is going to go anywhere near as deep with the other public club providers any time soon. But really my take away today from the analysis session was that VMware is going seriously to the edge and it's really interesting, they're building an appliance to take their entire stack and bring it down to edge deployment and distribute that around and then manage that for customer on a global basis with automation, there's going to be AI and machine learning built in so that if VMware will be able as a managed service to drive the software defined data center all the way out to the edges for its clients. And they're putting themselves in a position where they could actually, that could be there next major revenue producing business. As the traditional hypervisor VMworld begins to wane in terms of putting cube and server less and so forth on an appliance. Putting that in the clients sight and managing it for them. And then white boxing it potentially to other cloud providers to provide to their customers. This could be in the future coming in the next year or two. Something that can propel VMware to the next stage where they are everybody's preferred multi cloud management, edge management partner. >> Provide a slightly different version of one of the things you said. I definitely agree. I think what VMware hopes to do, I think they're not alone is to have AWS look like an appliance to their console, to have Assure look like an appliance to their console. So through free VMware, you can get access to whatever services you need including your VMware machines your VM's inside those clouds but that increasingly their goal is to be that control point, that management point for all of these different resources that are building and it is very compelling. I think that there's one area that I still think we need more from. As analysts we always got to look through what's more required. And I hear what you say about broad dimensions but I think that the edge story still requires a fair amount of work. >> Oh yeah. >> It's a project in place, but that's going to be an increasingly important focus of how architectures get laid out, how people think about applications in the future, how design happens, how methodologies for building software works. David, what do you think? When you look out, what is more is needed for you? >> So I think there are two things that give me a small concern. The edge, that's a long term view. So they have a lot of time to get that right. But the edge view is very much an IT view top down. And they are looking to put into place everything that they think the OT people should fit in with. I think that is personally not going to be a winning strategy. You have to take it from the bottom up. The world is going to go towards devices, very rich devices and sensors, lots of software, right on that device, the inference work on those devices. And the job of IT will be to integrate those devices. It won't be those devices taking on the standards of IT. It will be IT that has to shape itself to look after all those devices there. So that's the main viewpoint I think that needs adjustment and it will come I'm sure over time. >> But as you said, there's a lot of computer science, it's going to be an enormous amount of new partnerships are going to be fabricated. >> Exactly. >> Once you make this happen... >> I want to see the road map for Kuhernettys and server less. Last year they made an announcement of a server less project, I forgot what the code name is. Didn't hear a whole lot about it this year but they're going up the app stack. They got a coop distribution. They need a developer story. I mean developers are building functional apps and so forth. And they're also containerized. They need developer story and they need a server less story and they need to bring us up to speed on where they're going in that regard, because AWS, they're predominant partner, I mean they've got LAM dysfunctions and all that stuff. That's the development platform of the present and future and I'm not hearing an intersection of that story with VMware's story yet. >> Actually before VMware's was server installation it was work station. >> Work station, that's right. >> And we were an investor of VMware and we thought that was cool. Anyway, so fast forward to 2013, we go private. 2014, Joe Tuchi and I restart the discussion that we'd had earlier back in 2009 about combining together. 2015 we announced it and we thought that if we could combine everything together, that customers would really like it. And thankfully, as we found that that's been true, it's been more true then we thought. And the innovation engines are cranking on high. 12.8 billion dollars in RND invested in the last three years. And you see here at VMworld and in Dell technologies world the strength of the road maps. And so every turn of the crank, we're just getting stronger and stronger. We never believed that everything was going to go one place or the other. It's actually great that the edge is booming. Now if you said, did you know that five or ten years ago? No, I didn't really know, but you can kind of see some things starting to happen. But look, distributed computing will be even more distributed in the future. >> For your commentary, people at the convention of wisdom on that deal was it was a one way trip to the Hotel Cloudifornia and it's become a boon for the data center. Why the misconceptions? Why are you confident that it continues to be a boon for both companies? >> Yeah, and hey we got to go prove it. At the end of the day we have to go prove it. So, but the analysts were sort of viewing hey, there's this big sucking sound in the public cloud where everything congregates. You know point one, and three years ago that was the prevailing wisdom. Right, so that was going to be the case. Now everybody, you know, and like I had the big CIO who basically said, hey I've got 200 apps. I tried to move them to the public cloud. I got two done. I can build new things there, but this moving was really hard until we had the VMC service. So this ability to move things to the cloud and from the cloud, I call the three laws. The laws of physics, the laws of economics and the laws of the land. The laws of physics, hey if need 500 millisecond round trip to the cloud and the robotic arm needs a decision in 200 milliseconds. You know physics, economics. I'm not going to send every surveillance picture of the cat to the cloud. Ban would still cost, right. And then laws of the land right, where people say, government issues, GDPR, other things. So because of that we see this hybrid world and particularly as edge and IOT becomes more prominent, we fully expect that there's going to be more of that not less and as I showed in my key note last year, this pendulum of centralization and decentralization has been swinging through the industry for 40 years and we don't see that stopping and Edge will be a force of more data and compute pushing to the edge and that's obviously part of our key note as well. >> Yeah John, you know, we sat here analyzing this VMware AWS relationship. Is this a one way move to the public cloud? Is Amazon just going to take those 500,000 VMware customers and get them all to migrate? Even in the start of Andy and Pat up on stage you know, Andy goes, the number on use case is migrating our applications to the public cloud and Pat's like, and the number two use case is you know, bursting and on demand and things like that. So it's an interesting dynamic between what we call, you know, you got the gorilla in the data center of VMware and you've got the 800 pound gorilla in the cloud. Fast as the cheetah as Dave Velante says in AWS. But RDS on premises, this is a big deal. I tell you, I'm surprised, most people here are surprised with the discussion. We were at some shows recently when they're spanning the snowball use case. Snowballs great, it's edge, it's helping to migrate things to the data center. This is an Amazon service running into VMware on premise. Didn't think that we would be seeing this from Amazon who's goal was, we thought to get 100 percent of things in the public lap. >> Decisions on cloud. Okay, Andy Jaci comes on stage. You're personally involved with Andy on the Amazon analysis which is, I think people don't know how big that's going to be. But VMware and Amazon are seriously deep in a partnership. This is a big deal. This feels like a little wind tail kind of easy synergies across the board. >> Well you know, in some ways we'll say number one in public coming together with number one in private. That's a big deal. And you know, yesterday's announcement of RDS on premise to me sort of finishes this strategic picture that we were trying to paint where it really is a hybrid world, where we're taking workloads and giving people the access to this phenomenal rapidly growing public cloud. But we're also demonstrating that we can seamlessly connect to the private cloud and now we're bringing services back from the public cloud onto the private and neuron data center. And that's so profound because now customers can say, oh, I like the RDS API. I like the RDS management model. I can put the data wherever I need it for my business purposes and that hybrid bi directional highway is something that we're uniquely building with Amazon and hey, obviously we're working with other cloud providers. But they're our preferred partner and we're pretty thrilled. >> How are customers going to deal with the multiple clouds? I mean is there an infra ability framework coming? Do you see a real disruptive technology enable that'll have that kind of impact that TCP spawn massive opportunity and wealth creation and start ups and functionality? Is there a moment coming? >> So, TCP of course was the proper layering of an interact between the physical layer, you know layer one, layer two and the routing or the internet layer was just layer three. And without that, you know, this is back to the old internal argument, we wouldn't have what we have today on the internet. That was the only rational way to build a architecture that would actually. And I'm not sure if people had a notion in 1979 when TCP was started, that it would become that big. They probably would of picked a bigger adverspace if they had known. But it was, not just a longevity but the impact it had was just phenomenal, right. Now and that applied in terms of connectivity and how many things shift to interact between point a to point b. The NSX level of network management is a little different because it's much higher level. It's really a management plan, back to the point I made earlier about management plans, that allows you to integrate a cloud on your premise with one of Amazon or IBM or the future Google and so on in a way that you can have full visibility and you see, you know exactly what's going on, all the security policies. But this has been a dream for people to deliver but it requires to actually have a reasonable amount of cold in each of these places, both on user. It's not just a protocol, it's an implementation of accountability right. And VMware is the best solution that's available and I can see for that use case which is going to be very important to a large number of enterprises, many of which will want to have a small connection between on premise and off premise and in the future, to Edge, Telcol, and other things that will run a VM environment today but that will allow them to be fully securely linked >> I think, so we are seeing lots of customer energy around what we're doing in storage. There's huge momentum behind product like Vsend and our customers are truly embracing ACI in very mainstream use cases and we've seen customer after customer have gone all in meaning they're taking ACI and made a determination to run that for all of their virtualized workload. It's a very exciting time. But what's more interesting is their expanded view on what ACI is about. You know, certainly, we started was virtualizing computer and storage together on servers. But we're seeing rapid expansion of that definition. You know, we've been believer that HCI is a software architecture. I think now there's more recognition that. And it's also going from just computer storage to the full stack of the entire software defined data center is expanding into the cloud as you see from VMCIWS. It's expanding to the edge, expanding from just traditional apps to cloud native apps. You know we've announced Beta 4, you know V send to become the storage platform for Cupernetis NEV sphere environment. So lots of exciting expansion around how customers want to see HCI and if you look at HCI, hybrid cloud, SDDC the boundary among these three is not very clear. I think they're all converging to work something that's very common. >> That's been proposed. Dell came out a while ago and sort of floated this idea of a reverse merger. Street puked all over it. And then all of a sudden they came up with this other idea of I called it the independence vig. Okay, VMware is having to pay a 11 billion dollar dividend. Nine billion of that is going to go to DVMT shareholders to clean that up. And you're going to get cash or prorata shares and the new Dell. Okay, so the question on the table is will that constrict VMware in anyway in terms of its ability to fund RND? My quick thoughts are short term no, long term, Dell has to walk a fine line between taking VMware cash, paying down it's debt and funding the future. Your thoughts. >> Yes, so here are my thoughts on this. So, I think that, first let's explain to the people what you just talked about, I'll translate. What you described is Michael Dell's going private, 60 billion dollars. That number was debt deal he did to buy Dell DMC so he has all this debt. Debt is like heroin, you get addicted to it, hard to get straight from that. So you gotta pay down the debt. He's been knockin' down the debt and big bag of money called Vmware's sitting there. As long as Vmware's thrown off cash flow that's going to be a key consideration. So, the independent vig as long as this cash flow's coming in, I think is fine. It's not going to really hurt it. But I think Dell's been brilliant in this because he's been essentially land grabbing the computer industry on the infrastructure side and he's going to make more money than ever before. He's going to pull it off and the only thing that could hurt him is either some side of force major or downturn or revenue not coming in from the sources whether either it's a public offering, acquisitions he's trying to sell off, and or VMware sputters which I don't think it will. Now with VM is on, even if they just go all in on Amazon and pull off all the other clouds, they'll still make a boat load of cash. >> I think it goes down in history as one of the greatest trades ever. I mean it's just phenomenal. >> Look, I mean Dave, we talked about when EMC bought VMware it was one of the greatest acquisitions of all time. >> 635 million. >> Right but. >> Now it's 60 billion value evaluation. >> Dell buying EMC, most people were like, I'm not sure what's going to happen but Michael will make a lot of money. VMware is doing so well that they can now fund Dell going public again based on this deal. So it's been one of those fascinating financial orchestration pieces to be out there. >> You ever feel constrained writing an 11 billion dollar dividend? Do you ever feel constrained in terms of your ability to fund the RND necessary to do some of those things? >> No. >> Rio said the same thing off camera but I ask you on camera. >> Yeah, generally I mean, am I constrained at how much RND I can do? Well hey, I've got a budget, we build a PNL, we communicate it to the street and everyday possible I'm pushing the growth of business faster so I can shove more dollars into one of two places. More dollars into RND or more dollars into sales and customer facing. Right and if Robin Matlock is here, I keep giving her the table scraps at the end of those things. But build products that are innovated, radical and break through. Sell products and support our customers using them. That's the two thing... >> And I think it's a really interesting point that after a lot of conversations with a lot of folks saying AWS is all going to go up to the cloud and wondering whether that also is a one way street for VMware customers. But now we're seeing it's much more of a bilateral relationship. >> It's moving it to the right place. And that's the second thing. The embracing of multi cloud by everybody. One cloud is not going to do everything. There's going to be fast clouds, there's going to be multiple places where people are going to put certain workloads because that's the best strategic fit for it. And the acceptance in the market place that that is where it's going to go. I think that gain is a major change. The hybrid cloud and multi cloud environments. And then the third thing is I think the richness of the eco system is amazing. The going on the floor and the number of people that have come to talk to us with new ideas really fascinating ideas is something I haven't seen at all for the last three, four years. >> Alright, we've heard from some of our guests on theCUBE and you've heard our teams initial analysis of the news from VMworld. Now we want to hear from you. Please hop into the crowd chat below, give us your feedback, want a community discussion and let's hear about what everybody thinks about VMware and VMworld 2018. Once again, thanks so much for joining us and look forward to the conversation.

(electronic music) >> Narrator: From the SiliconANGLE Media office in Boston Massachusetts, it's the CUBE. Now here are your hosts, Dave Vellante and Stu Miniman. >> Cloud is dead, it's all going to the edge. Or is it? Hi everybody, this is Dave Vellante and I'm here with Stu Miniman. Stu, where does this come from, this narrative that the cloud is over? >> Well Dave, you know, clouds had a good run, right? It's been over a decade. You know, Amazon's dominance in the marketplace but Peter Levine from Andreessen Horowitz did an article where he said, cloud is dead, the edge is killing the dead. The Edge is killing the cloud and really we're talking about IoT and IoT's huge opportunity. Wikibon, Dave we've been tracking for many years. We did you know the original forecast for the Industrial Internet and obviously there's going to be lots more devices at the edge so huge opportunity, huge growth, intelligence all over the place. But in our viewpoint Dave, it doesn't mean that cloud goes away. You know, we've been talking about distributed architectures now for a long time. The cloud is really at the core of this building services that surround the globe, live in just hundreds of places for all these companies so it's nuanced. And just as the cloud didn't overnight kill the data center and lots of discussion as to what lives in the data center, the edge does not kill the cloud and it's really, we're seeing some major transitions pull and push from some of these technologies. A lot of challenges and lots to dig into. >> So I've read Peter Levine's piece, I thought was very thought-provoking and quite well done. And of course, he's coming at that from the standpoint of a venture capitalist, all right. Do I want to start you know, do I want to pour money into the trend that is now the mainstream? Or do I want to get ahead of it? So I think that's what that was all about but here's my question Stu is, in your opinion will the activity that occurs at the edge, will it actually drive more demand from the cloud? So today we're seeing the infrastructure, the service business is growing at what? Thirty five percent? Forty percent? >> Sure, sure. Amazon's growing at the you know, 35 to 40 percent. Google, Microsoft are growing double that right now but overall you're right. >> Yeah, okay and so, and then of course the enterprise players are flat if they're lucky. So my question is will the edge actually be a tailwind for the cloud, in your opinion? >> Yeah, so first on your comment there from an investment standpoint, totally can understand why edge is greenfield opportunity. Lots of different places that I can place bets and probably can win as opposed to if I think that today I'm going to compete against the hyperscale cloud guys. You know, they're pouring 10 billion dollars a year into their infrastructure. They have huge massive employment so the bar to entry is a lot higher. I'm sorry, the second piece was? >> So will the edge drive more demand for the cloud? >> Yeah, absolutely. I think it does Dave because you know, let's take something like autonomous vehicles. Something that we talk about. I need intelligence of the edge. I can't wait for some instruction to go back to the cloud before my Tesla plows into an individual. I need to know that it's there but the models themselves, really I've got all the compute in the cloud. This is where I'm going to train all of my models but I need to be able to update and push those to the edge. If I think about a lot of the industrial applications. Flying a plane is, you know, things need to happen locally but all the anomalies and new things that we run into there's certain pieces that need to be updated to the cloud. So you know, it's kind of a multi-layer. If we look at how much data will there be at the edge, well there's probably going to be more data at the edge than there will be in the central cloud. But how much activity, how much compute do I need, how much things do I need to actually work on. The cloud is probably going to be that central computer still and it's not just a computer, as I said, a distributed architecture. That's where, you know. When we've looked at big data in the early days Dave, when we can put those data lines in the cloud. I've got thousands or millions of compute cycles that I can throw at this at such a lower price and use that there as opposed to at the edge especially. What kind of connectivity do I have? Am i isolated from those other pieces? If you go back to my premise of we're building distributed architectures, the edge is still very early. How do I make sure I secure that? Do I have the network? There's lots of things that I'm going to build in a tiny little component and have that be there. And there's lots of hardware innovation going on at that edge too. >> Okay, so let's talk about how this plays out a little bit and you're talking about a distributed model and it's really to me a distributed data model. The research analysts at Wikibon have envisioned this three-tier data model where you've got data at the edge, which you may or may not persist. You've got some kind of consolidation or aggregation layer where it's you know, it's kind of between the edge and the deep data center and then you've got the cloud. Now that cloud can be an on-prem cloud or it could be the public cloud. So that data model, how do you see that playing out with regard to the adoption of cloud, the morphing of cloud and the edge and the traditional data center? >> Yeah we've been talking about intelligent devices at the edge for a couple decades now. I mean, I remember I built a house in like 1999 and the smart home was already something that people were talking about then. Today, great, I've got you know. I've got my Nest if I have, I probably have smart assistants. There's a lot of things I love-- >> Alexa. >> Saw on Twitter today, somebody's talking like I'm waiting for my light bulbs to update their firmware from the latest push so, some of its coming but it's just this slow gradual adoption. So there's the consumer piece and then there's the business aspect. So, you know, we are still really really early in some of these exciting edge uses. Talk about the enterprise. They're all working on their strategy for how devices and how they're going to work through IoT but you know this is not something that's going to happen overnight. It's they're figuring out their partnerships, they're figuring out where they work, and that three-tiered model that you talked about. My cloud provider, absolutely hugely important for how I do that and I really see it Dave, not as an or but it's an and. So I need to understand where I collect my data, where it's at certain aspects are going to live, and the public cloud players are spending a lot of time working on on that intelligence, the intelligence layer. >> And Stu, I should mention, so far we're talking about really, the infrastructure as a service layer comprises database and middleware. We haven't really addressed the the SAS space and we're not going to go deep into that but just to say. I mean look, packaged software as we knew it is dead, right? SAS is where all the action is. It's the highest growth area, it's the highest value area, so we'll cover that in another segment. So we're really talking about that, the stack up to the middleware, the database, and obviously the infrastructures as a service. So when you think about the players here, let's start with AWS. You've been to I think, every AWS re:Invent maybe, with the exception of one. You've seen the evolution. I was just down in D.C. the other day and they have this chart on the wall, which is their releases, their functional releases by year. It's just, it's overwhelming what they've done. So they're obviously the leader. I saw a recent Gartner Magic Quadrant. It looked like, I tweeted it, it looked like Ronnie Turcotte looking back on Secretariat from the Belmont and whatever it was. 1978, I think it was. (laughs) 31 lengths. I mean, massive domination in the infrastructure as a service space. What do you see going on? >> Yeah so, Dave, absolutely. Today the cloud is, it's Amazon's market out there. Interestingly if you say, okay what's some of the biggest threats in the infrastructure as a service? Well, maybe China, Dave. You know, Alibaba was one that you look at there. But huge opportunity for what's happened at the edge. If you talk about intelligence, you talk about AI, talk about machine learning. Google is actually the company that most people will talk about it, can kind of have a leadership. Heck, I've even seen discussion that maybe we need antitrust to look at Google because they're going to lock things up. You know, they have Android, they have Google Home, they have all these various pieces. But we know Dave, they are far behind Amazon in the public cloud market and Amazon has done a lot, especially over the last two years. You're right, I've been to every Amazon re:Invent except for the first one and the last two years, really seen a maturation of that growth. Not just you know, devices and partnerships there but how do they bring their intelligence and push that out to the edge so things like their serverless technology, which is Lambda. They have Lambda Greengrass that can put to the edge. The serverless is pervading all of their solutions. They've got like the Aurora database-- >> And serverless is profound, not just that from the standpoint of application development but just an entire new business model is emerging on top of serverless and Lambda really started all that but but carry on. >> Yeah and when you look in and you say okay, what better use case than IoT for, well I need infrastructure but I only need it when I need it and I want to call it for when it's there. So that kind of model where I should be able to build by the microsecond and only use what I need. That's something that Amazon is at the forefront, clear leadership position there and they should be able to plug in and if they can extend that out to the edge, starting new partnerships. Like the VMware partnerships, interesting. Red Hat's another partnership they have with OpenShift to be able to get that out to more environments and Amazon has a tremendous ecosystem out there and absolutely is on their radar as to how their-- >> They're crushing it So we were at Google Next last year. Big push, verbally anyway, to the enterprise. They've been making some progress, they're hiring a lot of people out of formerly Cisco, EMC, folks that understand the enterprise but beyond sort of the AI and sort of data analytics, what kind of progress has Google made relative to the leader? >> So in general, enterprise infrastructure service, they haven't made as much progress as most of us watching would expect them to make. But Dave, you mentioned something, data. I mean, at the center of everything we're talking about is the data. So in some ways is Google you know, come on Google, they're smarter than the rest of us. They're skating to where the puck is Dave and infrastructure services, last decades argument if it's the data and the intelligence, Google's got just brilliant people. They're working at the some of these amazing environments. You look at things like Google's Spanner. This is distributed architecture. Say how do I plug in all of these devices and help the work in a distributed gradual work well. You know, heck, I'd be reading the whitepapers that Google's doing in understanding that they might be really well positioned in this 3D chess match that were playing. >> Your eyes might bleed. (laughs) I've read the Google Spanner, I was very excited about it. Understood, you know, a little bit of it. Okay, let's talk about Microsoft. They're really of the big cloud guys. They're really the one that has a partnership strategy to do both on-prem and public cloud. What are your thoughts on that now that sort of Azure stack is starting to roll out with some key partners? >> Yeah absolutely, it's the one that you know. Dave, if you use your analogy looking back, it's like well the next one, it's gaining a little bit, gaining a little bit but still far back. There is Microsoft. Where Microsoft has done best of course is their portfolio of business applications that they have. That they've really turned the green light on for enterprises to adopt SAS with Office 365. Azure stack, it's early days still but companies that use Microsoft, they trust Microsoft. Microsoft's done phenomenal working with developers over the last couple of years. Very prominent like the Kubernetes shows that I've been attending recently. They've absolutely got a play for serverless that we were talking about. I'm not as up to speed as to where Microsoft sits for kind of the IoT edge discussions. >> But you know they're playing there. >> Yeah, absolutely. I mean, Microsoft does identity better than anyone. Active Directory is still the standard in enterprises today. So you know, I worry that Microsoft could be caught in the middle. If Google's making the play for what's next, Microsoft is still chasing a little bit what Amazon's already winning. >> Okay and then we don't have enough time to really talk about China, you mentioned it before. Alibaba's you know, legit. Tencent, Baidu obviously with their captive market in China, they're going to do a lot of business and they're going to move a lot of compute and storage and networking but maybe address that in another segment. I want to talk about the traditional enterprise players. Dell EMC, IBM, HPE, Cisco, where do they stand? We talk a lot at Wikibond about true private cloud. The notion that you can't just stick all your data into the public cloud. Andy Jassy may disagree with that but there are practical realities and certainly when you talk to CIOs they they underscore that. But that notion of true private cloud hasn't allowed these companies to really grow. Now of course IBM and Oracle, I didn't mention Oracle, have a different strategy and Oracle's strategy is even more different. So let's sort of run through them. Let's take the arms dealers. Dell EMC, HPE, Cisco, maybe you put Lenovo in there. What's their cloud strategy? >> Well first of all Dave I think most of them, they went through a number of bumps along the road trying to figure out what their cloud strategy is. Most of them, especially let's take, if you take the compute or server side of the business, they are suppliers to all the service providers trying to get into the hyperscalers. Most of them have, they all have some partnership with Microsoft. There's a Assure stack and they're saying, okay hey, if I want an HPE server in my own data center and in Azure, Microsoft's going to be happy to provide that for you. But David, it's not really competing against infrastructure as a service and the bigger question is as that market has kind of flattened out and we kind of understand it, where is the opportunity for them in IoT. We saw, you know Dave. Last five years or so, can I have a consumer business and an enterprise business in the same? HPE tore those two apart. Michael Dell has kept them together. IBM spun off to Lenovo everything that was on the more consumer side of the business. Where will they play or will companies like Google, like Apple, the ones that you know, Dave. They are spending huge amounts of money in chips. Look at Google and what they're doing with TP use. Look at Apple, I believe it was, there was an Israeli company that they bought and they're making chips there. There's a different need at the edge and sure, company like Dell can create that but will they have the margin, will they have the software, will they have the ecosystem to be able to compete there? Cisco, I haven't seen on the compute side, them going down that path but I was at Cisco Live and a big talk there. I really like the opening keynote and we had a sit down on the CUBE with the executive, it said really if I look out to like 2030. If Cisco still successful and we're thinking about them, we don't think of them as a network company anymore. They are a software company and therefore, things like collaboration, things like how it's kind of a new version of networking that's not on ports and boxes. But really as I think about my data, think about my privacy and security, Cisco absolutely has a play there. They've done some very large acquisitions in that space and they've got some deep expertise there. >> But again, Dell, HPE, Cisco, predominantly arms dealers. Obviously don't have, HPE at one point had a public cloud, they've pulled back. HP's cloud play really is cloud technology partners that they acquire. That at least gives them a revenue stream into the cloud. Now maybe-- >> But it's a consultancy. >> It's a consultancy, maybe it's a one-way trip to the cloud but I will say this about CTP. What it does is it gives HPE a footprint in that business and to the extent that they're a trusted service provider for companies trying to move into the cloud. They can maybe be in the catbird seat for the on-prem business but again, largely an arms dealer. it's going to be a lower margin business certainly than IBM and Oracle, which have applications. They own their own public cloud with the Oracle public cloud and IBM cloud, formerly SoftLayer, which was a two billion dollar acquisition several years ago. So those companies from a participation standpoint, even a tiny market share is compared to Amazon, Google, and Microsoft. They're at least in that cloud game and they're somewhat insulated from that disruption because of their software business and their large install base. Okay, I want to sort of end with, sort of where we started. You know, the Peter Levine comment, cloud is dead, it's all going to the edge. I actually think the cloud era, it's kind of, it's here, we're kind of. It's kind of playing out as many of us had expected over the last five years. You know what blew me away? Is Alexa, who would have thought that Amazon would be a leader in this sort of natural language processing marketplace, right? You would have thought it would come from, certainly Google with all the the search capability. You would have thought Apple with Siri, you know compared to Alexa. So my point is Amazon is able to do that because it's got a data model. It's a data company, all these companies, including Apple, Google, Microsoft, Amazon, Facebook. The largest market cap companies in the world, they have data at the core. Data is foundational for those companies and that's why they are in such a good position to disrupt. So cloud, SAS, mobile, social, big data, to me still these are kind of the last 10 years. The next 10 years are going to be about AI, machine intelligence, deep learning, machine learning, cognitive. We're trying to even get the names right but it starts with the data. So let me put forth the premise and get your commentary. and tie it back in the cloud. So the innovation, in the next 10 years is going to come from data and to the extent that your data is not in silos, you're going to be in a much better position than if it is. Number two is your application of artificial intelligence, you know whatever term you want to use, machine intelligence, etc. Data plus AI, plus I'll bring it back to cloud, cloud economics. If you don't have those cloud economics then you're going to be at a disadvantage of innovation. So let's talk about what we mean by cloud economics. You're talking about the API economy, talking about global scale, always on. Very importantly something we've talked about for years, virtually zero marginal costs at volume, which you're never going to get on-prem because this creates a network effect. And the other thing it does from an innovation context, it attracts startups. Or startups saying, hey I want to build on-prem. No, they don't want to build in the cloud. So it's data plus artificial intelligence plus cloud economics that's going to drive innovation in the next ten years. What are your thoughts? >> Yeah Dave, absolutely. Something I've been saying for the last couple of years, we watched kind of the the customer flywheel that the public clouds have. Data is that next flywheel so companies that can capture that. You mentioned Amazon and Alexa, one of the reasons that Amazon can basically sell that as a loss is lots of those people, they're all Amazon Prime customers and they're ordering more things from Amazon and they're getting so much data that drive all of those other services. Where is Amazon going to threaten in the future? Everywhere. It is basically what they see. The thing we didn't discuss there Dave, you know I love your premise there, is it's technology plus people. What's going to happen with jobs? You and I did the sessions with Andy McAfee and Eril Brynjolfsson, it's racing with the machine. Where is, we know that people plus machines always beat so we spent the last five years talking about data scientist, the growth of developers and developers and the new king makers. So you know what are those new jobs, what are those new roles that are going to help build the solutions where people plus machine will win and what does that kind of next generation of workforce going to look like? >> Well I want to add to that Stu, I'm glad you brought that up. So a friend of mine David Michelle is just about to publish a new book called Seeing Digital. And in that book, I got an advance copy, in there he talks about companies that have data at their core and with human expertise around the data but if you think about the vast majority of companies, it's human expertise and the data is kind of bolted on. And the data lives in silos. Those companies are in a much more vulnerable position in terms of being disrupted, than the ones that have a data model that everybody has access to with human expertise around it. And so when you think about digital disruption, no industry is safe in my opinion, and every industry has kind of its unique attributes. You know, obviously publishing and books and music have disrupted very quickly. Insurance hasn't been disrupted, banking hasn't been disrupted, although blockchain it's probably going to affect that. So again, coming back to this tail-end premise is the next 10 years is going to be about that digital disruption. And it's real, it's not just a bunch of buzzwords, a cloud is obviously a key component, if not the key component of the underlying infrastructure with a lot of activity in terms of business models being built on top. All right Stu, thank you for your perspectives. Thanks for covering this. We will be looking for this video, the outputs, the clips from that. Thanks for watching everybody. This is Dave Vellante with Stu Miniman, we'll see you next time. (electronic music)