>> From theCUBE Studios in Palo Alto and Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. >> UiPath has had a long, strange trip to IPO. How so you ask? Well, the company was started in 2005. But it's culture, is akin to a frenetic startup. The firm shunned conventions and instead of focusing on a narrow geographic area to prove its product market fit before it started to grow, it aggressively launched international operations prior to reaching unicorn status. Well prior, when it had very little revenue, around a million dollars. Today, more than 60% of UiPath business is outside of the United States. Despite its headquarters being in New York city. There's more, according to recent SEC filings, UiPath total revenue grew 81% last year. But it's free cash flow, is actually positive, modestly. Wait, there's more. The company raised $750 million in a Series F in early February, at a whopping $35 billion valuation. Yet, the implied back of napkin valuation, based on the number of shares outstanding after the offering multiplied by the proposed maximum offering price per share yields evaluation of just under 26 billion. (Dave chuckling) And there's even more to this crazy story. Hello everyone, and welcome to this week's Wikibon CUBE Insights, Powered by ETR. In this Breaking Analysis we'll share our learnings, from sifting through hundreds of pages (paper rustling) of UiPath's red herring. So you didn't have to, we'll share our thoughts on its market, its competitive position and its outlook. Let's start with a question. Mark Roberge, is a venture capitalist. He's a managing director at Stage 2 Capital and he's also a teacher, a professor at the B-School in Harvard. One of his favorite questions that he asks his students and others, is what's the best way to grow a company? And he uses this chart to answer that question. On the vertical axis is customer retention and the horizontal axis is growth to growth rate and you can see he's got modest and awesome and so forth. Now, so I want to let you look at it for a second. What's the best path to growth? Of course you want to be in that green circle. Awesome retention of more than 90% and awesome growth but what's the best way to get there? Should you blitz scale and go for the double double, triple, triple blow it out and grow your go to market team on the horizontal axis or should be more careful and focus on nailing retention and then, and only then go for growth? What do you think? What do you think most VCs would say? What would you say? When you want to maybe run the table, capture the flag before your competitors could get there or would you want to take a more conservative approach? What would Daniel Dines say the CEO of UiPath? Again, I'll let you think about that for a second. Let's talk about UiPath. What did they do? Well, I shared at the top that the company shunned conventions and expanded internationally, very rapidly. Well before it hit escape velocity and they grew like crazy and it got out of control and he had to reign it in, plug some holes, but the growth didn't stop, go. So very clearly based on it's performance and reading through the S1, the company has great retention. It uses a metric called gross retention rate which is at 96 or 97%, very high. Says customers are sticking with it. So maybe that's the right formula go for growth and grow like crazy. Let chaos reign, then reign in the chaos as Andy Grove would say. Go fast horizontally, and you can go vertically. Let me tell you what I think Mark Roberge would say, he told me you can do that. But churn is the silent killer of SaaS companies and perhaps the better path is to nail product market fit. And then your retention metrics, before you go into hyperbolic growth mode. There's all science behind this, which may be antithetical to the way many investors want to roll the dice and go for super growth, like go fast or die. Well, it worked for UiPath you might say, right. Well, no. And this is where the story gets even more interesting and long and strange for UiPath. As we shared earlier, UiPath was founded in 2005 out of Bucharest Romania. The company actually started as a software outsourcing startup. It called the company, DeskOver and it built automation libraries and SDKs for companies like Microsoft, IBM and Google and others. It also built automation scripts and developed importantly computer vision technology which became part of its secret sauce. In December 2015, DeskOver changed its name to UiPath and became a Delaware Corp and moved its headquarters to New York City a couple of years later. So our belief is that UiPath actually took the preferred path of Mark Roberge, five ticks North, then five more East. They slow-cooked for the better part of 10 years trying to figure out what market to serve. And they spent that decade figuring out their product market fit. And then they threw gas in the fire. Pretty crazy. All right, let's take a peak (chuckling) at the takeaways from the UiPath S1 the numbers are impressive. 580 million ARR with 65% growth. That asterisk is there because like you, we thought ARR stood for annual recurring revenue. It really stands for annualized renewal run rate. annualized renewal run rate is a metric that is one of UiPath's internal KPIs and are likely communicate that publicly over time. We'll explain that further in a moment. UiPath has a very solid customer base. Nearly 8,000, I've interviewed many of them. They're extremely happy. They have very high retention. They get great penetration into the fortune 500, around 63% of the fortune 500 has UiPath. Most of UiPath business around 70% comes from existing customers. I always say you're going to get more money out of existing customers than new customers but everybody's trying to go out and get new customers. But UiPath I think is taking a really interesting approach. It's their land and expand and they didn't invent that term but I'll come back to that. It kind of reminds me of the early days of Tableau. Actually I think Tableau is an interesting example. Like UiPath, Tableau started out as pretty much a point tool and it had, but it had very passionate customers. It was solving problems. It was simplifying things. And it would have bid into a company and grow and grow. Now the market fundamentals for UiPath are very good. Automation is super hot right now. And the pandemic has created an automation mandate to date and I'll share some data there as well. UiPath is a leader. I'm going to show you the Gartner Magic Quadrant for RPA. That's kind of a good little snapshot. UiPath pegs it's TAM at 60 billion dollars based on some bottoms up calculations and some data from Bain. Pre-pandemic, we pegged it at over 30 billion and we felt that was conservative. Post-pandemic, we think the TAM is definitely higher because of that automation mandate, it's been accelerated. Now, according to the S1, UiPath is going to raise around 1.2 billion. And as we said, if that's an implied valuation that is lower than the Series F, so we suspect the Series F investors have some kind of ratchet in there. UiPath needed the cash from its Series F investors. So it took in 750 million in February and its balance sheet in the S1 shows about 474 million in cash and equivalent. So as I say, it needed that cash. UiPath has had significant expense reductions that we'll show you in some detail. And it's brought in some fresh talent to provide some adult supervision around 70% of its executive leadership team and outside directors came to the company after 2019 and the company's S1, it disclosed that it's independent accounting firm identified last year what it called the "material weakness in our internal controls over financial report relating to revenue recognition for the fiscal year ending 2018, caused by a lack of oversight and technical competence within the finance department". Now the company outlined the steps it took to remediate the problem, including hiring new talent. However, we said that last year, we felt UiPath wasn't quite ready to go public. So it really had to get its act together. It was not as we said at the time, the well-oiled machine, that we said was Snowflake under Mike Scarpelli's firm operating guidance. The guy's the operational guru, but we suspect the company wants to take advantage of this mock market. It's a good time to go public. It needs the cash to bolster its balance sheet. And the public offering is going to give it cache in a stronger competitive posture relative to its main new competitor, autumn newbie competitor Automation Anywhere and the big whales like Microsoft and others that aspire and are watching what UiPath is doing and saying, hey we want a piece of that action. Now, one other note, UiPath's CEO Daniel Dines owns 100% of the class B shares of the company and has a 35 to one voting power. So he controls the company, subject of course to his fiduciary responsibilities but if UiPath, let's say it gets in trouble financially, he has more latitude to do secondary offerings. And at the same time, it's insulated from activist shareholders taking over his company. So lots of detail in the S1 and we just wanted to give you some of those highlights. Here are the pretty graphs. If whoever wrote this F1 was a genius. It's just beautiful. As we said, ARR, annualized renewal run rate all it does is it annualizes the invoice amount from subscriptions in the maintenance portion of the revenue. In other words, the parts that are recurring revenue, it excludes revenue from support and perpetual license. Like one-time licenses and services is just kind of the UiPath's and maybe that's some sort of legacy there. It's future is that recurring revenue. So it's pretty similar to what we think of as ARR, but it's not exact. Lots of customers with a growing number of six and seven figure accounts and a dollar-based net retention of 145%. This figure represents the rate of net expansion of the UiPath ARR, from existing listing customers over a 12 month period. Translation. This says UiPath's existing customers are spending more with the company, land and expand and we'll share some data from ETR on that. And as you can see, the growth of 86% CAGR over the past nine quarters, very impressive. Let's talk about some of the fundamentals of UiPath's business. Here's some data from the Brookings Institute and the OECD that shows productivity statistics for the US. The smaller charts in the right are for Germany and Japan. And I've shared some similar data before the US showed in the middle there. Showed productivity improvements with the personal productivity boom in the mid to late 90s. And it spilled into the early 2000s. But since then you can see it's dropped off quite significantly. Germany and Japan are also under pressure as are most developed countries. China's labor productivity might show declines but it's level, is at level significantly higher than these countries, April 16th headline of the Wall Street Journal says that China's GDP grew 18% this quarter. So, we've talked about the snapback in post-COVID and the post-isolation economy, but these are kind of one time bounces. But anyway, the point is we're reaching the limits of what humans can do alone to solve some of the world's most pressing challenges. And automation is one key to shifting labor away from these more mundane tasks toward more productive and more important activities that can deliver lasting benefits. This according to UiPath, is its stated purpose to accelerate human achievement, big. And the market is ready to be automated, for the most part. Now the post-isolation economy is increasingly going to focus on automation to drive toward activity as we've discussed extensively, I got to share the RPA Magic Quadrant where nearly everyone's a winner, many people are of course happy. Many companies are happy, just to get into the Magic Quadrant. You can't just, you have to have certain criteria. So that's good. That's what I mean by everybody wins. We've reported extensively on UiPath and Automation Anywhere. Yeah, we think we might shuffle the deck a little bit on this picture. Maybe creating more separation between UiPath and Automation Anywhere and the rest. And from our advantage point, UiPath's IPO is going to either force Automation Anywhere to respond. And I don't know what its numbers are. I don't know if it's ready. I suspect it's not, we'd see that already but I bet you it's trying to get there. Or if they don't, UiPath is going to extend its lead even further, that would be our prediction. Now personally, I would have Pegasystems higher on the vertical. Of course they're not an IPO, RPA specialist, so I kind of get what Gartner is doing there but I think they're executing well. And I'd probably, in a broader context I'd probably maybe drop blue prism down a little bit, even though last year was a pretty good year for the company. And I would definitely have Microsoft looming larger up in the upper left as a challenger more than a visionary in my opinion, but look, Gartner does good work and its analysts are very deep into this stuff, deeper than I am. So I don't want to discount that. It's just how I see it. Let's bring in the ETR data and show some of the backup here. This is a candlestick chart that shows the components of net score, which is spending momentum, however, ETR goes out every quarter. Says you're spending more, you're spending less. They subtract the lesses from the mores and that's net score. It's more complicated than that, but that's that blue line that you see in the top and yes it's trending downward but it's still highly elevated. We'll talk about that. The market share is in the yellow line at the bottom there. That green represents the percentage of customers that are spending more and the reds are spending less or replacing. That gray is flat. And again, even though UiPath's net score is declining, it's that 61%, that's a very elevated score. Anything over 40% in our view is impressive. So it's, UiPath's been holding in the 60s and 70s percents over the past several years. That's very good. Now that yellow line market share, yes it dips a bit, but again it's nuanced. And this is because Microsoft is so pervasive in the data stat. It's got so many mentions that it tends to somewhat overwhelm and skew these curves. So let's break down net score a little bit. Here's another way to look at this data. This is a wheel chart we show this often it shows the components of net score and what's happening here is that bright red is defection. So look at it, it's very small that wouldn't be churn. It's tiny. Remember that it's churn is the killer for software companies. And so that forest green is existing customers spending more at 49%, that's big. That lime green is new customers. So again, it's from the S1, 70% of UiPath's revenue comes from existing customers. And this really kind of underscores that. Now here's more evidence in the ETR data in terms of land and expand. This is a snapshot from the January survey and it lines up UiPath next to its competitors. And it cuts the data just on those companies that are increasing spending. It's so that forest green that we saw earlier. So what we saw in Q1 was the pace of new customer acquisition for UiPath was decelerating from previous highs. But UiPath, it shows here is outpacing its competition in terms of increasing spend from existing customers. So we think that's really important. UiPath gets very high scores in terms of customer satisfaction. There's, I've talked to many in theCUBE. There's places on the web where we have customer ratings. And so you want to check that out, but it'll confirm that the churn is low, satisfaction is high. Yeah, they get dinged sometimes on pricing. They get dinged sometimes, lately on service cause they're growing so fast. So, maybe they've taken the eye off the ball in a couple of counts, but generally speaking clients are leaning in, they're investing heavily. They're creating centers of excellence around RPA and automation, and UiPath is very focused on that. Again, land and expand. Now here's further evidence that UiPath has a strong account presence, even in accounts where its competitors are presence. In the 149 shared accounts from the Q1 survey where UiPath, Automation Anywhere and Microsoft have a presence, UiPath's net score or spending velocity is not only highly elevated, it's relative momentum, is accelerating compared to last year. So there's some really good news in the numbers but some other things stood out in the S1 that are concerning or at least worth paying attention to. So we want to talk about that. Here is the income statement and look at the growth. The company was doing like 1 million dollars in 2015 like I said before. And when it started to expand internationally it surpassed 600 million last year. It's insane growth. And look at the gross profit. Gross margin is almost 90% because revenue grew so rapidly. And last year, its cost went down in some areas like its services, less travel was part of that. Now jump down to the net loss line. And normally you would expect a company growing at this rate to show a loss. The street wants growth and UiPath is losing money, but it's net loss went from 519 million, half a billion down to only 92 million. And that's because the operating expenses went way down. Now, again, typically a company growing at this rate would show corresponding increases in sales and marketing expense, R&D and even G&A but all three declined in the past 12 months. Now reading the notes, there was definitely some meaningful savings from no travel and canceled events. UiPath has great events around the world. In fact theCUBE, Knock Wood is going to be at its event in October, in Las Vegas at the Bellagio . So we're stoked for that. But, to drop expenses that precipitously with such high growth, is kind of strange. Go look at Snowflake's income statement. They're in hyper-growth as well. We like to compare it to Snowflake is a very well-run company and it's in hyper-growth mode, but it's sales and marketing and R&D and G&A expense lines. They're all growing along with that revenue. Now, perhaps they're growing at a slower rate. Perhaps the percent of revenue is declining as it should as they achieve operating leverage but they're not shrinking in absolute dollar terms as shown in the UiPath S1. So either UiPath has applied some magic automation mojo to it's business (chuckling). Like magic beans or magic grits with my cousin Vinny. Maybe it has found the Holy grail of operating leverage. It's a company that's all about automation or the company was running way too hot on the expense side and had a cut and clean up its income statement for the IPO and conserve some cash. Our guess is the latter but maybe there's a combination there. We'll give him the benefit of the doubt. And just to add a bit more to this long, strange trip. When have you seen an explosive growth company just about to go public, show positive cashflow? Maybe it's happened, but it's rare in the tech and software business these days. Again, go look at companies like Snowflake. They're not showing positive cashflow, not yet anyway. They're growing and trying to run the table. So you have to ask why is UiPath operating this way? And we think it's because they were so hot and burning cash that they had to reel things in a little bit and get ready to IPO. It's going to be really interesting to see how this stock reacts when it does IPO. So here's some things that we want you to pay attention to. We have to ask. Is this IPO, is it window dressing? Or did UiPath again uncover some new productivity and operating leverage model. I doubt there's anything radically new here. This company doesn't want to miss the window. So I think it said, okay, let's do this. Let's get ready for IPO. We got to cut expenses. It had a lot of good advisors. It surrounded itself with a new board. Extended that board, new management, and really want to take advantage of this because it needs the cash. In addition, it really does want to maintain its lead. It's got Automation Anywhere competing with it. It's got Microsoft looming large. And so it wants to continue to lead. It's made some really interesting acquisitions. It's got very strong vision as you saw in the Gartner Magic Quadrant and obviously it's executing well but it's really had to tighten things up. So we think it's used the IPO as a fortune forcing function to really get its house in order. Now, will the automation mandate sustain? We think it will. The forced match to digital worked, it was effective. It wasn't pleasant, but even in a downturn we think it will confer advantage to automation players and particularly companies like UiPath that have simplified automation in a big way and have done a great job of putting in training, great freemium model and has a culture that is really committed to the future of humankind. It sounds ambitious and crazy but talk to these people, you'll see it's true. Pricing, UiPath had to dramatically expand or did dramatically expand its portfolio and had to reprice everything. And I'm not so worried about that. I think it'll figure that pricing out for that portfolio expansion. My bigger concern is for SaaS companies in general. I don't like SaaS pricing that has been popularized by Workday and ServiceNow, and Salesforce and DocuSign and all these companies that essentially lock you in for a year or two and basically charge you upfront. It's really is a one-way street. You can't dial down. You can only dial up. It's not true Cloud pricing. You look at companies like Stripe and Datadog and Snowflake. It is true Cloud pricing. It's consumption pricing. I think the traditional SaaS pricing model is flawed. It's very unfairly weighted toward the vendors and I think it's going to change. Now, the reason we put cloud on the chart is because we think Cloud pricing is the right way to price. Let people dial up and dial down, let them cancel anytime and compete on the basis of your product excellence. And yeah, give them a price concession if they do lock in. But the starting point we think should be that flexibility, pay by the drink. Cancel anytime. I mentioned some companies that are doing that as well. If you look at the modern SaaS startups and the forward-thinking VCs they're really pushing their startups to this model. So we think over time that the term lock-in model is going to give way to true consumption-based pricing and at the clients option, allow them to lock-in for a better price, way better model. And UiPath's Cloud revenue today is minimal but over time, we think it's going to continue to grow that cloud. And we think it will force a rethink in pricing and in revenue recognition. So watch for that. How is the street going to react to Daniel Dines having basically full control of the company? Generally, we feel that that solid execution if UiPath can execute is going to outweigh those concerns. In fact, I'm very confident that it will. We'll see, I kind of like what the CEO says has enough mojo to say (chuckling) you know what, I'm not going to let what happened to for instance, EMC happen to me. You saw Michael Dell do that. You saw just this week they're spinning out VMware, he's maintaining his control. VMware Dell shareholders get get 40.44 shares for every Dell share they're holding. And who's the biggest shareholder? Michael Dell. So he's, you got two companies, one chairman. He's controlling the table. Michael Dell beat the great Icahn. Who beats Carl Icahn? Well, Michael Dell beats Carl Icahn. So Daniel Dines has looked at that and says, you know what? I'm not just going to give up my company. And the reason I like that with an if, is that we think will allow the company to focus more on the long-term. The if is, it's got to execute otherwise it's so much pressure and look, the bottom line is that UiPath has really favorable market momentum and fundamentals. But it is signing up for the 90 day short clock. The fact that the CEO has control again means they can look more long term and invest accordingly. Oftentimes that's easier said than done. It does come down to execution. So it is going to be fun to watch (chuckling). That's it for now, thanks to the community for your comments and insights and really always appreciate your feedback. Remember, I publish each week on Wikibon.com and siliconangle.com and these episodes are all available as podcasts. All you got to do is search for the Breaking Analysis podcast. You can always connect with me on Twitter @dvellante or email me at david.vellante@siliconangle.com or comment on my LinkedIn posts. And we'll see you in clubhouse. Follow me and get notified when we start a room, which we've been doing with John Furrier and Sarbjeet Johal and others. And we love to riff on these topics and don't forget, please check out etr.plus for all the survey action. This is Dave Vellante, for theCUBE Insights Powered by ETR. Be well everybody. And we'll see you next time. (gentle upbeat music)

>> Live from Orlando, Florida, it's theCUBE covering Cisco Live 2018, brought to you by Cisco, NetApp and theCUBE's ecosystem partnership. (upbeat techno music) >> Welcome back, I'm Stu Miniman and this is theCUBE's exclusive coverage of Cisco Live 2018 in Orlando, Florida. Happy to welcome to the program, first time guest David Arnette, who's a technical marketing engineer with NetApp. He's living in the heart of the show, which of course is The Knock. Thanks so much for joining us. >> Thanks, Stu, it's good to be here. >> All right, so Dave, first before we get into it, give us a little bit about your background, where were you based and what your role is. >> Well, I'm based in Research Triangle Park, which is NetApp's East Coast headquarters, were basically right across from Cisco's East Coast headquarters. >> So we all know the RTP, those of us that work in tech. >> Right, so my role, I'm a technical marketing engineer on the FlexPod solutions team, so I build systems in the lab and then validate them, and then document them, and publish them for our customers to use to build similar systems for themselves. >> Okay, if we go with all the TLAs, or the TME from RTP or any in the NOC. (laughs) >> That's correct. >> All right, so you are not responsible for the network here, so we're not >> That's correct. >> gonna ask you why the network went down for a few minutes, (laughs) and people are troubleshooting everything with that. >> Thanks, I appreciate that. >> Why don't you explain NetApp and your role at The Knock. >> Well, NetApp is a big sponsor of this conference and one of the ways we do that is that we supply storage systems for the Network Operations Data Center. There's a lot of systems that have to run in addition to the actual network in order to make everything run, and those systems require data center resources, so we bring servers and storage to run all of the services necessary. >> Okay, and luckily I'm sure, everything's running really smoothly, there's never any challenges, and that's why it's just this great glass thing that we look at as we walk by. >> It just magically appears like that, right? >> All right, so give us a little bit of insight. You've done this at a few shows. What kind of things do you run in? What are the stresses and strains? And how does the architecture hold up? >> Well, we started Wednesday of last week putting The Knock together, and of course the room here was completely empty. There's nothing here, the rigging is laying all over the floor, and we end up with delays just because things are in the way. We can't put our equipment where it needs to be, then the power gets pulled in. We had the racks in place and then waited an hour or two for power to come in, and then another couple hours for the network drop to arrive before we could get connected to the outside world. So, it's always kind of a challenging, there's a lot of moving parts in order to get this thing off the ground. >> It reminds me so much of you talk about customer environments. All right, how does day zero go? Well, things like we interviewed one of your colleagues talking about FlexPod, FlexPod conversion, hyper-converged infrastructures help simplify that initial rollout, and then it should also help once you're up and running. So once you've got The Knock up and running, what's your team working on? Are there knobs you've gotta adjust? Are there outside stresses that need to concern you? >> Well, I'm happy to say that the storage and the data center infrastructure is one of the most reliable parts of The Knock, right? Once we get it up and running, it's more about monitoring and management than anything else. I'm personally monitoring to make sure that we're not running out of storage capacity, to make sure that everything is still online, and make sure that basically everything is running as smoothly as it can be. >> Okay, are you doing any analytics on this? Do you have hero numbers that come out after the show? >> We do, we participate in the session on Thursday, The Knock round table session, and so we're collecting all of the, all of the numbers, how much capacity we're actually using, kinda what the performance envelope of the system is and so on. >> It's interesting, when we talk about customers and their deployment one of the biggest challenges is "Okay, I'm gonna deploy this. "How long am I gonna have it, "and when am I gonna run out of storage? "When am I gonna need to grow?" It's kind of a unique beast when we're here at a show like this cause you've got some ideas, but what if something's really popular or stresses and strains? How do you plan for that, and has anything ever come up that you have to worry about? >> Well, we've never actually hit the wall yet. We try to be very careful. We've actually provisioned a considerable amount more capacity than we need, and the system that we've deployed is an all-flash FAS, so it's got performance to spare. So we really try and avoid any of those problems up front. We have seen in the past issues where the cameras and recording and such generated more data than we expected, but it was not more than we could handle. We had planned ahead and made sure we have plenty of extra capacity. >> Oh trust me, this is our ninth year doing theCUBE. In some of the early days we were scrambling. Luckily we actually work with a lot of storage companies, (laughs) so sometimes there's spare drives or things that we can grab because, yeah, it's more and more data, the devices get larger megapixels, higher resolution. It's challenging to deal with things like video. >> Yeah, it is pretty challenging and of course every time we do this, there are and more cameras, not just the data they produce, but the actual items that are producing it, so things really can grow very quickly. >> Yeah Dave, there any interest, are they playing with IoT here that brings data back? >> Not so much, I mean the video recording is more just for general monitoring and security purposes. There is, there's not a whole lot of deeper level analysis going on like on the video or anything like that. As far as the rest of the systems, everything is constantly being monitored, and for pretty much every system that we run, at the end of the week we'll kinda produce some metrics around what we saw and where the challenges were. >> Okay, you said at the end of the show there's a round table to talk about it. What are the users looking for? What kind of things do they learn going to a session like that? >> Well, they're really interested in how it's possible to bring such a huge scale network into existence, especially in such a short period of time, right? So we talk a lot about the deployment, and how the wireless access points get spread all over, and how all the applications come up and come online, and then take advantage of the networks that we put in place. They're really interested in the deployment details, because they're doing the same things in their own shops, and they're looking for guidance on how the experts do it. >> Yeah, it's interesting. I remember I read a book once, they're like you can't teach a kid to ride a bike at a conference, but there are some interesting lessons (laughs) that we learn going through some of these deployments. Any interesting points over your time working with The Knock? >> Well, we built this system to be really highly reliable. That's key for the operation of the show, right? We just can't take any chances that it goes down. We've had some incidents where the wrong circuit breaker gets switched, and so we're left with a failed over situation, but because the system was designed to withstand those kind of failures, it's really nothing but a thing. We flip the power back on and make sure the other half comes back alive, and we're back in action. >> All right, yeah, definitely I'm sure people's running around a little bit trying to fix those-- >> Oh yeah, as soon as lights go dark, man, there's chickens in the hen house. >> All right, and it's something we people can walk by, and is there tours of it? Is it a big plexiglass thing? (mumbles) >> Yeah, there's a, The Knock is actually all of our data center equipment is out on the floor for everybody to see. Rotalis supplied an enclosure and the cooling equipment, so we can run it right there in the middle of the floor and still keep it at proper data center temperatures. It's there all the time for everybody to come look at, but then there are tours daily, starting at noon I think, every hour on the hour. There's a tour related to more specific technologies like the wireless, and the routing and switching, and then of course the data center. >> And the stuff you're not using, you're doing Bitcoin mining on that now? >> That's correct. (laughs) No actually, we do run some, we do run some, oh, I can't even think of the name of the application now. It's one of, it's like not SETI, but something similar, folding at home or something like that to really just kind of drive the systems a little harder, and run them at an operational pace, more like what a customer would see. We actually, in terms of the entire infrastructure, we are way over-provisioned in terms of compute capacity and stuff. So we have some room to do that, and that's always an interesting number at the end to produce how many projects we closed in a folding at home scenario. >> Okay, so you've got half a week to set it up. How much time do they give you to tear the whole thing down? >> About 24 hours. (laughs) Yeah, it goes down really quickly, it's remarkable. >> Yeah, it is something. If you've ever, people, if you've been involved in these events, it takes such a long time to set things up, but they usually are designed to break it down and get out of town, on to the next thing. >> Yeah, all of the, all the equipment is in racks, pre-racked. It arrives in the rack and we just connect up the patch panels between the racks, and when the time comes to go, we just power everything off and pull the cables and roll it back into the crate. >> Do you do similar things at other events? >> We don't do similar things at other events. Cisco Live is actually the only show I know of that actually runs the operations as a centerpiece of the show. It's really a remarkable thing. >> It is, the network is obviously pretty critical here. >> Yeah, the attendees expect a world-class experience right? And so, our job is really to make sure that happens. >> All right, Dave, wanna give you the final word. Key takeaways you have coming to events like this? >> Well, it's really kind of an honor and a privilege, right? NetApp is really proud to be a part of what Cisco has going on here. We've got a lot of synergies with our FlexPod program, and so it's really great to be here and be a part of this show, and really specifically to work on The Knock team where I can say I had a hand in making it a success. >> Dave Arnette, really appreciate you joining, giving us some insight into some of the inner workings that help everything going on here at the show. >> Thanks very much. >> All right, we'll be back with lots more coverage here at Cisco Live Orlando 2018. I'm Stu Miniman, and thanks so much for watching theCUBE. (upbeat techno music)

(techno music) >> Announcer: Live, from Washington, D.C., it's the Cube. Covering .conf2017 brought to you by Splunk. >> Well, welcome inside the Walter Washington Convention Center here. We're at Splunk .conf2017, Washington, D.C. the nation's capital rolling out its red carpet. For Splunk, first time ever the show's been here and certainly I know from the 7000 plus who are here, so far it's a big thumbs up. John Walls and Dave Velante, and we're joined as well by Brian Goldfarb, who is the Chief Marketing officer of Splunk. And Brian, good to see you this morning sir. >> Great to be here, thanks for having me. >> Yeah, I just, Dave and I were talking about the vibe here, it's always so positive right? Anytime you're around a Splunk event. But coming here, Washington, you've got great attendance I mean your take so far on what you're feeling and what you're seeing. >> It's been unbelievable, we're so blessed with customers and users that really love our products. And helping each other and bringing them all together creates an environment that's unlike anything I've ever seen in my entire career, and I've been in this industry for a long time, I've done a lot of shows. There's an electricity, the information sharing, the conversation, and you kind of see it everywhere you go. >> Well I mean you've, came from the biggest of all shows, right? With Sales Force but, whole different vibe here, I mean really intimate. I was saying off camera this is our seventh year with the Cube. And we were following Splunk, pre IPO. >> Brian: Right. >> Now you're a you know, 1.2 plus billion dollar company, so you have to change in a lot of ways, but you're trying to keep that culture of intimacy. How do you do that as a CMO and as an organization? >> I mean ultimately that's the biggest challenge, is when you grow from a show that's 500 people to a show that's over 7000, how do you keep the roots that, about what makes it great? And intimacy is exactly the right word. How do you capture that, how do you make that real? And for us, there's a couple things. You know, one is just information sharing. It's intimate when people are talking to other people about the great use cases and things they've done with our products. Because Splunk lets you do anything, and so, when customer A says, "Oh I used to, I do it this way." And customer B sees that, it's incredible and you see that through the sessions, we talked about this before. Like so much user generated content. The second thing is all these cool kind of off the beaten paths activities. We have a thing called Boss of the Sock, and Boss of the Knock, which are curated games effectively. Big massive multi-player games, where everyone gets in the room, it started yesterday evening at 7:30 pm, it wrapped just after midnight, and you walked in, and people were glued to their screens trying to win, it's capture the flag style. It was unbelievable. And things like that help us keep it intimate. >> Well there's a lot- there's a culture of fun too, I was saying, we were talking about in the open. You know the t-shirts, take the SH out of IT, (chuckles) Me-trics, getting rid of me-trics. I mean really a lot of fun going on people dropping ping-pong balls in the one that they like the best. >> Brian: Yeah! >> So you've maintained that flavor, which is fantastic. So, what do you see as sort of the next wave of Splunk? I mean, what should we as an audience be thinking about and watching for Splunk? >> I mean for me this is the best conf ever. This is our eighth one, it's the biggest one, it's the best one. We've been able to land so many great partners. We have 71 partners here, telling there stories. We have all the different customer sessions, we just completed the keynote, which I think was absolutely fantastic, the office space parody was I think, bring-the-house-down funny. And I think that's the beginning of the future, how do we take, all the wonderful things that we see our customers doing and bring them to light, and bring them to life, in more inspirational and more personal ways? I'll give you one really great example, we talked about GEN, the Global Emancipation Network. And they're working to help, you know, help human trafficking and human slavery as much as they possibly can, which is a very large problem, and we were able to work with them and help them through our Splunk for good efforts, to give them access to software, which has contributed to the work that they're doing. And we're just honored to have been a part of that, and they're here on site and they told their story in the keynote. And I can, there's example after example after example of the good we're doing for the world, in addition to the work we're doing for companies. And I think that's where we're moving forward. How do you keep those things in lock step so you're actually contributing to the betterment of our global society. At the same time making our user's lives better. >> You know I think, an example at least that really struck me when I was listening to the keynotes, we talked about the Boss of the Sock event, you talk about your community, and the spirit you're trying to create, and continue to perpetuate, was that, the winning team was thrown together right at the last minute. And these were people from different parts, different communities, different sectors if you will. And yet they bound together, they came up with a game plan, they win and so now you've created like a sub-culture as part of the greater community, but that seems to be kind of the embodiment of your philosophy is no boundaries, no limits and let's see how big we can make our tribe, if you will. >> I think tribe is another great word, community. You know, it's a skill set, you want a language you can communicate with each other. You learn how to use Splunk, and all of the sudden you have a common language and a common bond. And team "Last Minute," which won Boss of the Knock, you can't beat, you cannot plan for those kinds of things. People came together with a common understanding of how to accomplish a task, formed instantaneous comradery, and then were able to solve difficult problems. And if you bridge that to a conversation about business, we're all trying to solve problems. Technology they say is hard, we all know it's the culture and the people that's the most difficult thing to do and if we can be something that provides technology that helps drive culture change and people change, that's critical in transformation, and that's one of the things, and I've only been at Splunk 10 months, that I've seen we can do with our customers and that's pretty incredible. >> That's a key part of your messaging, I wanted to make an observation, when we followed Splunk early on, during the ascendancy of the so called big data memes, Splunk never really talked about big data you just sort of did it. You know you solve problems. Now big data is sort of passe, actually you guys talk about big data, it's very interesting to me, I wonder if you could talk about that a little bit. >> You know, lots of people like to throw buzz words. Industry terminology, we try really hard to avoid really getting into it like digital transformation being one, no don't ever say that. Because it doesn't help anyone. Right, at the end of the day you have to find the problems that our customers have, build solutions to help them solve that, and it turns out when big data was the hype, that wasn't the problem that customers have. But with the explosion in data over the last decade that continues to grow, we are actually now seeing true big data style problems. And that's why in the keynote we talked about scale, and how today's scale and tomorrow's scale is just table stakes, because you have to continue to grow to meet that. And so as the machine data company, really trying to make sure people get value out of this machine data, and turn those, that data into answers and get the insights they need to take action, that's the future. And with big data, because it's no longer buzzy, there's new buzz words we can avoid. >> Dave: It just is. >> It just is, everyone has a ton of data. >> I think the point you're making about digital transformation is interesting. We do over a hundred of these a year and every, the vast majority of digital transformation with no meat on the bone. And to us, a digital business is, is one that leverages it's data. So when you think about the evolution of Splunk, it's all about leveraging data and we're seeing, do you envision a Splunk where Splunk actually becomes that development platform for applications which has been the nirvana of so-called big data for years, it appears that Splunk is becoming just that. >> I think that's part of our long-term strategy, in that, the beginning of that already exists. Splunk base has over 1200 apps that extend the Splunk platform already, and those apps do anything from make it easier to ingest data from different data sources, to visualize data through interesting dash boards, to customized searches. A great example, ransomware, we talked about it in the keynote, super hot topic in the industry. Something that's affecting the world at large and something we want to make sure we're helping people deal with, we launched a new product called Splunk Insights for Ransomware, which is just an app built on top of Splunk, that gives you better dash boarding, better searching and better licensing for customers to get in, pay per user, get started really fast and solve that particular problem. And we see that as really really critical, as we evolve our strategy to address these transformative types of things, and the application ecosystem that comes with them. >> We saw this in the demos, another buzz word of course machine learning, but we saw an application of machine learning to dramatically learning to simplify the number of events I have to look through as a security professional and map those to you know, actual problems that I can solve. Again, another application, practical application of Splunk at play. >> Meat on the bone, you said it. So at the end of the day, this is a user conference, and our users use the product every day, and if we're not giving them real value, they're going to let us know. We put tons of energy into that. >> How about the ecosystem, the message to the ecosystem. What is the message to those guys, what are the sort of swim lanes you guys will develop applications versus their opportunities? >> I think that's emerging, I think we're still learning how to work with our ecosystem. We're so blessed with an amazing ecosystem, a huge community of participants. We talked about the Splunk trust. This core group of 42 people, we inducted 14 new ones today who really embody everything that is so great about our company and our customers and what they do for their constituents. And they are helping us think through you know, where can you build, how do you build and who should build, and getting that real time feedback. And all the partners that are here right, are adding value. And that's our goal, create the platform so that we can solve everyone's machine data challenges at scale so they can provide better answers and ultimately more value to their company. >> So getting a little personal then, you mentioned first show, >> First show. >> You coming into this, so you inherit this seven year machine right? Growing, expanding and so your perspective coming into that, what have you brought, you think or you're seen as an outsider who's now an insider, and maybe leverage the culture that was being created to take us to where we are here this year here in D.C.? >> One of the main reasons I came to Splunk, was my extremely positive impression of the product, and the brand, and the customer community around it. My entire history, at Microsoft and Google, Cloud Platform and Sales Force, was predicated on customers who love the products. You can't create that, right, you earn that through amazing work, and amazing technology. And being able to walk in here at Splunk and already have that, was the gift that really got me excited. And so you talk about coming in, and what you already have I got handed the best thing ever. Hundreds of thousands, millions of users that are excited about our product. And so what I wanted to bring was not a lot of change in the culture, it's more how do you maintain that intimacy, how do you keep the what makes Splunk, Splunk and then do that on a grander scale? And I think if you look at .conf this year, this embodies the vision that I've had with my team and with the company on how to bring .conf, I'm sorry, bring Splunk to life in a massive way. And this is, you know you can see around us, all the activity going on, it's pretty amazing. >> How about the choice of the district? You know, love the venue, love being in D.C. always, of course east-coast guys, your backyard. >> John: It's a home game for me, yeah love that. >> Brian: I'm 20 minutes away, I love it. >> But so obviously a lot of government clients, they you know, don't go to Vegas or can't go to Vegas, it's a strong community here, very advanced. Talk about that choice. >> Yeah, very thoughtful choice. We do a lot of business with the federal government. We do a lot of business with state and local officials. We do a lot of business with education and universities. And so we thought coming to D.C. was the perfect place to really embrace the public sector in America. But also an amazing venue, weather's cooperated for the most part, all the things you would want. And what we've seen with the program, is we've had more public sector attendance which is great to be able to give them more skills. The work we do with veterans, we talked about giving free training to our service men and women. And veterans service men and women which is super important to us as a company, that was a big honor to be able to do it here in D.C. Kind of a no-brainer for us, and also seeing how the rest of the community has come, it's a lot of west-coast American folks, we have people from 65 countries from all over the world that have all descended here, and it's been really really incredible. So it's been really good for us, and as we think through next venues and future years, I think there's a lot really exciting things to come. But being in D.C. is an honor for the company, and it's been great to see the turnout. >> Hey my last question, several years ago Gartner came up with the stats, said CMO was going to spend more than the CIO on technology. I don't know if that ever came to fruition but it was an interesting prediction. As a CMO, somebody who's obviously using data, for marketing, at a data company, what's the state of that what's your philosophy around data, the intersection of data and marketing? >> Yeah, I've read those Gartner articles too. The Chief Marketing Technology Officer, and you know my background is deeply technical, I was an engineer by training. And our CIO Deckland and I have an incredibly tight relationship, and I actually think that's the future. Marketing is data, and that's the big change that's happening in the marketing landscape. There's old-school marketing, advertising and things like that, that make sense and maybe be to see kind of opportunities. But if you're in a business to business universe, working with larger enterprises and governments like we are at Splunk, there's a new age of marketing that's evolved over the last decade that is predicated with operational data, that helps you make better decisions, invest more, make more personalized engagements. This doesn't have to be throw a big thing and hope someone sees it. I can engage with you and you in a personal and intimate way which aligns incredibly well with our culture and who we want to be. And so I agree it doesn't matter how you calculate the dollars or the spend or the budget, but technology is an enormous driver of modern marketing, and being at a data company makes it incredibly easy. I Splunk everything, we have dash boards, you come by my office and we have a wall of TVs with Splunk dash boards showing our social status, and we're using LinkedIn Elevate, and we see what's coming out of sales force data on sales and pipeline, all the different things so we have this real time, operational dash board that Splunk is giving us from the business side. >> I love that answer, it's not an either or with marketing and IT it's an and. >> It has to be. You just put such a sharp point on that pencil right now as you said with metrics you have all the data you need, continued success, we with you all that. >> Brian: Thank you. >> Good job getting the plane off the ground here today, and happy landing for the rest of the week. >> Brian: Thank you so much, it's an honor to be here. Thank you for joining us for your seventh year, look forward to your eighth. >> Dale: Alright, thanks for having us. >> Absolutely, thanks Brian. Brian Goldfarb, the CMO at Splunk. We're back with more here on the Cube from Washington D.C. at .conf2017, right after this. (techno music)