from the cube studios in Palo Alto in Boston connecting with thought leaders all around the world this is a cube conversation on June 23rd the Wall Street Journal reported that Dell is exploring strategic options for its approximately 81% share in VMware both Dell and VMware stocks popped on the news we believe that Dell is floating this trial balloon to really gauge investor customer and partner sentiment and perhaps send a signal to the short sellers that you know what Michael Dell has other arrows in his quiver to unlock in case you want to squeeze me I'm gonna squeeze you back who knows hello everyone and welcome to this week's wiki Bond cube insights powered by ETR in this breaking analysis we'll unpack some of the complicated angles in the ongoing VMware saga and assess five scenarios that we think are possible as it pertains to this story as always we're going to bring in some ETR customer data to analyze what's happening with the spending picture let's take a look at what happened and just do a quick recap The Wall Street Journal story said that Dell was considering spinning off VMware or buying the remaining 19 percent of VMware stock that it doesn't own the Journal article cited unnamed sources and said that a spinoff would not likely happen until 7 September 2021 for tax reasons that would mark of course the 5 year anniversary of Dell acquiring EMC and would allow for a tax free transaction always a good thing what's going on here and what options does Dell really have what does it mean for Dell VMware customers and partners we're gonna try to answer those questions today so first of all why would Dell make such a move well I think there's tweet from your own name Marc he's a portfolio manager at one main capital it kind of sums it up he laid out this chart which shows Dells market cap prior to the stock pop you know it's closer to 38 billion today and the value of its VMware owner which is over 50 billion since the stock pop but let me cut to the chase investors value the core assets of Dell which accounts for around 80 billion dollars in revenue when you exclude vmware somewhere south of negative 10 billion dollars why it's because Dell is carrying more than 30 billion dollars of core debt when you exclude Dell Financial Services and it looks like a conglomerate owning the vast majority of VMware shares Michael Dell has something like a 97 percent voting control Cordell is a low margin low growth business and as some have complained that Michael uses VMware as his piggy bank and many investors just won't touch the stock so the stock generally Dell stock has underperformed I've often said even going back to the EMC days that owning the stock of VMware's owner is actually a cheap way to buy vmware but that's assuming that the value somehow gets unlocked at some point so Dell is perhaps signaling that it has some options and other levers to pull as I said you may be trying to give pause to the shorts now let's have a look at some of the ETR spending data and value and evaluate the respective positions of Dell and VMware in the market place this chart here uses the core ETR methodology that we like to talk about all the time for those not familiar we use the concept of net score net score is a simple metric it's like Net Promoter Score sort of the chart shows element the elements of Dells net score so each quarter ETR goes out and ask customers do you plan to adopt the vendor new that's the lime green at 4% spend more relative to last year more meaning more than 6% that's the forest green and you can see that's at 32% flat spend is the grey meaning plus or minus 5% and then decrease spending by 6 percent or greater that's the pink and that's just 11% for Dell or are you replacing the platform to see that that's the bright red there at 7% so net score is a measure of momentum and it's derived by adding the greens and subtracting the Reds and he can see Dell in the last ETR survey which was taken at the height of the pandemic has a net score of 18% now we we colored that soft red it's not terrible but it's not great either now of course this is across Dells entire portfolio and it excludes vmware so what about vmware so this next graphic that we're showing you it applies the exact same methodology to vmware and as you can see vmware has a much higher net score at 35% which of course shouldn't surprise anybody it's a higher growth company but 46% of vmware customers plan to spend more this year relative to last year and only 11% planned to spend less that's pretty strong now what if we combined dell and vmware and looked at them as a single entity hmm wouldn't that be interesting okay here you go so there were nine hundred and seventy five respondents in the last ETR survey when we matched the two companies together and you can see the combined net score is 27% with 42 percent of respondents planning to spend more this year than they did last year so you may be asking well is this any good how does this compare to dell and vmware competitors well I'm glad you asked so here we show that in this chart the net score comparisons so we take the combined dell and vmware at 27% Cisco as we often reported consistently shows pretty strong relative to the enterprise data center players and you can see HPE is a kind of a tepid 17 percent so it's got some work to do to live up to the promises of the HP HPE split we also we also show IBM red hat at 14% so there's some room for improvement there also and you can see IBM in the danger zone as we break that down and red hat much stronger but you know what it softened somewhat in the EGR survey since last year so we'd like to see better momentum from IBM and RedHat it's kind of unfortunate that kovat hit when it did his IBM was just kind of ramping up its RedHat go to market now just for comparison purposes for kicks we include Nutanix nifty annex is a much smaller company but it's one that's fairly mature and you can see at 52% its net scores much higher than the big whales now we've been reporting for months on high fliers like automation anywhere CrowdStrike octa rubric snowflake uipath these emerging companies have net scores you know north of 60% and even in the 70% range but of course they're growing from a much smaller base so you would expect that now let's put this into context with a two-dimensional view that we'd like to show now as you know in addition to net score that metric we like to use so-called market share market share is a measure of pervasiveness in the data set or essentially market share in the survey and it's a proxy for a real market share so what this chart here does it plots several companies with their net scores on the y-axis and market share on the x-axis and you can see that we combine Dell and VMware together and we plotted them in that red highlighted box just for comparison purposes so what does this tell you about the competitive landscape well first everyone would love to be AWS Microsoft - we didn't plot Microsoft because they're so bloody dominant they skew the chart somewhat but they would be way way out to the right on the x-axis because they have such a huge number of products and mentions in the data set so we left them out now you can see vmware and cisco are kind of right on top of each other which is sort of ironic as they're you know kind of increasingly overlapping with their offerings in the marketplace particularly nsx and you can see the other companies and for context we've added a few more competitors like theme and CommVault and you know they're in a pretty strong position as well as the combination of Dell and VMware so let's start there Steve Phil analyst Brad Reebok was quoted in the market watch publication is saying the following we have long believed Dell would ultimately buy in the approximately 19% our 12 and a half billion of VMware that it does not own in order to gain full control over VMware's substantial free cash flow which is about four billion dollars annually and we still expect this to be the ultimate outcome huh you know I don't know I'm not sure about this on the one hand you can see from the previous chart this would be a better outcome for Dell from a competitive standpoint what it did is it pulls Dell up and to the right yeah but perhaps not so much for VMware as it went down and to the left adèle would have to raise a bunch more cash to do this transaction and what take on even more debt you know maybe it could get Silverlake to finance the deal you know then essentially Dell would become the Oracle of infrastructure you know it certainly would make Dell even more strategic to CIOs would that be good for customers well on the one hand I guess it would bring better integration between Dell and VMware yeah but I wonder if that's the critical issue for customers yeah and nearly and I think it would stifle VMware's innovation engine and a little bit further and I wonder how Pat Yeltsin here would react I mean my guess is he would call it a day and what about Sanjay Putin who was the obvious next in line for the CEO job at VMware what he becomes the president of Dells software division and what about the rest of the team at VMware yes they're a Silicon Valley stalwart and that would slowly morph into austin-based Dell with the debt burden growing you know it's gonna mean more of VMware's cash would go to paying down the debt meaning less for R&D or even stock buybacks what you know I'm not a huge fan of and I'm not a huge fan of this scenario for sure the the technology park partner ecosystem would be ice cold on such a deal although you know you could argue there are already less than lukewarm but here I want to explore some other options so the next on the list is Dell could sell VMware to a private equity firm mmm or a strategic it could basically wipe out its debt and have some cash left over to sail into the sunset that would be a big pill for someone to swallow even though Michael Dell has 97 percent voting power I think there's fine print that says he has a responsibility to protect the interest of the minority shareholders so to get approval it would have to sell at a premium you know that could be as high as you know almost seventy billion dollars Microsoft has the cash but they don't need VMware and Amazon I guess could pull it off but that certainly is not likely even if Google who has the cash we're interested in buying VMware Google be the most likely candidate you know it would give Google Cloud instant access to the coveted enterprise but it's really hard to conceive I mean same for a PE company 65 to 70 billion you know they get their money out in 15 to 20 years so I I just I just don't see that as viable all right what's next how about this scenario of spinning off VMware that the Journal reported so in this transaction Dell shareholders would get a bunch of vmware stock now there may be some financial wizardry that tom sweet dell CFCF owned his band of financial geniuses could swing I can't even begin to speculate what that would be but but I've heard there's some magic that they could pull off to maybe pull some cash out of such a transaction and this would unlock the value of both Dell and VMware by removing the conglomerate and liquidity hangover for Dell and it were to definitely attract more sideline investors into VMware stock and Michael Dell would still own a boatload of VMware stock personally so there's an incentive there so this is interesting and certainly possible you know I think in a way it would be good for VMware customers VMware we get full autonomy and control over its destiny without Delvaux guarding its cash so it could freely innovate Dell would become probably less strategic for customers so I don't think that for Dell EMC buyers you know the technology ecosystem partners like HPE IBM Napa cetera would would would they would like it more but they were already kind of down the path of looking to optimize VMware alternatives so you know think about Cisco but you know I think for VMware customers okay I think for for daily MC customers not so much now what about the do-nothing scenario you know I think this is as possible as any outcome Dell keep chipping away at its debt using VMware as a strategic linchpin with customers sure they continue to pay the liquidity overhang tax and they'll frustrate some shareholders who we're going to remain on the sidelines but you know that's been the pattern anyway now what about delivering some of the VMware ownership so the more I think about it the more I like this scenario what if del sold 20% of its VMware stake and let's say raised ten twelve billion dollars in cash that it could use to really eat into its debt burden a move like this combined with its historical debt pay down could cut its death debt in half by say 2021 and get the company back to investment grade rating something that Tom sweet has aspired towards this one dropped hundreds of millions if not a billion dollars to the bottom line and it would allow Dell to continue to control VMware what I don't know I don't know if there are nuances to this scenario in other words does this dropping ownership from roughly eighty percent to about sixty percent trigger some loss of control or some reporting issue I'm sure it's buried somewhere in the public filings or acquisition Docs but this option to me makes some sense it doesn't really radically alter their relationships with customers or partners so it's kind of stable with VMware maintains its existing autonomy and even somewhat lessens Dale's perceived control over VMware in an attacks Dells debt burden yeah it's still a bit of a halfway house but I think it's a more attractive and as I said stable option in my view okay let's talk about what to look for next you know it looks like the stock market is coming to the reality that we are actually in a recession although it appears that Nasdaq is trying to ignore this or maybe the the markets a little bit off because they're afraid Joe Biden is gonna win the election he's not gonna be good for the for the economy we'll see we'll see what the economic shutdown means for tech companies in this earnings season etrs next survey is in the field and they're gonna have fresh data on the impact of kovat going into the dog days of summer here's what I think let me give you my preview and you'll see in a few weeks you know how accurate is I believe that tech spending is going to be soft broadly I think it's gonna especially be the case for legacy on-prem providers and expect their traditional businesses to to deteriorate somewhat I think there's gonna be bright spots in text protect for sure the ones we've reported on cloud yes absolutely automation you know I'm really looking closely at the battle between the two top our PA vendors automation anywhere in uipath I think there's a really interesting story brewing there and the names that we've been pounding like snowflake the security guys like CrowdStrike and octa and Z scalar I think they're gonna continue to do very well with this work from home pivot we also expect Microsoft to continue to show staying power but because of their size you know they're exposed to soft demand pockets but I think that continue to be very very strong and threatening to a lot of segments in the market now for Dell I think the data center businesses continue to be a tough one despite some of the new product cycles especially in storage but I think dal is gonna continue to benefit from the work from home pivot as I believe there's still some unmet demand and laptops we're gonna see that I believe show up in Dells income statement in the form of their their client revenue I'd love to know what you think you could tweet me at Devante or you can always email me at david dot Volante at Silicon angle com please comment on my LinkedIn post always appreciate I post weekly on silicon angle calm and on wiki bond calm so check out those properties and of course go to e TR dot plus for all the survey action as I say e TR is in the field with the current survey they got fresh Cova data so we're excited the report on that in the coming weeks remember these episodes are all available as podcast wherever you listen this is Dave Volante for the cube insights powered by ETR thanks for watching everyone we'll see you next time [Music]

from the cube studios in Palo Alto in Boston connecting with thought leaders all around the world this is a cube conversation as we've been reporting the Koba 19 pandemic has created a bifurcated IT spending picture and over the last several weeks we've reported both on the macro and even some come at it from from a vendor and a sector view I mean for example we've reported on some of the companies that have really continued to thrive we look at the NASDAQ and its you know near at all-time highs companies like oh and in CrowdStrike we've reported on snowflake uipath the sectors are PA some of the analytic databases around AI maybe even to a lesser extent cloud but still has a lot of tailwind relative to some of those on-prem infrastructure plays even companies like Cisco bifurcated in and of themselves where you see this Meraki side of the house you know doing quite well the work from home stuff but maybe some of the traditional networking not as much well now what if you flip that to really try to understand what's going on with the shape of the recovery which is the main narrative right now is it a v-shape does it a u-shape what is what's that what do people expect and now you understand that you really have to look at different industries because different industries are going to come back at a different pace with me again is Sagar khadiyah who's the director of research at EGR Sagar you guys are all over this as usual timely information it's great to see you again hope all is well in New York City thanks so much David it's a pleasure to be back on again yeah so where are we in the cycle we give dividend a great job and very timely ETR was the first to really put out data on the koban impact with the survey that ran from mid-march to to mid-april and now everybody's attention sagar is focused on okay we're starting to come back stores are starting to open people are beginning to to go out again and everybody wants to know what the shape of the recovery looks like so where are we actually in that research cycle for you guys yeah no problem so like you said you know in that kind of march/april timeframe we really want to go out there and get an idea of what we're doing the budget impacts you know as it relates to IT because of kovat 19 right so we kind of ended off there around a decline of 5% and coming into the year the consensus was of growth of 4 or 5% right so we saw about a 900,000 basis points wing you know to the negative side and the public covered in March and April were you know which sectors and vendors were going to benefit as a result of work from home and so now as we kind of fast forward to the research cycle as we kind of go more into May and into the summer rather than asking those exact same question to get again because it's just been you know maybe 40 or 50 days we really want Singh on the recovery type as well as kind of more emerging private vendors right we want to understand what's gonna be the impact on on these vendors that typically rely on you know larger conferences more in-person meetings because these are younger technologies there's not a lot of information about them and so last Thursday we launched our biannual emerging technology study it covers roughly 300 private emerging technologies across maybe 60 sectors of technology and in tandem we've launched a co-ed flash poll right what we wanted to do was kind of twofold one really understand from CIOs the recovery type they had in mind as well as if they were seeing any any kind of permanent changes in their IT stacks IT spend because of koban 19 and so if we kind of look at the first chart here and kind of get more into that first question around recovery type what we asked CIOs and this kind of COBIT flash poll again we did it last Thursday was what type of recovery are you expecting is it v-shaped so kind of a brief decline you know maybe one quarter and then you're gonna start seeing growth in 2 to H 20 is it you shaped so two to three quarters of a decline or deceleration revenue and you're kind of forecasting that growth in revenue as an organization to come back in 2021 is it l-shaped right so maybe three four five quarters of a decline or deceleration and then you know very minimal to moderate growth or none of the above you know your organization is actually benefiting from from from koban 19 as you know we've seen some many reports so those are kind of the options that we gave CIOs and you kind of see it on that first chart here interesting and this is a survey a flash service 700 CIOs or approximately and the interesting thing I really want to point out here is this you know the koban pandemic was it didn't suppress you know all companies you know and in the return it's not going to be a rising tide lifts all ships you really got to do your research you have to understand the different sectors really try to peel back the onion skin and understand why there's certain momentum how certain organizations are accommodating the work from home we heard you know several weeks ago how there's a major change in in networking mindsets we're talking about how security is changing we're going to talk about some of the permanence but it's really really important to try to understand these different trends by different industries which you're going to talk about in a minute but if you take a look at this slide I mean obviously most people expect this u-shaped decline I mean a you know a u-shaped recovery rather so it's two or three quarters followed by some growth next year but as we'll see some of these industries are gonna really go deeper with an l-shape recovery and then it's really interesting that a pretty large and substantial portion see this as a tailwind presumably those with you know strong SAS models some annual recurring revenue models your thoughts if we kind of star on this kind of aggregate chart you know you're looking at about forty four percent of CIOs anticipated u-shaped recovery right that's the largest bucket and then you can see another 15 percent and to say an l-shape recovery 14 on the v-shaped and then 16 percent to your point that are kind of seeing this this tailwind but if we kind of focus on that largest bucket that you shaped you know one of the thing to remember and again when we asked is two CIOs within the within this kind of coded flash poll we also asked can you give us some commentary and so one of the things that or one of the themes that are kind of coming along with this u-shaped recovery is you know CIOs are cautiously optimistic about this u-shaped recovery you know they believe that they can get back on to a growth cycle into 2021 as long as there's a vaccine available we don't go into a second wave of lockdowns economic activity picks up a lot of the government actions you know become effective so there are some kind of let's call it qualifiers with this bucket of CIOs that are anticipating a u-shape recovery what they're saying is that look we are expecting these things to happen we're not expecting that our lock down we are expecting a vaccine and if that takes place then we do expect an uptick in growth or going back to kind of pre coded levels in in 2021 but you know I think it's fair to assume that if one or more of these are apps and and things do get worse as all these states are opening up maybe the recovery cycle gets pushed along so kind of at the aggregate this is where we are right now yeah so as I was saying and you really have to understand the different not only different sectors and all the different vendors but you got to look into the industries and then even within industries so if we pull up the next chart we have the industry to the breakdown and sort of the responses by the industries v-shape you shape or shape I had a conversation with a CIO of a major resort just the other day and even he was saying what was actually I'll tell you it was Windham Resorts public company I mean and obviously that business got a good crush they had their earnings call the other day they talked about how they cut their capex in half but the stock sagar since the March lows is more than doubled yeah and you know that's amazing and now but even there within that sector they're peeling that on you're saying well certain parts are going to come back sooner or certain parts are going to longer depending on you know what type of resort what type of hotel so it really is a complicated situation so take us through what you're seeing by industry sure so let's start with kind of the IT telco retail consumer space Dave to your point there's gonna be a tremendous amount of bifurcation within both of those verticals look if we start on the IT telco side you know you're seeing a very large bucket of individuals right over twenty percent that indicated they're seeing a tail with our additional revenue because of covin 19 and you know Dave we spoke about this all the way back in March right all these work from home vendors you know CIOs were doubling down on cloud and SAS and we've seen how some of these events have reported in April you know with this very good reports all the major cloud vendors right select security vendors and so that's why you're seeing on the kind of telco side definitely more positivity right as it relates to recovery type right some of them are not even going through recovery they're they're seeing an acceleration same thing on the retail consumer side you're seeing another large bucket of people who are indicating what we've benefited and again there's going to be a lot of bifurcation here there's been a lot of retail consumers you just mentioned with the hotel lines that are definitely hurting but you know if you have a good online presence as a retailer and you know you had essential goods or groceries you benefited and and those are the organizations that we're seeing you know really indicate that they saw an acceleration due to Koga 19 so I thought those two those two verticals between kind of the IT and retail side there was a big bucket or you know of people who indicated positivity so I thought that was kind of the first kind of you know I was talking about kind of peeling this onion back you know that was really interesting you know tech continues to power on and I think you know a lot of people try I think that somebody was saying that the record of the time in which we've developed a fit of vaccine previously was like mumps or something and it was I mean it was just like years but now today 2020 we've got a I we've got all this data you've got these great companies all working on this and so you know wow if we can compress that that's going to change the equation a couple other things sagar that jump out at me here in this chart I want to ask you about I mean the education you know colleges are really you know kind of freaking out right now some are coming back I know like for instance my daughter University Arizona they're coming back in the fall evidently others are saying and no you can clearly see the airlines and transportation as the biggest sort of l-shape which is the most negative I'm sure restaurants and hospitality are kind of similar and then you see energy you know which got crushed we had you know oil you know negative people paying it big barrels of oil but now look at that you know expectation of a pretty strong you know you shape recovery as people start driving again and the economy picks up so maybe you could give us some thoughts on on some of those sort of outliers yeah so I kind of bucket you know the the next two outliers as from an l-shaped in a u-shaped so on the l-shaped side like like you said education airlines transportation and probably to a little bit lesser extent industrials materials manufacturing services consulting these verticals are indicating the highest percentages from an l-shaped recovery right so three plus orders of revenue declines and deceleration followed by kind of you know minimal to moderate growth and look there's no surprise here those are the verticals that have been impacted the most by less demand from consumers and and businesses and then as you mentioned on the energy utility side and then I would probably bucket maybe healthcare Pharma those have some of the largest percentages of u-shaped recovery and it's funny like I read a lot of commentary from some of the energy in the healthcare CIOs and they were said they were very optimistic about a u-shaped type of recovery and so it kind of you know maybe with those two issues then you could even kind of lump them into you know probably to a lesser extent but you could probably open into the prior one with the airlines and the education and services consulting and IMM where you know these are definitely the verticals that are going to see the longest longest recoveries it's probably a little bit more uniform versus what we've kind of talked about a few minutes ago with you know IT and and retail consumer where it's definitely very bifurcated you know there's definitely winners and losers there yeah and again it's a very complicated situation a lot of people that I've talked to are saying look you know we really don't have a clear picture that's why all these companies have are not giving guidance many people however are optimistic not only for a vet a vaccine but but but also they're thinking as young people with disposable income they're gonna kind of say dorm damn the torpedoes I'm not really going to be exposed and you know they can come back much stronger you know there seems to be pent up demand for some of the things like elective surgery or even the weather is sort of more important health care needs so that obviously could be a snap back so you know obviously we're really closely looking at this one thing though is is certain is that people are expecting a permanent change and you've got data that really shows that on the on the next chart that's right so one of the one of the last questions that we asked on this you know quick coded flash poll was do you anticipate permanent changes to your kind of IT stack IT spend based on the last few months you know as everyone has been working remotely and you know rarely do you see results point this much in one direction but 92% of CIOs and and kind of IT you know high level ITN users indicated yes there are going to be permanent changes and you know one of the things we talked about in March and look we were really the first ones you know you know in our discussion where we were talking about work from home spend kind of negating or balancing out all these declines right we were saying look yes we are seeing a lot of budgets come down but surprisingly we're seeing 2030 percent of organizations accelerate spent and even the ones that are spending less they even then you know some of their some of their budgets are kind of being negated by this work from home spend right when you think about collaboration tool is an additional VPN and networking bandwidth in laptops and then security all that stuff CIOs now continue to spend on because what what CIO is now understand as productivity has remained at very high levels right in March CIOs were very with the catastrophe and productivity that has not come true so on the margin CIOs and organizations are probably much more positive on that front and so now because there is no vaccine where you know CIOs and just in general the population we don't know when one is coming and so remote work seems to be the new norm moving forward especially that productivity you know levels are are pretty good with people working from home so from that perspective everything that looked like it was maybe going to be temporary just for the next few months as people work from home that's how organizations are now moving forward well and we saw Twitter basically said we're gonna make work from home permanent that's probably cuz their CEO wants to you know live in Africa Google I think is going to the end of the year I think many companies are going to look at a hybrid and give employees a choice say look if you want to work from home and you can be productive you get your stuff done you know we're cool with that I think the other point is you know everybody talks about these digital transformations you know leading into Kovan and I got to tell you I think a lot of companies were sort of complacent they talked the talk but they weren't walking the walk meaning they really weren't becoming digital businesses they really weren't putting data at the core and I think now it's really becoming an imperative there's no question that that what we've been talking about and forecasting has been pulled forward and you you're either going to have to step up your digital game or you're going to be in big trouble and the other thing that's I'm really interested in is will companies sub optimize profitability in the near term in order to put better business resiliency in place and better flexibility will they make those investments and I think if they do you know longer term they're going to be in better shape you know if they don't they could maybe be okay in the near term but I'm gonna put a caution sign a little longer term no look I think everything that's been done in the last few months you know in terms of having those continuation plans because you know do two pandemics all that stuff that is now it look you got to have that in your playbook right and so to your point you know this is where CIOs are going and if you're not transforming yourself or you didn't or you know lesson learned because now you're probably having to move twice as fast to support all your employees so I think you know this pandemic really kind of sped up you know digital transformation initiatives which is why you know you're seeing some companies desks and cloud related companies with very good earnings reports that are guiding well and then you're seeing other companies that are pulling their guidance because of uncertainty but it's it's likely more on the side of they're just not seeing the same levels of spend because if they haven't oriented themselves on that digital transformation side so I think you know events like this they typically you know Showcase winners and losers then you know when when things are going well and you know everything is kind of going up well I think that - there's a big you know discussion around is the ESPY overvalued right now I won't make that call but I will say this then there's a lot of data out there there's data and earnings reports there's data about this pandemic which change continues to change maybe not so much daily but you're getting new information multiple times a week so you got to look to that data you got to make your call pick your spot so you talk about a stock pickers market I think it's very much true here there are some some gonna be really strong companies emerging out of this you know don't gamble but do your research and I think you'll you'll find some you know some Dems out there you know maybe Warren Buffett can't find them okay but the guys at Main Street I think you know the I am I'm optimistic I wonder how you feel about about the recovery I I think we may be tainted by tech you know I'm very much concerned about certain industries but I think the tech industry which is our business is gonna come out of this pretty strong yeah we look at the one thing we we should we should have stated this earlier the majority of organizations are not expecting a v-shaped recovery and yet I still think there's part of the consensus is expecting a v-shaped recovery you can see as we demonstrate in some of the earlier charts the you know almost the majority of organizations are expecting a u-shaped recovery and even then as we mentioned right that you shape there is some cautious up around there and I have it you probably have it where yes if everything goes well it looks like 2021 we can really get back on track but there's so much unknown and so yes that does give I think everyone pause when it comes from an investment perspective and even just bringing on technologies and into your organization right which ones are gonna work which ones are it so I'm definitely on the boat of this is a more u-shaped in a v-shaped recovery I think the data backs that up I think you know when it comes to cloud and SAS players those areas and I think you've seen this on the investment side a lot of money has come out of all these other sectors that we mentioned that are having these l-shaped recoveries a lot of it has gone into the tech space I imagine that will continue and so that might be kind of you know it's tough to sometimes balance what's going on on the investor in the stock market side with you know how organizations are recovering I think people are really looking out in two to three quarters and saying look you know to your point where you set up earlier is there a lot of that pent up demand are things gonna get right back to normal because I think you know a lot of people are anticipating that and if we don't see that I think you know the next time we do some of these kind of coded flash bolts you know I'm interested to see whether or not you know maybe towards the end of the summer these recovery cycles are actually longer because maybe we didn't see some of that stuff so there's still a lot of unknowns but what we do know right now is it's not a v-shaped recovery agree especially on the unknowns there's monetary policy there's fiscal policy there's an election coming up there's a third there's escalating tensions with China there's your thoughts on the efficacy of the vaccine what about therapeutics you know do people who have this yet immunity how many people actually have it what about testing so the point I'm making here is it's very very important that you update your forecast regularly that's why it's so great that I have this partnership with you guys because we you know you're constantly updating the numbers it's not just a one-shot deal so suck it you know thanks so much for coming on looking forward to having you on in in the coming weeks really appreciate it absolutely yeah well I will really start kind of digging into how a lot of these emerging technologies are faring because of kovat 19 so that's I'm actually interested to start thinking through the data myself so yeah well we'll do some reporting in the coming weeks about that as well well thanks everybody for watching this episode of the cube insights powered by ETR I'm Dave Volante for sauger kuraki check out ETR dot plus that's where all the ETR data lives i published weekly on wiki bon calm and silicon angle calm and reach me at evil on Tay we'll see you next time [Music]

from the cube studios in Palo Alto in Boston connecting with thought leaders all around the world this is a cube conversation [Music] hello everybody and welcome to this week wiki bond cube insights powered by ETR in this breaking analysis we want to update you on the latest spending data from EGR as you know we've been tracking this weekly saga kodachi is here he's the director of research at ET our saga thanks for coming on thanks for having me again Dave really appreciate it yes so so let me remind everybody so we entered the Year this year 2020 with a consensus IT spend for cast of plus 4% once coronavirus hit ET are launched its latest survey in March and we saw those numbers you'll come down last week we reported well the first report we made was it looked like it was flat last week we reported a slight negative and today we want to update you guys on those numbers so saga before we get into the data just give us the high level on where you guys are at in terms of your survey yeah no problem so currently we are forecasting a decline in global IT budgets about negative 4% I think what's happened you know over the last you know 10 or 15 days is you've just seen more and more information released that's given organizations more of an understanding of just how severe this you know epidemic is and so what we've been able to do on our end is kind of do an event study analysis or simulation analysis kind of what you're seeing here a really pinpoint the time period where organizations understood the severity of the epidemic and then really trying to measure the declines in IT budgets from there great so guys bring that slide back up I want to share with our audience what's happening here so what ETR has done is an event-based analysis and what you can see is where the survey launched on 3/11 you could see how sentiment has declined literally daily as the data rolled in then you see the US declared a national emergency you saw that the federal plan leaked for that you know penned pandemic protect projection and obviously New York became a hot spot and then you can see this the stimulus package in it and sagger it looks like there's a slight uptick here but generally speaking it's down now it could be worse but you guys were the first to report the offset from work it worked from home infrastructure we'll talk about that a little bit talk about this event analysis and what you're seeing here and how you compressed the analysis hosting these events no problem so let's start with a blue line here and just so the audience knows the x-axis is going to be date and the y-axis is going to be annual growth or decline in nit budgets what you're seeing here and if we start with the blue line is we started pulling on 3/11 and on that date we started to ask you know fortune 100 is fortune 500 how their budget was going to change based on the impacts of coded nineteen versus their original expectations coming into coming into the year and again consensus estimates coming to the year were positive four percent so if you track that line all the way through you get to a decline of about one percent now what's the issue of starting polling on 3/11 or using that blue line well one of the big issues is a few days later the US declared a national emergency so more information was released right I think organizations that took the survey in the first two days didn't have a complete picture as to what's going on and then effectively a week later you saw federal documents get leaked stating how bad this epidemic was right in terms of the last 18 18 plus months and so what we did was we did it effectively an event based analysis or defuse different simulation where if you take a look at the yellow and red lines to start what we're doing is we're effectively saying okay let's ignore everyone that took the survey prior to that let's take their budgets in terms of how they indicated change versus their original expectations for 2020 and then let's go ahead and map that and if you look at the yellow line as an example that goes to a decline of 2% and then once I think you know the next shoe dropped in terms of organizations understanding this is not going to be a few weeks or this is not the common cold or flu once organizations knew this was going to be an 18 plus epidemic you can see if we started pulling respondents from there how much more negative it gets and of course once NYC became the epicenter you saw a little another shoe drop so now those those scenarios or simulations are taking us between a decline of three and four percent and then of course if we look at that last purple line there when the stimulus got announced what we are seeing is it looks like it may have bottomed down we have to continue tracking it because you know again it's just a few days since the stimulus is was passed and so let's see if the data starts improve a little bit or at least stabilize but I think from the last three events in terms of the the federal plan being leaked NYC becoming the epicenter and the stimulus it looks like the market now is fully aware of what's going on and now we're kind of seeing some stabilization in the data in terms of the declines for 2020 so between the feds action and the the fiscal stimulus we've we've seen some optimism although people are really cautious of course remember folks this would be worse were it not for the shift in spend to work from home infrastructure not just collaboration and visualization tools but other infrastructure around that network bandwidth security desktop virtualization etc so guys if you bring up the next chart I want to set this up we've been reporting this framework for a while now what this shows is what the sentiment is in terms of the budget change and you can see the gray bar now is 35% it started at 40% so that's dropped so the percentage of CIO saying no change the green is held pretty steady at around 20 to 22% that's it's roughly in there and the red you know has been has been shifting and you can see most of the green ie spending more in 2020 is focused on that you know one to two ten percent but but Sagar bring us up to date now we're going to settle in it right now about three and a half to four percent on the negative side give us some color on this chart please yeah no problem so the best way to connect this chart with what we saw earlier is this is a snapshot so this is a single day so this is the data that is feeding the time series chart kind of help the audience understand what's going on so if we were to look at this exact chart Oh since March 11 you would see that midpoint Average effectively coming down every day and that's effectively what's making up that time series in terms of this chart you know Dave you kind of hit it right on the nail you're kind of seeing the positivity remain or be stable and again that's that work from home infrastructure as you as you mentioned right the collaboration pools no the virtualization support services networking bandwidth all that stuff right being more and more security but on the negative side I think what you're seeing is that again as organizations now understand the severity of the epidemic I think as we understand further and we've talked about this you know a few weeks ago that organizations were anticipating less demand they were anticipating an uptick in broken supply chains now you're starting to see some of that play out and as a result you're seeing organizations get more and more negative and that's why that midpoint average it keeps declining that's why those red bars keep going up is the the impacts in you know based on the data are are now starting to be to be seen and so you know let's see if the stimulus stabilizes this data and we'll continue tracking that you know over the next few weeks the next few months okay so basically we're coming in - three and a half to four percent that's where we are today we're not going to get detailed into some of the vendors today we talked a little bit about that last week and go back to last week's breaking analysis you can see some of that vendor commentary I want to talk about what happens next ETR now we'll go into a two-week quite self-imposed quiet period and really start crunching the data at the end of that quiet period they will release to their private clients the their latest thinking in a webcast after that time we at the cube are allowed to share public information and we're gonna drill down into some of the segments that our community is most interested in but-but-but etrs going quiet now so saga maybe you can explain that sequence and fill in any holes that I missed there yeah no problem the next two weeks so we've we've collected a tremendous amount of data you know we're over you know we're at a hundred fortune 100 organizations you know almost three four hundred global two thousand organizations and so we're at a point now where it's time to start aggregating the data start really analyzing it going through this Koga drill down that we conducted but also we conducted a tremendous study on technology spending intentions of crossing over 350 vendors dozens of Technology sectors and so now it's really a time to kind of drill in and you know what what we're looking for or even some of the biggest takeaways from from this Cove it you know drill down is you know if if you started polling before 3:23 chances are your forecast is gonna come in light and I think that's one of the things that we've learned as we're kind of going into this to hear it is we really want to measure the impact starting right around that 3:23 timeframe it looks right around then based on that time series chart that we showed earlier that's when the market fully understood the impact of this epidemic and so as we start over the next two weeks even though we started pulling a little bit early we really want to focus on that second set a second half of responses because that's probably gonna be more indicative of what's going on I think the second thing is gonna be look if condition of conditions continue to deteriorate things can get worse and so we may come out of the next two weeks with this data that we collected and again have to continue indicating that you know the environment has continued coming down and you know maybe we may have to make adjustments as we see fit so I think that's kind of you know this whole situation is so dynamic still and so we're gonna do our best in the next week and a half to kind of get this data to market to at least give everyone an idea here's how everything stands right now and so that people have a good benchmark and then move forward yeah so this is as close to real time really as you can get in some of this IT spending world saga mentioned some of the numbers and in the global 2000 fortune fortune 100 1000 this this end now just the reminder is up over 1200 I believe right Sahra the total and that you've collected this this month that's correct exactly every time we've been doing one of these it's been going up another a couple hundred respondents so yeah we're at a very comfortable level now our sample right now represents five hundred and fifty five billion dollars in annual IP spend you know and global IT spend every year is a little over you know three trillion so this is a significant significant portion of a global IT spend and we feel comfortable at this point kind of going into that quiet period as you mentioned and really start to dig through the results that you know now that we've kind of you know covered the the 10,000 foot or the macro layer so to speak in terms of where budgets are going now it's really time to start drilling down and do the sectors and vendors because this is this is not going to be a every vendors going down or whatever maybe there's so many different dynamics here some vendors are going to do very well because the work for MoMA infrastructure and I think some vendors are gonna do very poorly because one they're not only on the legacy side but they're not really aligned from this whole work from home infrastructure movement so you're gonna see a lot of bifurcation you know as we get into 53 that's right and we're gonna dig into all those segments we're gonna look at the work from home we're gonna look at the traditional stuff we're gonna look at cloud we're gonna drill into specific segments that are that are of interest to our community it's a pleasure to really have you on here Sagar thank you for for sharing giving us access to this data and and stay safe and we will be watching go to ETR dot plus and you know check out what's happening there Silicon Engel Tom will obviously cover this and I published weekly on wiki bond comm again that saga thanks so much for coming on the cube yeah no problem thank you so much and looking forward to catching up in a few weeks all right then thank you for watching everybody this is Dave a latte for the cube or wiki bounce cube insights powered by ETR we'll see you next time [Music]

hello everyone and welcome to this week's wiki Bond cube insights powered by ETR in this breaking analysis we're going to share fresh data from etrs latest spending survey in particular ETR added a drill down question on the impact of coronavirus now yesterday I had the pleasure of hosting ETRS director of research Sagar khadiyah who took us through the details of that survey and we're gonna bring his comments in to this discussion so today I want to accomplish three things first I want to summarize the macro where are we at this point on the second day of spring in Massachusetts second I want to assess the impact from Co vid 19 on i.t spend for 2020 and the third thing I want to do is drill down into the findings from ET ARS latest survey after we do this I'll summarize and talk about what the outlook it looks like so where are we today you know we've gone from the fear of missing out in the stock market to basically fall out fear now as you well know the economic impact is not pretty I gotta say this is the first time I've ever seen a government imposed recession rightly so to save lives but I've also never seen such an escrow the board doubled downward shift in both supply and demand this creates uncertainty and ambiguity in pricing which makes forecasting anything really really difficult the liquidity shock and the credit risks are really of primary concern right now the price of oil is a huge issue why it's because energy companies account for a very sizable portion of the high-yield credit market over 10% so as prices fall it's going to be harder for oil companies to repay loans this creates default risk so this is the markets freaked out and functioning very very poorly now a poorly functioning market signals that we are not at the bottom everybody wants to know where the bottom is I'm not a stock picker and I'm not a market technician but I've seen a lot of downturns I'll share a quick story when I was at IDC we had an exclusive deal with Goldman Sachs two of the Goldman analysts were embedded into our Framingham offices now in 1987 on Black Monday and the following weeks I would stand at their real-time terminal there was no internet back then kids nobody had access to real-time trades but I did and I would watch the market in freefall and I would see it bounce back and then I would see it freefall again what I will tell you is this bottoms are impossible to protect everybody says that why because bottoms are not technical their psychological their emotional and in 1987 and then after the dot-com bust and after the financial crisis each time you saw the S&P with rally sometimes it would rally as high as 10% it would suck people back into the market and then pull back and that's going to happen here the markets not just gonna be fine any day now now if you're looking for some positives there is some silver linings that the canals in Venice are running clear which is amazing to see nitrous oxide levels over China are way way down okay let's shift and take a look at what this all means for IT spending what are the industries that are being most affected right now now as I show here there are some obvious sectors like energy and transportation retail etc but let's listen to Sagar from ETR what he told me yesterday now pay particular attention to what he says about supply chains roll the clip yeah industrials materials manufacturing retail consumer you know the healthcare pharma they you know those are the verticals from a supply chain perspective that are in you know elevated levels of broken supply chains and what's actually interesting is we in this survey we actually asked not only whether your supply chains were broken today but do you anticipate or do you continue or do and just they continue getting experiencing broken supply chains in three months from now and those percentages were up and I think that really tells us that this is not a one or two month type of recovery we're gonna see supply chains and demand continuing to be broken continuing to come down over the next three four months that I think is probably one of the biggest takeaways from the drill-down study so you see in the EGR survey it really underscores that we are not likely to see a quick snap back it's not a 1 or a two-month fix now in my own research I go out to the field I talked to people on the cube within our network I can add some excuse me some comments and some color here what we see is that healthcare right now is so swamped that they're not buying anything I mean they just they just are how many cycles most customers are taking they're skunkworks put anyone hold they're narrowing the capital spend and really focusing only on mission-critical items banks even though banks are down they have capital and they're still buying they got cash thanks they're smart and they're negotiating very hard for big discounts the other thing is a lot of customers have no choice but to buy many are on an AR are in your recurring revenue or annual current contract and have compliance edicts like we got to send out monthly statements if they don't renew they can't use their software to do that it's different but somewhat similar with maintenance contracts so you're seeing that sales teams are clearly bringing down their forecasts but they're not cutting them in half mmm not yet anyway all right but here's what's somewhat counterintuitive and you really you can really only quantify this with data some companies actually believe it or not they're spending more why because they try to preserve productivity would their work from home solutions they need infrastructure to do that so they're pivoting their budget to work from home they also have to secure that infrastructure so that means the cyber cyber security is seeing a little bit of momentum now let's take a look at the EGR data this is from more than a thousand CIOs and IT buyers it's fresh data right from March 40% of the survey said they see no current impact on their IT budget that is surprisingly high and look at all the green to the right-hand side you know most are showing five to ten percent increase but more than 20% of the respondents are actually expecting to increase budget in 2020 for things like work from home infrastructure let's take a listen to saga kadia who explains this further roll the clip yeah I think that's I think the the positive spent or the no change in spend I think that is what a lot of the market right now is missing and I haven't seen a lot of research on that because no one else has really been able to quantify how budgets are changing and so as you noted we're actually seeing people accelerate spend because of Kovan 19 and the reason is you know they're trying to avoid a catastrophe in productivity they are ramping up all this work from home infrastructure right not just collaboration tools virtualization infrastructure increasing VPN networking bandwidth mobile devices laptops security desktop support right you're a fortune 500 organization and you have 40 50 60 thousand employees working from home all the sudden you have to be able to support those employees and as a result you're actually seeing a large number of organizations accelerating spend and even the ones that are being hurt by the broken supply chains the demand coming down you're seeing some of their spendy seller ation being offset by spending a little bit more kind of what we're calling this kind of work from home infrastructure so sada went on to explain that consensus consensus expectations for global IT spend they were roughly at four percent before coronavirus and the pullback takes us now to flat or zero percent but what's not been reported is really the offset to the declines particularly from the work from home infrastructure now obviously this could all change in a likely will but this next chart really underscores that uncertainty and really the dynamic nature of the risk here what this track charts is the daily impact of the expected retraction so earlier this month in the et our survey you saw about a two percent retraction and exceed by March seventeenth it's down to flat so as we heard from Sagar the et our thesis is currently at 0% IT spend for growth in 2020 because of some of the offset now if the news continues to worsen the outlook is going to follow alright I want to wrap up by summarizing and and talking about what what's next and what you can expect so the current call as I said is for flat IT spend in 2020 it would be worse if not for the uptick in work from home and corollaries security infrastructure now it's not just collaboration and video tools it's virtualization solutions it's VPNs network upgrades mobile devices laptops and and the software to to secure all this stuff and make it work now despite the work from home offset we fully expect this picture or worsen over the next three months you got a watch for the duration of the the remote work at home mandates the travel bans the the no meeting policies there's a little doubt that productivity is going to be heard as we discussed yesterday with Sagar you can't just flick a switch and scale remote worker productivity you know that's a real challenge now having said that the expectation from CIOs is that this spending decline is going to be temporary what's unclear is the shape of the recovery is it going to be a v-shaped or a slow slog you can see the distant rim on the other side of the canyon it's there we just don't know how far away it is and we don't know how deep the canyon really is now there will be changes in our opinion that are going to be permanent as we said on a last braking analysis over the next several months organizations they're going to learn new things and that is going to shape their thinking in the future I personally expect accelerated digital transformations and a sustained viability of the work from home options you're gonna see new capabilities from distant learning with all the college shutdowns you're also going to see new risk mitigation paradigms you know the list goes on and on and on in terms of what we're going to see here as I said earlier there seemed to be some environmental benefits you know if you're looking for some positives here I think this next generation is much more in tune with that and you have my word and my promise and our team's promise that the cube and ETR is going to be here to keep you up to date et our survey data keeps rolling in you can check that out at ETR dot plus they are vigilant on this issue as are we from our remote studios look this is the new normal our skeleton crews are in studio and we're keeping the content flowing as many folks on our team they're working from home and they're on the grid currently our Palo Alto studio is fully operational four days a week each week and we're capturing remote guests on camera and Boston is open as well so get in touch if you need anything we are here to help and we're here to serve you okay this is Dave Villante for wiki bones cube insights powered by ETR thanks for watching this breaking analysis remember these episodes they're available on podcasts wherever you listen please connect with me emails David Galante at Silicon angle dot-com comment on my LinkedIn post I always appreciate that from the community thanks for watching everybody wishing good health and safety for you and your families we'll see you next time [Music]

it's gonna come from the expansion potential right none of our customers are more than one percent automated from an RPA perspective so that shows you the massive opportunity but back to the market site data size I Craig and I in the other annals we talk often about because I think the Tam views are very low you look at our markets here let's just get some real data out there right our market share in 2017 was 5% let's use Craig's linear data for now you know our market share this year's over 20% our market share applying and I don't get the exact numbers you don't provide guidance anymore it's substantially we're substantially gaining share now I believe that's the reality of the market I think because we know blue president's numbers we'd go four times faster than them every quarter Automation anywhere won't share their numbers but you know I can make some guesses but either way you know I think we're gaining share on them significantly I think you know Craig's not gonna want us to be 50% of the market two years he's just not and so he's gonna have to figure out how do we didn't have it brought more broadly about about that market trend he talked about it on stage today about how does he calculate the AI impact and the other piece is now the process mining now that we are integrating process mining into RP a right it strategic component of that how does that also involve the market so I think you have both the expansion in the product portfolio which tries and then you have the fact that customers are gonna add more automation at faster pace and more robots and that's where the expansion really kicks in them we often say you know look is up there's a company that you know one day will be public company our a our our number is very important we do openly transparently share that but you know the other big metric will be you know dollar base net expansion rate the shows really how customers are expanding I think that I know what our number is we haven't shared it yet I know all the SAS companies the top 10 I can tell you you know we're higher than all of them the market projections are low and I think he knows in what you were just saying - is that that the company's pitch is that we are freeing people we are liberating them from the mundane from the drudgery from the data entry and and as you as you pointed out rightfully a lot of the customers are saying oh no it's giving our time it's giving our employees time back to focus on the higher level tasks the more creative aspects of their job butBut I wonder if it is in fact what what it really is doing two jobs I mean I think that there's a really telling line in that Forex profile of Daniel Dinah's who is the CEO of this company's founder of this company the newly minted billionaire the first ever bot billionaire exactly where it was an MIT professor quoted saying you know we always say to the companies that we say give us your data and we'll tell you if it is in fact having this job-killing effect and he said the companies don't want to give that up so accelerate that accelerate we're one of the largest nice providers is the only thing that we do where process automation and AI company and our sole focus has been process automation since our inception in our past lives were generalists we did well and wanted to do it again so when we started accelerating we wanted to make sure that we focus on a very specific vertical niche and process automation was just starting up the optic about mid-2016 ish I think one of the big trends that's out there I mean our PA has come onto the scene I like how you phrase it Dave because you refer to it as rightly so automation is not new and so we sort of say the big question out there is is our pages flavor of the month art being is definitely not and I come from a firm we put out a blog earlier this year called our PA is dead long live automation and that's because when we look at our PA and when we think about when we think about what its impact is in the marketplace to us the whole point of automation in any form regardless of whether it's our PA whether it be a good old old-school BPM whatever it may be its mission is to drive transformation and so the HFS perspective and what all of our research shows and sort of justifies that the goal is what everyone is striving towards is to get to that transformation and so the reason we put out that piece the RP is dead long live integrated automation platforms is to make the point that if you're not because what is our PA allow it affords an opportunity for change to drive transformation so if you are not actually looking at your processes within your company and taking this opportunity to say what can I change what processes are just bad and we've been doing them I'm not even sure why for so long what can we transform what can we optimize what can we invent if you're not taking that opportunity as an enterprise to truly embrace the change and move towards transformation that's a missed opportunity so I always say our PA you can kind of couch it as one of many technologies but what RP has really done for the marketplace today it's given business users the leaders the realization that they can have a role in their own transformation and that's one of the reasons why it's actually become very important but a single tool in its own right will never be the holistic answer that's a very good question I think it's a question that has been very common throughout this entire conference I would say you know when I think about scaling what I've noticed over the past few years is that you know the actual bot development is about 25 percent of the work that you need to do right when it comes to scale there is everything outside of the actual development is the important part so how are you funneling opportunities into a pipeline how are you streamlining the entire process reengineering of you know fitting an RPA into an existing process you know what is what are the governance that what's the governance you have in place to make sure that the code of that development is clean and can be maintained long term and then more importantly I think that people overlook you know the people think of scale is being able to develop a lot of bots I think more importantly what scale is is being able to efficiently maintain a large portfolio bots and that's what I've realized this year we've got now about 300 automations in production and you know your reputation as an organization is really on how well you maintain those box because if your bots are consistently failing and you're not fixing them quick enough for your functional users to leverage them then you lose a lot of credibility so I think that's been a big learning for us as we reach how are you guys thinking about the way in which a user worker interacts with that that fog I think it's it's more like a dance and and less like a task manager right so you might think in classic automation you know click a button go do this thing click about and go do that thing that the automation is happening when you want it to the way that our platform is written the robot can listen to what you're doing it can monitor for when you click on a specific button or for when you move files to a folder so think about it less like a conscious effort to guide the robot and more as a a collaborative you know effort where where the robot is seeing what you're doing and taking action to help you and do things on your behalf and then letting you know when they're done so it's the paradigm is changing for work and when you have a robot on your computer it's gonna open up a new way of doing your daily act and and the enabler there is what machine learning machine intelligence it's a combination of things so think about machine learning and AI as just one tool that that robot has to use both CR as well you know we did a demo earlier this week where we took receipts moved him to a folder the robot sees that you've moved receipts into a folder can bounce it off an end point that and break apart those receipts using OCR load that all into excel and help you with your expense report so think about things like this you things you need to do you do what you would normally do put receipts in a folder and the robot takes care of the rest the most fascinating thing about RPA right now is that it's really highlighting the problems that organizations have all their accidents of history are really being brought up by RBA and then you've got these digital darlings that they're trying to compete with the greenfield site kind of people and some of those don't have beautiful back offices but let's not go there for a minute so it our PA is an opportunity for companies to link their digital dreams with their existing legacy nightmares I definitely think we're seeing less tech spending expected for q4 and I think that will spill into 2020 based on the ETR and enterprise technology research data that we see but I think it's actually a healthy pullback I kind of agree with guy on that front and I actually think it is good for our PA I think our PA is one of those sectors that you see in the EGR surveys that is gaining share relative to other tech spending and I think that will continue in any downturn so I expect softness you know however you define downturn I don't think it's going to be falling off the cliff or a disaster but I definitely think spending will be more tepid one of the nice things about our PA is you can take your software robots and apply them to an existing process and a lot of times changing processes not a lot sighs almost always changing processes is painful however we've talked to some customers that have said by applying our PA to our business it's exposed some really bad processes have you experienced that and can you maybe share that experience with us absolutely so for us one of the initial robots may apply to a customer facing process it was our field team trying to get back to our customer with with some information and we realized that the the cycle time was very long and the reason is there are four functions involved in answering the question and seven different applications are being touched all the way from Excel to ERP CRM so with it obviously bringing a strategic solution to fix the cycle time and reduce that to streamline the process was going to take us long so our PA was great help we'd reduce the cycle time by putting a robot and we were able to get back to ours please sales team in the field in matter of minutes what used to take hours was now being responded in minutes now that doesn't mean that process is perfect but that's unacceptable steam was in the field before you know streamlining and going into a bigger initiative anything you could share Christine coming from a software engineer background I at least I had the tendency to don't give enough credit to sales to marketing and not even to the customers we understand the customers in the so we build technology for the sake of technology so we were really fortunate to have some multi customers what we didn't understand how because I thought that customers should go to themselves to test and find the best technology out there and just go with it I I was really kind of I had a lot of blind spots on how this world operates but after I've started to visit customers and understand their pain points and their requests actually machine using our own technology because they use it in the real world so that message that that completely transform my thinking so I went back to my engineering teams tonight and I tell the guys from this day I don't wanna ever here we don't fix bugs and we do features and we do this when the customers say you do this you say thank you thank you for showing me the light I will do this that's that makes we create the better draw [Music]

from the silicon angle media office in Boston Massachusetts it's the queue now here's your host David on tape hello everyone and welcome to this week's episode of wiki bots cube insights powered by EGR in this breaking analysis we take a deeper dive into the world of robotic process automation otherwise known as RPA it's one of the hottest sectors in software today in fact Gartner says it's the fastest growing software sector that they follow in this session I want to break down three questions one is the RP a market overvalued - how large is the total available market for RP a and three who were the winners and losers in this space now before we address the first question here's what you need to know about RP a the market today is small but it's growing fast the software only revenue for the space was about 1 billion dollars in 2019 and it's growing it between 80 to a hundred percent annually RP a has been very popular in larger organizations especially in back-office functions really in regulated industries like financial services and healthcare RP a has been successful at automating the mundane repeatable deterministic tasks and most automations today are unattended the industry is very well funded with the top two firms raising nearly 1 billion dollars in the past couple of years they have a combined market value of nearly 14 billion now some people in the art community have said that RP a is hyped and looks like a classic pump and dump situation we're gonna look into that and really try to explore the valuation and customer data and really try to come to some conclusions there we see big software companies like Microsoft and sa P entering the scene and we want to comment on that a little later in this segment now RBA players have really cleverly succeeded in selling to the business lines and often a bypassed IT now sometimes that creates tension in or as I said customers are typically very large organizations who can shell out the hundred thousand dollar plus entry point to get into the RP a game the Tam is expanding beyond back office into broader on a broader automation agenda hyper automation is the buzzword of the day and there are varying definitions Gartner looks at hyper automation as the incorporation of RPA along with intelligent business process management I BPM and I pass or intelligent platform-as-a-service Gardner's definition takes a holistic view of the enterprise incorporating legacy on-prem app apps as well as emerging systems now this is good but I question whether the hyper term applies here as we see hyper automation as the extension of our PA to include process mining to discover new automations or new automation opportunities and the use of machine intelligence ml and a I applied to process data data where that combination drives intelligence analytics that further drives digital business process transformation across the enterprise so the point is that we envision a more agile framework and definition for hyper automation we see legacy BPM systems informing the transformation but not necessarily adjudicating the path forward we liken this to the early days of big data where legacy data warehouses and ETL processes provided useful context but organizations had to develop a new tech stack that broke the stranglehold of technical debt we're seeing this emerge in the form of new workloads powered by emerging analytic databases like redshift and snowflake with ml tools applied and cloud driving agile insights in that so-called Big Data space so we think a similar renaissance is happening here with with automation really driven by the money the mandate for digital business transformation along with machine intelligence and that tooling applied for a really driving automation across the enterprise in a form of augmentation with attended BOTS at scale becoming much much more important over time ok now let's shift gears a little bit question is the RP a market overhyped and overvalued now to answer this let's go through a bit of a thought exercise that we've put together and look at some data what this chart shows is some critical data points that will begin to help answer the question that we've posed in the top part of the chart we show the company the VC funding projected valuations and revenue estimates for 2019 and 2020 and as you can see uipath an automation any where are the hot companies right now they're private so much of this data is estimated but we know how much money they've raised and we know the valuations that have been reported so the RP a software market is around a billion dollars today and we have it almost doubling in 2020 now the bottom part of this chart shows the projected market revenue growth and the implied valuations for the market as a whole so you can see today we show a mark that is trading at about 15 to 17 times revenue which seems like a very high multiple but over time we show that multiple shrinking and settling in mid decade at just over 5x which for software is pretty conservative especially for high-growth software now what we've done on this next chart is we brought down that market growth and the implied valuation data and highlighted twenty twenty-five at seventy-five billion dollars the market growth will have slowed by then to twenty percent in this model and this thought exercise with a revenue multiple of five point four x for the overall market now eventually as growth slows RBA software will start to throw off profits at least it better so what we show here is a sensitivity analysis assuming a 20% 25% 30% and 35% for the market as a whole we're using that as a proxy and we show a 20/20 X even multiple which for a market growing the software market growing this fast you know we think is pretty reasonable consider the tech overall typically is gonna have a an even multiple of ten to fifteen you know X it really should be easy your enterprise value over a bit it's really a more accurate measure but but this is back in the Afghan on the balance sheet date and I'm a forecast all-out but we're trying to just sort of get to the question is is this market overvalued and as you can see in the Far column given these assumptions we're in the range of that seventy five billion dollar market valuation with that Delta now reality you're going to have some companies growing faster than the market overall and we'll see a lot of consolidation in this space but at the macro level it would seem that the company which can lead and when the Spoils is gonna really benefit okay so these figures actually suggest in my view that the market could be undervalued that sounds crazy right but look at companies like ServiceNow and work day and look at snowflakes recent valuation at twelve billion dollars so are the valuations for uipath and automation anywhere justified well in part it depends on the size of the market the TAM total available market in their ability to break out of back-office niches and deliver these types of revenue figures and growth you know maybe my forecasts are a little too aggressive in the early days but in my experience the traditional forecast that we see in the marketplace tend to underestimate transformative technologies you tend to have these sort of o guides where you know it takes off and really steep ins and it has a sharp curve and then tapers off so we'll see but let's take a closer look at the Tam but you know first I want to introduce a customer view point here's Eric's Lac Eric Lex who's an RPA pro at GE talking about his company's RPA journey play the clip I would say in terms of our journey 2017 was kind of our year to prove the technology we wanted to see if this stuff could really work long term and operate at scale given that I'm still here obviously we proved that was correct and then 2018 was kind of the year of scaling and operationalizing kind of a a sustainable model to support our business units across the board from an RPA standpoint so really building out a proper structure building out the governance that goes along with building robots and building a kind of a resource team to continue to support the bots that that you know we were at scale at that point so maintaining those bots is critically important that's the direction we're moving in 2019 we've kind of perfected the concept of the back office robot and the development of those and running those at scale and now we're moving towards you know a whole new market share when it comes to attended automation and citizen Development so this is a story we've heard from many customers and we've tried to reflect it in this graphic that we're showing here start small get some wins prove out the tech really in the back office and then drive customer facing activities we see this as the starting point for more SME driven digital transformations where business line pros are rethinking processes and developing new automations you know either in low code scenarios or with Centers of Excellence now this vision of hyper automation we think comes from the ability to do process mining and identify automation opportunities and then bring our PA to the table using machine learning and AI to understand text voice visual context and ultimately use that process data to transform the business this is an outcome driven model where organizations are optimizing on business KPIs and incentives are aligned accordingly so we see this vision as potentially unlocking a very large Tam that perhaps exceeds 30 billion dollars go now let's bring in some of these spending data and take a look at what the ETR data set tells us about the RPA market now the first thing that jumps out at you is our PA is one of the fastest growing segments in the data set you can see that green box and that blue dot at around 20% that's the change in spending velocity in the 2020 survey versus last year now the one caveat is I'm isolating on global 2000 companies in this data set and as you can see in in that red bar up on the left and remember our PA today is really hot in large companies but not nearly as fast growing when you analyze the overall respondent base and which includes smaller organizations nonetheless this chart shows net scores and market shares for our PA across all respondents remember net score is a measure of spending velocity and market share is a measure of pervasiveness in the survey and what you see here is that our PA net scores are holding steadily the nice rate and market shares are creeping up relative to other segments in the data set now remember this is across all companies but we want to use the ETR data understand who is winning in this space now what this chart shows is net score or spending velocity on the vertical axis and market share or pervasiveness on the horizontal axis for each individual player and as we run through this sequence from January 18 survey through today across the nine surveys look at uipath an automation anywhere but look at uipath in particular they really appear to be breaking away from the pack now here's another look at the data it shows net scores or spending velocity for uipath automation anywhere blue prism pegye systems and work fusion now these are all very strong net scores which are essentially calculated by subtracting the percent of customers spending less from those spending more the two leaders here uipath and automation anywhere August but the rest rest are actually quite good there in the green but look at this look what happens when you isolate on the 349 global 2,000 respondents in the survey uipath jumps into the 80 percent net score territory again spending velocity automation anywhere dips a little bit pegye systems interestingly jumps up nicely but look at blue prism they fall back in the larger global 2000 accounts which is a bit of a concern now the other key point on this chart is that 85% of UI customers and 70% of automation anywhere customers plan to spend more this year than they spent last year that is pretty impressive now as you can see here in this chart the global 2000 have been pretty consistent spenders on our PA for the past three survey snapshots uipath again showing net scores or spending intensity solidly in the 80% plus range and even though it's a smaller end you can see pay go with a nice uptick in the last two surveys within these larger accounts now finally let's look at what ETR calls market share which is a measure of pervasiveness in the survey this chart shows data from all 1000 plus respondents and as you can see UI path appears to be breaking out from the pack automation anywhere in pega are showing an uptick in the january survey and blue prism is trending down a little bit which is something to watch but you can see in the upper right all four companies are in the green with regard to net score or against pending velocity so let's summarize it and wrap up is this market overhyped well it probably is overhyped but is it overvalued I don't think so the customer feedback that we have in the community and the proof points are really starting to stack up so with continued revenue growth and eventually profits you can make the case that whoever comes out on top will really do well and see huge returns in this market space let's come back to that in a moment how large is this market I think this market can be very large at am of 30 billion pluses not out of the question in my view now that realization will be a function of RPAs ability to break into more use cases with deeper business integration RBA has an opportunity in our view to cross the chasm and deliver lower code solutions to subject matter experts in business lines that are in a stronger position to drive change now a lot of people poopoo this notion and this concept but I think it's something that is a real possibility this idea of hyper automation is buzzword e but it has meaning companies that bring RPA together with process mining and machine intelligence that tries process analytics has great potential if organizational stovepipes can be broken down in other words put process data and analytics at the core to drive decision-making and change now who wins let me say this the company that breaks out and hits escape velocity is going to make a lot of money here now unlike what I said in last week's braking analysis on cloud computing this is more of a winner-take-all market it's not a trillion dollar team like cloud it's tens of billions and maybe north to 30 billion but it's somewhat of a zero-sum game in my opinion the number one player is going to make a lot of dough number two will do okay and in my view everyone else is going to struggle for profits now the big wildcard is the degree to which the big software players like Microsoft and sa P poison the RPA well now here's what I think I think these big software players are taking an incremental view of the market and are bundling in RPA is a check off item they will not be the ones to drive radical process transformation rather they will siphon off some demand but organizations that really want to benefit from so-called hyper automation will be leaning heavily on software from specialists who have the vision the resources the culture in the focus to drive digital process transformation alright that's a wrap as always I really appreciate the comments that I get on my LinkedIn posts and on Twitter I'm at at D Volante so thanks for that and thanks for watching everyone this is Dave Volante for the cube insights powered by ETR and we'll see you next time

from the silicon angle media office in Boston Massachusetts it's the queue now here's your host David on tape hello everyone and welcome to this week's episode of the cube insights powered by ETR this week cisco CEO Chuck Robbins has invited a number of analysts and press to San Francisco for an event to talk about the future of Cisco and no doubt the role of the company in the next decade and I will be there so in this breaking analysis I thought that I'd focus on Cisco and its prospects in this era of next-generation cloud of course last week we attended AWS reinvent and you can catch all our coverage on the cube net but the key takeaways are that we're entering a new era of cloud that is heavily emphasized emphasizing getting more value out of data with machine intelligence and things like sage maker now AWS was heavily focused on this notion of transformation putting forth the strong case that enterprises have to transform not just incrementally it was a clear message that CEOs really have to lead and AWS are striking directly at the heart of what a device had Andy Jesse calls the old guard namely IBM Dell Oracle HPE and many others including of course Cisco saying that you can't just transform incremental e CEOs you have to transform whole house so today I want to look at six areas and I'm showing them here on this on this slide but the first thing I want to do is just review the overall spending climate and then what I want to do is discuss Cisco in the context of industry leadership playing on Jesse's themes and then you know we'll look at the spending momentum in the latest ETR survey for those leaders next thing I want to do is I'm going to talk about the cloud and it's impacting everyone and I want to take a look specifically at how it's impacting Cisco and how Cisco is faring in the face of competent from the public cloud which we've talked about a lot across a number of vendors we're then going to look at Cisco's business overall from a spending perspective and then I'll wrap with some some comments on what I see is opportunities for Cisco like edge I want to talk specifically about multi cloud and of course cloud in general so let's start drilling into the spending climate overall now remember the EGR data tells us that spending on balance is reverting to pre 2018 levels but it's not falling off the cliff buyers member are narrowing their experimentation on new technologies and they're placing more focused bets as part of the digital transformations we're also seeing more replacements of redundant systems that buyers were running in parallel as a hedge on their bets and that is affecting overall spending and it's somewhat compressing spending so with that as a backdrop let's look at some of the the latest data from ETR and focus on the leaders from the latest survey so what I'm showing here is data from ETRS October 2019 Syria one thousand three hundred and thirty six IT buyers who responded and I've selected market share as the metric across all sectors as you can see here in number eight now remember market share is a measure of pervasiveness and it's calculated by dividing the total vendor Mensch mentions divided by the sector total so now the remember the ETR methodology allows for multiple responses by a vendor so you can see in the y-axis there can be more than a hundred percent okay because of those multiple responders respondents now note that Microsoft Cisco Oracle AWS and IBM have the highest shared ends or mentions and you can see the pervasiveness of Microsoft and its prominence which is not surprising but Cisco Oracle and IBM generally have held from again pervasiveness standpoint pretty well as you can see the steady rise as well in AWS is market share so cisco really the bottom line there is cisco is a clear leader in this industry and it's maintaining its leadership position and you can of course on that chart you can see the others who really didn't make the top five but they're prominently you know mentioned with the shared ends that's VMware Salesforce Adobe's up there and of course Dell EMC is the you know 90 to 100 billion dollar company now let's take a look specifically at spending momentum you know what we're showing here in this chart is the exact same cut except we've changed the metric from market share to net score now remember net score is a measure of spending momentum that's calculated by essentially subtracting the percent of customers that are spending less in a given survey from those that are spending more and that's the net score and you can see the picture changes pretty dramatically AWS jumps up to the top spot with a 62% you know net score over taking Microsoft but then look at Cisco it's very strong with the 36 about 34 percent net score you know not nearly as high as AWS and Microsoft but very respectable and holding you know fairly strongly and notably ahead of IBM and Oracle which are both in the red you see that red area which signals caution now what I want to do is address the question of how is the cloud affecting Cisco's business you've seen me do this with a number of other vendors let's drill into what it means for Cisco so if you've been following these breaking analysis segments you know we've been reporting that the the pace at which the cloud is eating away at a traditional on-prem data data data center business continues now here's a quote from an IT Pro that summarizes the situation for networking in general and then we'll come back and specifically talk about Cisco he says or she says as we migrate the data centers to AWS networking costs will decline over three years this is a director of tech strategy for a large telco so the question I have is does the et et our data back this up let's take a look so what this chart shows is a cut of cloud spenders there are 818 in the latest ETR survey and the net score within those accounts specifically for Cisco so it's spenders on AWS asier and Google cloud and you can see the steady decline post 2010 for Cisco so just as I've reported for Dell EMC HPE Oracle and others you can see that the clouds steady march continues to challenge the on-prem suppliers so each of these companies has really got to figure out how to respond now in the case of Cisco it's moving from owning the network market to really participating in the public cloud and interconnecting clouds so we've seen Cisco make many acquisitions that can allow them to work with AWS for example app D which is application performance management VIP teller which is SD win clicker which is orchestration duo in cloud security and then you've seen bets on kubernetes which are going to help them span hybrid you know as well you've seen them make partnerships with the leading cloud some suppliers and I'll make some comments later on when I talk about multi cloud so let's look at how these diversification moves have impacted Cisco overall because they've not sat still you can see that in this chart what it shows is Cisco's market share across all of its businesses including analytics security telephony and of course core networking but also servers storage video conferencing and virtualization so the point is that by diversifying its business the company has expanded its Tam its total available market and as I showed you before has maintained a leadership position in the data center is measured by market share now here's a deeper sector analysis of Cisco's business by various sectors and what we're showing here is Cisco's business across a number of sectors comparing the October 18 survey with July 19 and the October 19 surveys so this is net score view and you can see across all customers that Cisco's second-half net score for these sectors which are in the green are showing strong momentum relative to a year ago so here you go Meraki which includes Cisco's wireless business its telephony business parts of its security business core Cisco Networking they're all showing strength now parts of its security portfolio like Open DNS and Sourcefire which is intrusion detection which Cisco bought about six years ago and some at Cisco's voice and video assets are showing slower momentum but Cisco's overall spending momentum is holding on pretty well all right let me talk a moment about some of Cisco's opportunities they're trying to transform into more of a software company with assets like duo app dynamics and they want to focus less on selling boxes and ports and more on licenses and subscriptions so it's also got its got to use software also to unify its many platforms so I want to talk about for a moment about multi cloud hot new area right everybody's talking about it cisco recently made some organizational moves to take its separate cloud group and better align it with Cisco's core operations in a new group that they call cloud strategy and compute now cisco competes in multi cloud with vmware IBM curves Red Hat Microsoft and Google even though they partner with Microsoft and Google so here's some ETR data that looks at key Cloud sectors including the three did I pulled out cloud computing container orchestration and container platforms so these are buyers spending on these three areas so there's 937 in the latest survey you can't see that and because I'm hiding it with the pulldown but trust me but you can see the big players with spending momentum and while cisco doesn't you know show the momentum of an azure or a red hat or even a Google it's in that multi cloud game and my my premise is that cisco is coming at this opportunity from its strengths and networking and it's got more than a fighting chance why because cisco is in my view in the position to connect multiple clouds to on-prem and convince buyers that cisco is the best partner to make networks higher performance more secure and more cost-effective than the competition now let me wrap with some critical comments and then i'll end up on an opportunity with with some comments on edge so the first thing I want to say is well Cisco is dominant in a space it's missed a number of opportunities VMware has beaten Cisco to the punch in the initial move of course to virtual machines and then the nice Sara acquisition NSX as I've shown before is clearly has strong momentum in the market and is really eating into Cisco's core business Cisco's ACI does okay but it's definitely a sore spot Francisco and this represents a crack in the companies Armour containers the move to cloud native architectures is mostly a move to public cloud so it's a replacement or a displacement more so than a head-to-head competition that hurts Cisco here is John Fourier says you have you have cloud native and if you take the T out of cloud native you have cloud naive so cisco along with others must not beat cloud naive rather it has to remain relevant in the cloud as we discussed earlier in the multi cloud discussion now Cisco they were the king of converged infrastructure if you remember with the first wave of Vblock along with the Flex pod from NetApp and it you know changed the server game and drove UCS adoption and then guys like IBM and pure jumped in Cisco really became the standard now well hyper-converged infrastructure didn't really displace Cisco Networking you know Dell VMware with it with VX rail and Nutanix as well as HPE who's in the third position are posing a challenge that's so cisco cisco they everything they really don't play in the lucrative high margin external storage business but there's some challenges there that from a tam standpoint but I don't worry so much about that because despite all the rumors over the years specifically in storage that Cisco is going to buy a storage company and I think there are better opportunities in soft where in the end the edge and as I've said before storage right now is kind of on the back burner it's not it's a very difficult market for a company like Cisco to to enter so I want to talk more about the edge because they think it's a way better opportunity for Cisco Cisco among all the legacy tech vendors and my view could really compete for the edge and the reason I say this is because Cisco is the only legacy player in my opinion that is a solid solid developer strategy and it's because of dev net dev net is the initiative to make all Cisco products programmable we talk a lot about the API economy and infrastructure of code as code and what Cisco is doing is they're taking Cisco certified engineers like CC IES and all these people that they've trained over the years huge number of IT pros and they're retraining them and teaching them how to code on Cisco products to create new use cases new workloads and new applications specifically at the edge and Cisco products are designed to be programmable so they have a developer play and I've always said the edge is going to be won by developers this is why frankly I was so excited last week at reinvent about AWS outpost and the move they're making at the edge because they're essentially bringing their stack to the edge and making it programmable IBM failed to do this with bluemix they couldn't attract developers they they had to go by Red Hat for thirty four billion dollars you know Dell MC they have VMware and they have an opportunity with pivotal but that's got to come together they currently have very little developer synergy in my view specifically with Dell Hardware at least that I can see and there seems to be little or no effort to retrain storage admins and VM admins in the same way that cisco is is doing this with CC IES HPE essentially I see them like Dallin away throwing server boxes over the fence to the edge you know versus really attracting developers to identify sort of new workload new use cases so I like Cisco strategy in this regard and it's something that we're gonna continue to watch very closely and probe this week with Chuck Robbins okay this is date Volante sounding out from this episode of the cube insights powered by ETR thanks for watching everybody and we'll see you next time